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Today is October 23, 2024. I'm one of your hosts, Ann Mazenga. And I'm Stanford bound for his 25th college reunion, Chris Walton. Oh my God. And we are here once again to discuss all the top headlines from the past week making waves in the world of omnichannel retailing. Chris, you mentioned your college reunion. How could we get past it? You've got every piece of Stanford gear that you own on right now.
Everyone knows you went to Stanford, but what are you so excited about for this weekend for your reunion? Oh man, I just can't wait to get back there. First of all, it's in sunny California, which is always a plus. And. And second, the thing I'm most excited about, which I know you're going to call me a major geek for, is there is a reunion of our freshman humanities course, which is a course that we took, all 90 of us, we lived in the same dormitory together. We took all our classes together.
And I'm excited to reconnect with those people, which were all, honestly, we were kind of the dorks on campus, which isn't a surprise, but I'm excited to reunite with them. Oh, I'm actually not. I think that is nice like that. That makes sense to me. That's a reason to, like, you had this intimate experience with the. Well, hopefully not too intimate all in one dorm, but you had this very close experience together, and that makes sense to go back for, I don't know, the.
The cardinals, though your cardinal game is strong right now. You got a lot. You got a lot going for you. So I hope. For me. I hope. Thank you. And yes, we'll actually be doing an hour long session on Plato as part of the reunion, too. So that gives you an idea of just how Doordash group is. That's where you lost me. Okay. Well, Chris, we have also been working very hard at the shops. I've just started to condense it to the shops conferences the last two weeks. We were at grocery shop.
We were at shop talk fall last week, and so we have to call in some reinforcements for this week's. So joining us today for their regularly scheduled monthly appearance, we have the Alvarez Marcel consumer and retail groups Lakshman, Lakshman and Chris Kreitz here to help us break down the week's headlines. Chris and Lakshman, thank you so much for your bearing with us as we have this introduction and cover all of Chris's past college experiences.
But I'd love for you both to reintroduce yourself to our audience. And, Chris, start with you. Hey, guys. Chris Kreitz with a and M CRG live over here in Charlotte, North Carolina. It's a beautiful day out here. Specialize in working with clients on the merchandising side, answering questions around space, assortment, pricing, things like that. Really excited. And hope we'll be following the Socratic method today. Chris, for your play doh throwback, that's awesome, man.
That is kind of the vibe of our show, actually, that we get a little Socratic in terms of how we approach this show. That's wonderful. I know no one's going to be surprised that I was in honors English in high school and read the cliff's notes for every one of those books. So that is something that I will not be participating in, Chris. But we'll give it the old college try. Lakshman, why don't you introduce yourself to the audience? Hey, everyone, I'm Lakshman.
Lakshman and the other newly minted lacs here, who probably is having a longer shelf life than the other lacks. But all jokes aside, very excited to be here. Been part of a and M CRG for about four years now. Do specialize in consumer goods and retail, specifically in the areas of supply chain analytics and technology. And in the spirit of keeping the reunion spirit alive, Washington, target guy. And go bullseye. Chris and Ann, so excited to have you both. Thank you.
Thank you so much for being up for today's fast five. All right, Chris, should we do the headlines? Ann, this is always my favorite show every month because I love when these guys are on because they help carry the show and provide new insights that we don't always think of. So let's do it. Today's fast five headlines are brought to you by manifest. Manifest. The future of supply chain and logistics agenda is now live. What's in store, you may ask.
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In this week's Fast five, we've got news on Amazon testing yet another grocery concept in Chicago, the return of bed, Bath and beyond stores, and conversely, bye bye babies plants to shutter all of its stores and chick fil A's release of its own family friendly entertainment app. But we begin today with news that could shake up the pharmacy industry. And shake that up is right. Headline number one, Walmart has added same day prescription delivery service.
According to Seeking Alpha, the retail giant will begin to deliver prescriptions to households in the US in as little as 30 minutes. 30. That's right, 30 minutes. Customers have the ability to add prescriptions and medication refills to their orders for groceries and other products, and the service will be free for Walmart plus members. Walmart aims to have prescription delivery available in 49 states by the end of January, with coverage across more than 86% of us households.
Chris we're going to you first here. How big of a move is same day prescription delivery from Walmart? There's a lot of perks in that announcement. Yeah, I mean, I think it's definitely a big move. I think it's scarier if you're CV's Walgreens sitting there. It's obviously quite a, quite an intimidating move. But I don't think of it as some people have been saying, this is the critical death of pharmacy and drug.
I look at it more as a million cuts that are going to a contributing factor that's going to lead to continued decline in drug. Today, 90% of households are within 10 miles of a Walmart pharmacy. But actually Walmart only has 5% of the market share for prescriptions, Walgreens and CV's 40 50%. So right out of the gate, will they start to steal some market share away? Probably, but their overall penetration in the pharmacy is relatively low. It starts to get more interesting.
Amazon's doing the same thing. I think Walmart's targeting 90% coverage by January. Amazon's opening new pharmacies. I think they're trying to reach 50% of households with same day over the next year. So you start to have more and more competitors in the space. And I think it does beg the question of what is the future for pharmacies like Walgreens and CV's that have 8000 locations. They're continuing to evaluate their footprints.
I think the bigger thing here for them is that Walmart doesn't really have to make money on their pharmacy, whereas they really do. So I think it's just another cut that's going to start amping up the pressure. And it really shows how other players who are competing for those same scripts and the same front end baskets have a lot more levers to innovate than your cvs is in your Walgreens of the world. Yeah, absolutely.
And, and then you throw in grocery delivery in there, too, which is something that Walgreens CV's can't compete with, for sure. Um, all right, Chris Walton, you are so excited about this. I know. What are your thoughts here? Yeah, I mean, Chris brought up some great points there. Like, I didn't realize the underpenetration of Walmart's pharmacy business. So that means to me, this is just all a massive growth opportunity.
Me. The other thing that I'm reminded of is the great MC Hammer song and of can't touch this because Chris mentioned it a little bit. But like, the Walgreens and CV's is the world. They can't really do this at the same scale, particularly because of the dynamics of the other items you can ship with your pharmacy orders that Walmart can. And then I look at their biggest competitors, Target, particularly Target can't touch this at all because of their CV's relationship.
They've subcontracted out their pharmacy business to CV's. So think about the coordination that's going to be involved in that. And CV's has a ton of other problems, namely they just named a new CEO in the last week. So they're not going to be focused on trying to do that and figuring out how to make that happen at a target, particularly. And then Amazon just doesn't have the physical presence. So I don't know.
The thing I love most about this is that it shows the beauty of how Walmart is also thinking about Walmart plus. It's taking the beauty of, of what Walmart does best, which is its physical stores by way of gas discounts, scan and go activations, and now pharmacy and creating differentiation through digital by way of that subscription, which is just going to be so powerful. And to Chris's point, with under penetration, a massive gross opportunity here potentially, too. Zachary?
Yeah, Chris, I think it's really important what you highlight, too, about the Walmart plus membership, too. Holden Bale, he was sharing with me some research at shop talk last week where he said that, you know, of the, of these retailers that they studied, the most surprising thing that he found was that so many of the retailers are just looking at what their competitors are doing and trying to do that versus what their customers are telling them that they want.
And I think this is a perfect example of Walmart doing the opposite here. Walmart listened to what their customers said. They said the number one thing they wanted with their Walmart plus membership was the ability to combine grocery delivery and prescription delivery. And Walmart delivered. It's the single most asked for service. And them listening to their customers instead of just saying like, what's Amazon doing? What's target doing? What's, you know, what are CV's and Walgreens doing?
They are uniquely positioned to give the customers what they want. I think it's so brilliant here. Lakshman, I'd love for you to close us out. What do you think of this move? How big is Walmart's same day prescription delivery? Yeah, we know the demographic curve that's coming up, right. We know that the baby boomers and the next, the next wave are coming up to age now. It's a great they want convenience, they want speed, they want security, they want reliability.
Who best to deliver that than Walmart? 100%. That's a great point too, because the demographics of who shops where at what pharmacies is also going to shift because as you get older is when you start needing medication. So that 50% roughly, I think you said, Chris, that shop at Walgreens and CV's, that's going to change naturally, too. So it's a really interesting point. Lakshman. All right. And we just interviewed Vanessa Yates, the SVP of Walmart.
Plus, she's got the best poker face in the world. We interviewed her ten days ago. We asked her like, what's coming with Walmart? Plus, she didn't give us any indication that this bombshell was on the doorstep. I can only imagine what's in store still. Like, that's not the end of this. They just, they're moving at lightning speed right now. It's remarkable. A hundred percent. All right.
Now, what is quite possibly, even though I love that last headline, this is quite possibly my favorite headline to get into a discussion about today, which is that headline number two, Amazon is testing a new small format grocery store concept in Chicago. According to Chain storage, the company has opened a 3800 square foot small format grocery store concept in downtown Chicago in a building that also houses a Whole foods market.
An Amazon spokesman spokesperson confirmed the new store, called Amazon Grocery. Got to love that name. Amazon Grocery. And not to be confused with Amazon Fresh or Amazon Go, features a selection of approximately 3500 products and is located in the one Chicago building. The new store allows customers to complete quick trips like grocery top ups, coffee and grab and go meals all during their regular trip to whole foods.
It also offers national grocery bands or household essentials that are not available at Whole Foods. Lakshman, I'm going to go to you first on this. What in the heck is Amazon's grocery strategy? Like, I just cannot put my finger on it at all. Like, WTF? What are they doing here? And what do you think of this new concept? Does it help things at all or does it just muddy the waters? Yeah, let's add another banner under the grocery experiments that are happening right now with Amazon.
Listen, this is a walled garden. You cannot have, it's a small store format, 3500 skus, very limited national brands. They do not allow the customer to go and transact between the two. They cannot have one single cart that moves up and down. So from a, it is going to be a walled garden because the private labels, they cannot place it they cannot increase the penetration of their own products.
They have to rely on trade funds and everything that's coming from the national brands to fund their marketing expense for this particular channel, which is quite expensive. Shall I say? The name of the game here is convenience. Looking at the age group of about 25 to 35 people living in the series with an income of 80 to 120k, who just need to go and buy or get that one small item that they forgot to get, whether it's coke or it's a packed sandwich, that's a convenience thing. Play here.
It squarely goes against what 711 is trying to do, which is upscale their convenience format and make it more interesting. I think it's got very limited shelf life. It is an experiment. I feel like they probably are going to try a couple of other huge city centers locations and likely it will saturate at that point. Is it a good experiment though? Is it an experiment worth running just by the fact that you have to put it next to Whole Foods?
And the whole strategic premise that you're pitching in this article is that it's next to a Whole Foods. Yeah. And think about the cost delta between the two. You have to have a separation of at least 20% to 40%. If not, the customer is not going to walk in. And the other thing is you're likely cannibalizing your own sales.
If there is an equivalent national brand, same quality price point is 20% higher, then you are competing against your own private label in some ways, and you are competing against your higher end whole food products themselves. It's a very interesting Swartman tiering problem, which is why this is very baffling for me to co locate it in the same spot.
If it were at least a mile away and there was some separation between the two, it makes a ton of sense that they're trying to get entry into this particular fast moving segment. But to co locate it is what is really the baffler here. Interesting. Chris, I saw you shaking your head. What's your points that you'd add here? No, I mean, I actually just had a different take on. I thought Lakshman's take was really interesting. I thought about it differently.
Okay. I think the whole point was co locating it. Or what I wonder is, is the whole point co locating it? I agree with Lakshman. It's not a concept that's designed to scale. I kind of see this one as a data gathering experiment, a pet project from someone there. And I think it's all about exploring like the whole Amazon Whole Foods piece where you can't have national brands in the store.
There's a big customer problem that that customer now has to make two shopping trips to do their grocery shopping. So I think it's an experiment to place national brands in close proximity without violating that wall and see how many of those customers you can actually get to shop in Whole foods. Then buy national brands right next door on the same shopping trip because Amazon's actually experimenting with other concepts that are similar.
So in Pennsylvania, they have like a micro fulfillment center tied to a whole foods where the idea is you place your Amazon order on your phone and you can get your national brand products right outside the door of the whole food so you can do one trip. So I kind of see it as more of like a similar, very small scale test concept to further discussions and test data on how do you integrate national brands within the Whole Foods channel. But, you know, I could be wrong.
It's a weird spot to do it, too, because, tilaksha, like the one Chicago, it's a residential building. Uh, and you have to imagine a lot of those 3500 skus are just convenience focused, like quick grab and go stuff. So that's the part that doesn't quite tie for me. Yeah. Yeah. Okay, so. So you're kind of liking it. Lakshman's a little more baffled by it. And what do you think here? Yeah, I mean, I agree with Chris.
I think this is just another version of the test that is happening in Pennsylvania right now. Like, what's the threshold? Ultimately, what do I think is going to happen? I think that this is a continuation of our conversation last week, Chris. I think this is the death of Whole Foods as we know it right now.
I think that eventually Amazon's just going to see people want to get all their private brands or, sorry, all their keep saying private brands, all of their national brands and their Whole Foods brands in one place. But I'm wondering and I think that this store, Whole Foods, is going to go away and eventually it's just going to be called Amazon grocery because I think it's just going to be easier to put all those brands side by side inside the whole Foods.
Now, yes, you lose this coveted Whole Foods, you know, experience. But I honestly am wondering if this is the only opportunity that Amazon has in grocery if it seems like it may be the winningest strategy where, you know, yes, you have other competition from some of these nicer, upscale groceries where that have this access to some of the organic foods. But will Amazon be able to offer some of these brands at a more affordable price because of the scale that they have with delivery.
With grocery like, to me it seems like this could be the only chance that Amazon has a success in grocery, which is is combining everything, the whole foods, the national brands and him having this Amazon grocery experience. But wow, you are not in the camp. No, I mean, I think if, I think if you play that out, you know who wins in that game? Sprouts. Because all the whole food shoppers start going to sprouts and sprouts explodes nationally.
Because in the sprouts have the national brands though, to the effect. But that's why I'm saying that those people don't want that. So sprouts gets it because if you stop back and you look at grocery from a mass market perspective, the mass market already determines what products are going into. Kroger, Target, Walmart, Safeway, Albertsons, they're already doing that. So Amazon's got to come in with an entirely new concept to make this work. So that's why, that's why I think this idea is.
This test particularly is the dumbest idea I've heard in a long time. To your point, if people want, if you, if you really think people want to buy, you know, general national brand products next to whole foods, just put them in freaking whole foods and run that experiment. Like what's the point of doing this? The small format is going to give you fake false positives or false negatives too because it's a separate location.
And like why, if I need to make another trip, I already go to Whole Foods and most of the time I have to compliment my trip by going to another store? Why would I go to a store that has 3500 items when I can go to my local grocery store that has a broad assortment and all the other options that have it that are available to me that I can't get at a Whole Foods. So this just makes no sense to me from a testing perspective and why you would waste your time on it.
But I don't know, somebody else take the last word on it because I got on my soapbox pretty quickly on this one. Well. I just questioned then like does Amazon grocery really just become Amazon, the mass retailer where they, like, is that where they are successful? You don't think so? Yeah, I mean, good luck. I mean, people are trying to do that all the time.
Good. I mean, I just think that's a, that's, that's a tough, tough game and they've shown that they haven't been able to create their own grocery concept, which, if, correct me if I'm wrong, but Amazon Fresh has some of the, I don't remember, but doesn't it have some of the Whole Foods elements inside of it already? So they've kind of been running this experiment, too. And that's not blowing the doors off anyone from a consumer love standpoint, either. So I don't, I don't know.
I just don't get it. Well, let's go into headline number three and talk more about going into physical retail. Guess what, guys? Bed bath and beyond stores could soon return. Yay. According to retail Dive, Kirkland's home and beyond have entered a strategic partnership that includes the pilot opening of up to five neighborhood small format bed, bath and beyond stores.
The company said Monday, you won't need the whole Saturday to go to bed Bath and beyond, Home Depot and others, you will just need a short amount of time because they're just tiny, little cute bed bath and beyond good friend to take reference and nice, subtle Kirklands is beyond beyond exclusive operator and licensee for the new stores bed Bath and Beyond shop and shops may also be opened inside of Kirkland's locations, but that's yet to be determined.
Beyond is providing $17 million in debt financing to Kirklands. Under the deals financial terms. Eight and a half million of that is a convertible note that will convert to Kirkland's common stock at $1.85 per share upon stockholder approval. Beyond will also buy $8 million of Kirkland stock in a subscription agreement. The company's also entered a seven year collaboration agreement starting in q one of 2025.
Beyond will earn a collaboration fee equal to 0.25% on all of Kirkland's quarterly retail and e commerce revenue, an incentive fee equal to 1.5% of Kirkland's incremental growth in e commerce revenue and a trademark license agreement where beyond will earn a store royalty fee equal to 3% of net store sales generated under the bed bath and beyond banner. I hope you were taking notes there. There is a lot of data that I just threw out you, but my question is simpler.
Does the market need a smaller incarnation of bed, bath and beyond, or is this an example of two wrongs that won't likely make a right? If you step back and think about what beyond is trying to do here, which is trying to have a broader play in home home improvement, home services, decor, furniture, I think that makes sense. Zulily they have bought bed Bath and beyond the ip of it over stock, and now they are forging a partnership with container store.
So they're moving more towards this home centered around home concept. And Marcus is a phenomenally well proven leader, so he has a plan to execute against it. Now, it's a small test that they are trying to get into. May likely be that Kirklands is not penetrated as much in the brick and mortar space as opposed to online. Probably their sales are a lot more lopsided towards online and e commerce, especially coming out of COVID And they have about $60 million in net sales.
And likely the revenue is going to be. They are expecting probably the vicinity of 200 to 500 range in terms of revenue from a store from this particular format, which is not huge expectation from a small, tightly controlled and well placed the retail location. That's the key. If they put it in the right set of semi urban, highly populated strip mall location, then you have low labor, low rentals, low reeses, so it has some legs. You can make the economics work.
Bed Bath and beyond still has a wonderful brand recall, but it's a more promotion oriented. Coupons, discounts, smart downs, so they'll have to price it properly. The biggest thing that led to chapter eleven for Bed Bath and beyond was that the costs were not in control and a lot of the merchandise choices that were made were competing with the national brands and were targeted with Walmart, especially in the home improvement category, home improvement and decor.
And now this is a very particular category. Furniture that they can probably reach more, lean more into, and have very clear merchandising, supply chain procurement cogs, gross margin play from Kirkland, that they probably have a good team already in place and they can lift and shift. So if you read the press release, Marcus is very clearly pointing that out, that they have a proven track record and he has confidence in the leadership team.
So I think if you tie all this together, I think there is something here that they can start this experiment in a small format and then assess, and I believe that the right location and the right investments will likely be, will help them shape this strategy and the pilots. Okay. All right, Chris Kreitz, what do you say about this? I'm going to go off on the rails here and just go a totally different direction and answer, oh, boy.
I think the whole history of beyond is so the new beyond is so interesting, right? Yeah. They buy the bed bath and beyond ip for $20 million. Right. Then they close overstock.com dot. Theyve now reopened overstock.com dot. They did a $40 million deal with the container store. They did this $17 million deal with Kirklands, they said were never going to open physical retail stores again. A year later, theyve opened physical retail stores again.
At the, from the outside, it looks like the most scattered retailing strategy you can possibly imagine, and then just dumping money into failing brands or struggling brands. If I step back and say it's either a very scattered strategy or there's something brilliant going on here, I thought Lakshman had a really good point. The beyond brand has extremely high rankings on search and customer recall. They know the name.
One of the things that's interesting in all the releases of the deals that they've done with Kirklands, with the container store, there's a small snippet that's hidden where they say all the companies are going to join beyond global data platform, which means my curiosity is, are they just making these investments to get access to the customer lists?
To Lakshman's point, to use their brand recall and search prominence to be able to funnel customers towards these brands, I think it could be overall just a large marketing play. The other interesting piece is they all say that theyre going to adopt the loyalty program and then it looks like theyre going to start selling payment solutions and insurance and those ancillary financial products.
Now that beyond is going to own, to me, theres some sort of marketing data play there where theyre just making these investments into smaller, in decline retailers that used to have billion dollars of sales. And now you have access to all of that customer data and you can figure out ways to funnel that data towards your future platform or brand. So I think its really interesting from that perspective too. So its a data play, you think, Chris Walton, this is your wheelhouse.
You worked in home furnishings for a long time with target. What do you make of this? Yeah, I mean, God, there's a lot here. I think both the two gentlemen before me summed it up pretty well. My biggest takeaway from this is, I got to say, great job, Marcus. He's doing what the entrepreneur does, which is offloading all the risk onto two other companies. We brought up the container store, but in this case he's offloading it to Kirklands.
Like, you know, that basically the money is just going to float to beyond. You know, if Kirklands tries to do anything and bedbeth beyond doesnt even really have to do anything to make that happen. So from a, from a cash flow perspective, I got to think thats good for beyonds business. But net net, when I step back from it, I struggle seeing why a new, smaller incarnation of bed bath and beyond is going to amount to anything because I just dont know the why.
Like what is the why in terms of why Im going to that store over any other option. Like I just don't get it. The space is so crowded already. And you know when I go back to like why, why bed Bath beyond failed initially, it's because bed Bath and beyond was done better by Amazon. It was all the beyond stuff that you could get now through Amazon just delivered to you. So especially with all the other competition. So I. Good luck. Kirkland's trying to do this.
I think he might have gotten hoodwinked a little bit on this one. Yeah, I agree Chris. I don't understand the new small format ones. I'm a little softer on the collaborations, the going inside the container store or going inside of a Kirklands. I don't hate that idea. I think that's an easier thing for them to test and they have the data, like Chris was saying, collected from shoppers across the platform, what they're interested in, what people are buying in those locations.
And I think the thing that we haven't talked about is from a customer perspective, I do like the potential option to use these Kirklands locations, these container store locations. As you know, returns drop off points for these retailers. Like, there is some benefit there, especially when you're buying home products. I think that it's just like apparel in my mind, where it's like you could be trying a different color pillow or comforter or something and so you might be ordering three or four.
Like, I think that from a customer standpoint it could be worth the test. But does it have the long term support? I think from an organizational perspective and from an ROI perspective, I really, I don't see that happening. But yeah, and I don't know, I think, like, while Bed Bath and beyond has good recall nationally as a brand, I don't see like what products are driving me into a shop and shop in either instance.
Like, you know, like, oh, I'm going to go to the container store to check out bed bath and beyond. What? You know? Well, I mean, I think it's more of like a vignette. Like when you go into the container store, like, are you able to make purchases? Like, do you buy a rug at that same point in time? Or are there certain items that maybe make sense that, you know, it's just saving their customers a trip? But brands, brands don't matter.
In home furnishings, though, like we've talked about, what people care about is the style, design and the quality of the product. So the brands of home furnishings are almost obsolete at this point, you know, so I don't know, but all right, let's keep moving because this one is related, the next one's related.
Headline number four, Bye Bye Baby plans to close all of its stores less than a year after its launch, according to retail dive bye Bye baby plans to close its entire physical store footprint by the end of this year, quote, transforming into a digital first brand, end quote. And allowing it to focus, quote, all our energy on providing an exceptional online experience.
Also, another end quote, store closing sales began on Friday and the banner will transition to an online only business, the company said in an faq on website Omni talk.
Fans will remember that the New Jersey based dream on me won the Bye bye baby brand intellectual property and digital assets at auction for 15 and a half million dollars and then bought eleven store leases in seven states for $1.17 million in a separate auction and relaunched the company in eleven stores last fall ahead of the store launch.
Bye bye baby CEO Pete Dalidin said in a statement that the retailer sought to position itself as a go to destination for all parents, caregivers and families seeking thoughtfully designed and quality baby and child focused products and exceptional customer service. End quote. Lakshman, let's go back to you on this one. Can a successful baby business exist in the long term without a store footprint? Well, I'd like to connect three disparate data points and probably try to make the connection.
So first is the birth rates, second is influencers and third is quality. I mean, we are currently at 1.6 birth rate, which is well below the 2.1 replacement. So much so that the likely huge billionaires and leaders of the society and politicians are, are talking about this consistently now. Then it's gotten national press, including Wall Street Journal and other shining a light on this particular problem. So industry itself has a population headwind that is fundamental and structural.
So there is that particular pressure that is kind of building up for it or against it. Then you have the second part of this is influencers. Over the last three to five years, since the time of COVID if you go to YouTube or Instagram, one of the highest group of influencers belong to this young mothers and or expectant mothers. They are publishing so much content and material on how to have safe, high quality products access to them. Where can you find it? How can you use it?
How can you install it? All of that has become such a big, big driver of that group of small group of influencers that are very, very vocal and influential the third is the commoditization of some of these products themselves where you wanted to test drive, you wanted to go look and feel touch.
But since COVID what has happened is, I mean interestingly the quality of the product, again, time to influencers and all of the ratings out there, you have almost commoditized something as complex as a stroller into a very simple scorecard that clearly lays out does it have, you know, harmful chemicals in it? Does it have stability, does it have balancing wheels? Does it have counterpart?
All of these content metadata characteristics of the, of the product itself has been very widely published and there are tons and tons and tons of information and content regarding how it can be done. So consumers have naturally gravitated towards the department stores and Amazon where if you think about this entire segment, about 1213 billion in size, you have Amazon, Target and Walmart dominating 80% of the market share here.
So it feels like a logical move from buybuy baby to kind of shutter the store because of the high operating expenses likely in the area that they were thinking about and likely exiting all of its formats and just being an online store where they can invest more into the marketing and attracting and go to the higher end of the funnel as opposed to servicing the customer in store through all of their associate experience. Okay, so interesting point. So you like this move?
Okay, throw me for a loop here already. Chris, what are your thoughts on this? It's a good point. Lakshman raises. I guess the, the first like the counter to the question of can you survive without a physical retail store is like can anyone survive with one? Right? Like everyone in baby. I mean there's like 15 to 20 millionft of retail space has been vacated that used to be in baby. Like gymboree babies r Us. Carter's is closing stores. Buy bye baby.
You know, now you have once upon a child is like that consignment space and local luxury boutiques. So most at scale, there's very few. I don't know of another major baby brand that has a big physical retail footprint. Like a lot of the people who would do try, you know, try and browse would end up going to buy online. To what Lakshman's point was that role that used to get traffic in the door which was like try and evaluate is now being filled in by social media and influencers.
Then it makes sense. Maybe you don't have the physical retail footprint but then the question is so you're just competing to buy traffic. So basically they already know the product they want to buy so then you're just spending marketing, your customer acquisition cost goes up, then you're just competing against Target, Walmart to buy that traffic and then you don't have the lifetime of the customer to make that money back, that investment back.
Whereas target, Walmart and Amazon, you can spend more to acquire a customer because your customer lifetime value is so much higher because for the next 20 years they're going to be buying product from you. Whereas if you're buy bye baby, you have to make enough back from that customer over the next year and a half of their baby purchases to be able to make the investment to capture that customer.
I mean, I'm sure there's some potential here, but for me, I'm a pessimist on whether you can really survive and compete against the brands that have taken so much of your market share already without a physical footprint. So. Yeah, so that's interesting. So you basically just think at this point, given the saturation of the marketplace, just the baby business is just a bad business to be in.
And particularly when you look at the macroeconomic factors too, in terms of the declining birth rates as well, that can't help anything too. That's your point, Chris, right. Totally. I mean it's puzzling, right? It's $100 billion market and it's really, really like you'd think massive market share currently only being done by Amazon, Target, Walmart really well.
Wow, that sounds like a great opportunity for a niche brand that better connects with consumers but no ones been able to do it really successfully. Yeah. Yeah. And I 100% agree with you too. I think the idea of doing it alone on the online only side is a fools errand, honestly, because the margins, the products are all market available. Right. Theres not one thing that differentiates you from anyone else.
You can get it from Amazon third party marketplace pretty easily and its really expensive to ship the gear and the cribs. The only margin in the business as the former head of this for Target is in the feeding area and the clothing area, which quite honestly are a little postnatal too, as much as they are prenatal. And so thats kind of a different business in that first time mom business as well.
So its just the markets too saturated with the incumbents to make a hay at this I think, without a physical store presence in particular. But Anne, what do you think? Zachary, I, you know, I, I agree with what you're saying. I don't think that they need to have these again, like we were saying with, with beyond, like I don't think that there needs to be this baby superstore anymore. But I do think we have to look at what's happening with, like, babies R Us and Kohl's.
I do think that there still is a need to go out and test and trial some of these products, especially the gear. So I do, I think the smart move from bye bye baby might be to look for a partner the same way that beyond is looking at container store and Kirklands, because you do get traffic from that. So whether or not they're ordering that stroller from you, for example, you do get people in the store to test it. And I think that's what Kohl's is banking on here with their strategy.
Babies or us is like, hopefully once you're inside of a Kohl's, they're capturing you as a longer term customer. Like Chris was saying. They're, you know, they're giving you some reason to kind of be and start to stay and develop a relationship in this store. I just, I don't think that it needs to be the grand footprint that we're talking about. And if I were buy by baby, I would start looking for a similar partnership of Kohl's and Babies R Us with another retailer.
Like especially, you know, might be far fetched, but even like an Ikea where you're like really in the furniture space or you're thinking of like a place that you're going to get people to invest in for the coming years after that in other higher margin areas potentially. But that's, that key is just, yeah, I mean, the thing thats interesting about buyback baby is they get the brands that the targets and the Walmarts dont get, too.
They get the upper echelon gear brands, which is, what is the differentiation point. So thats what you have to play up. The last thing id make here, too. I think if theres a condemnation that should go out on this headline, its that they have the audacity to think they could run stores across, what was it, seven states like as an online only brand, you're going to know come in and know how to do that. That's just really hard.
So, like, you just shot too hard and why didn't you just like keep one of them and make one of them really, really strong? I'm curious why that isn't part of this announcement. Why is it just shutting everything down completely? I don't know. You got to wonder like, how bad it was going for them for them to buy eleven leases and within, oh, my God. Because when you open a new retail store, you have a new presence. I mean, there's a ramp up time. Right. So how bad was it going that, like.
Because that decision was probably made four or five months ago to close it all down. So, you know, within the first five months, they were just like, oh, my God, no. Yeah. They must have been, like, drowning. That's the only thing I can think of. They're like, what do we get ourselves into? Let's just get out of this completely. And, and, and that's what, that's what ultimately didn't work here, which is why I still think there could be a concept for the baby market, you know, at the upper end.
All right, let's talk about what those babies are going to be doing on the phones that they're given very shortly after they're born. In headline number five, Chick fil A is releasing its own entertainment app, you guys, with family friendly shows and podcasts. According to CNBC, Chick fil A plans to launch a new app on November 18 with a slate of original animated shows, scripted podcasts, games, recipes, and ebooks aimed at families.
A preview of the app, viewed by CNBC, included the first 22 minutes episode of Legends of Evergreen Hills, which continues or protagonists Sam's adventures in the fantasy world of Evergreen Hills. The first installment of Hidden Island, a scripted podcast about a family that shipwrecks on a deserted island, and a step by step cooking tutorial that uses a chick fil a milkshake as a key ingredient.
Customers can pre download the free Chick fil a play app for their phones, iPads, and Android devices ahead of the launch next month. Chris, I'm going to have you wrap this up. This is in your wheelhouse, as you said. Are you buying or selling the idea of Chick fil a producing and distributing its own content via a standalone app? I love it. Like, you know, disclosure bias tier, you know, major Chick fil a fan, avid. As are many of our omnitoc listeners after last week's show.
Yeah, yeah, they, you know, I love it. I think it's a good idea for them, right. It's a brand that people already love. And I think, like, on the surface level, right, people are doing less dining at the restaurant. You know, there are places like McDonald's starting to close their playpens, et cetera. I think it's a fun way to have some sort of replacement engagement in the restaurant.
And I thought you brought up a really good point at the beginning of the show of brands doing a good job listening to customers and I don't think any customers like, actually said, oh, my God, I want chick fil a streaming. But when you look at the release here, they talked about understanding the adjacencies and how the adjacencies to mealtime are shifting.
And instead of having, like, the play centers, they were looking for activities and games that could be adjacent to meal time that customers are doing now. Parents with iPads and things at restaurants, I think it's a great idea to have a slightly different engagement in the restaurant, but then outside the restaurant, you just extend your connection to that customer into totally new environments. When Chick fil A was never being discussed. So, like, is it going to be a massive win? Probably not.
Is there going to be a lot of halo effect from deepening connection with the brand? And, you know, can you market to kids without blatantly marketing to kids with this? Yeah, probably, right? I like it. Yeah. I mean, that's a question that they bring up in this article, too, that I thought was interesting. Like procter and Gamble did this with the soap opera early on. Like, is this the next? Is Chick fil a the next p and g? And do they have the ability to drive traffic to another destination?
We'll see. Lakshman, where do you come down on this? Well, if they figure out the licensing fees and all the royalties and everything with others in terms of how they're going to go to production services on this one, right. If it is a low overhead and they not invested a ton into that and have lot more AI driven content generation going on here, this is a real use case for asset light model for them to develop and deliver content quite significantly.
And kids are always stuck to their iPads, so we can have greater engagement. I think it just increases two things. One is traffic, where kids have a reason to go to chick fil a now. And number two, duration for which they can stay in the store. So you at least have to stay for the duration of the video. Likely. Right. And they likely, you know, give free Wi Fi and whatnot for this. And eight to ten minutes will likely get extended to 15 to 20 minutes.
The longer you stay, the more you buy, which in case drives the basket size and the AoE. Yeah. And I mean, Chris, what are your thoughts here? Walton? Chris Walton, because it's not in the chick fil a app. You use the chick fil a app like no one's business. So I mean, do you think that they'd be better positioned putting this inside of that app experience or can they drive traffic to an entirely new app. I don't know.
I'm starting to feel like this is a glass half empty podcast for me because I hate this idea, too. I mean, and for the reasons you're saying, I think the PNG analogy is a false analogy, because PNG producing that content, but distributing it through an existing content network, which is the problem here. So whether you create your own app or whether you put it in the existing chick fil a app, when people are in the entertainment seeking mood, we talk about it all, all the time on the show.
Like, you're competing against TikTok, Instagram, YouTube. That's a hard hurdle to get over. And so this whole thing, I mean, it's funny. It reminds me of my old boss, Jason Goldberger, used to have this thing where he'd say, like, you remember, like, the app craze in 2010, 2011? Like, roughly, he'd be like, do you know that Lysol built an app? Like, why in the hell would Lysol build an app? But that's what they did.
And I think that's what we're seeing here as well, is that a lot of companies are trying to get into this media thing, but they're not thinking about the right way to do it. And they're almost over engineering a new wheel too much. Instead of just saying, okay, yeah, we want to put content in there. We want to create attachment to our brand. What's the right distribution channels for us to do that? And that's how you should be thinking of it. But this is. This is way too souped up for my tastes.
Yeah, I mean, and I think it actually goes a little bit against what Lakshman was saying, because they. It does involve a heavy amount of capital to invest to make this content and to real and to drive traffic to it early on. Yes, you have AI that can help make this a little bit simpler. But my only question here is, you know, something that really started to resonate with me when we were at shop talk fall last week, and that is just really rethinking about Gen Z and Gen Alpha.
They are the first digital first generation that has been. Has started on iPads from the moment that they were coming out a bye bye baby. And now they are looking at content. They're exploring brands and experiencing brands in a digital way like they never have before. So is this. Is chick fil a really, like, doubling down and saying, this is how we're going to try to invest with the next generation of consumer? We know we have them. We know that they want to come to our stores.
We know that the content that we're generating on the social platforms is working with them. How do we get them further embedded with us? And that's, that's the only question that I have here is, like, will they actually be able to pull this off?
Because they're, they're really putting all of their investment in doing that in a, in a way that a lot of other retailers aren't doing anymore, especially like Walmart last year was doing, trying to do this, too, with their add to heart series that we haven't heard anything about yet this year. But could this be, could this be them being kind of, you know, ahead of their time? Yeah, but, and to that point, like Walmart, we haven't heard word one about that from Walmart this year.
And they were doing that through YouTube, too. So, like, but net. Net, what do you, do you like this idea? And though, like, would, is this how you would advise them, trying to approach Gen Z? And I would do it in this way, I think I try to keep it within the chick fil a app. I think that makes more sense as a starting point. And then using clips of or content to put on the social platforms on YouTube, on TikTok, where the generation is exposing themselves or discovering content.
And then I drive them into the app for, for long form content if that's what they want. All right, let's go to the Lightning round, you guys. Question one goes to you. Chris retailbrew recently released their list of the best horror movies set inside retail destinations. What is the best movie shot in a retail location? And I'll give you extra credit if it's horror or Halloween related. I'm going to thank you and I'm going to decline the extra credit and go. I'm going to lower the bar here.
That's just fine. That's just fine. That's just fine. I'm going to go with bad Santa, the classic retail Santa. And then I'll add a fun fact to try and get back some of the extra credit that I. We're accepting. We're accepting. Billy Bob Thornton actually was drunk on set during that scene to play up the role of being the drunken Santa in the department store. So. Oh, my God. Points back. How do we sign up for that job? Yeah, right. That would be that movie in a while.
Yeah. I got to find a quote from that movie for our newsletter. All right, Chris, back to you. Doritos on Monday released its first ad filmed in space, and it is filled with the sound of astronauts crunching down on the brand's first ever chips to leave the planet. If you were to take one food into space with you, what would it be? It's a good question. I'm going to go. There's a new chip that's very similar to Doritos. They're called quest protein chips. They're made out of whey protein.
It's 20 grams of protein, 140 calories. It tastes just like a Dorito. They're fantastic. Yeah. Really good. You have to check them out. All right, I'm going to try it. I don't know. I don't know if I can believe that a whey protein chip is going to give me the satisfaction of Doritos, but I'll hold on. And of all the food, that's what you take into space with you, Chris. They're really, you love them that much? That's funny, because my answer is Doritos, too, so. Okay. I can buy that.
I guess they're that good. I got to try them. Yeah. All right. All right, Lakshman, we're going to you now. It's almost Halloween. Very simple. Rank your top three Halloween candies. Oh, boy. Of course, you know, there is sore patch. There is skittles. That is Eminem is my personal favorite of mine is Hershey's kisses. Hershey's, kiddos. Yes. Wow. Okay, that's number one. What's two and three? Sour patch kids and skittles. And the second would be.
Yeah. Second would be skittles and third would be, you know, probably sour patch. Yeah. Oh, my God. I love. I'm with you on sour patch. I don't know about the Hershey kiss, though, man. Wow. That's so random. One of those is not like the other two. That's so crazy that Hershey kiss leads the pack. All right, last one, Locksmith. LinkedIn lunatics.
A 670,000 member Reddit community devoted to, quote, insufferable LinkedIn content has made it made it its mission to poke fun at insufferable LinkedIn posts that have no business being shared on a business to business networking site. What is the most audacious post? You recall the reading on LinkedIn that you wish was not on the platform? Yeah. LinkedIn is like kitchen sink. I say if you don't pay attention to it, it gets like really nasty in a few weeks.
So you have to continuously keep cleaning it and maintaining it. But for me, I think, you know, all of the advertisements around, you know, hey, here are the new products, et cetera. Those are fine. But teaching life lessons through memes, that is one that probably crosses the boundary for me. Got it. Yes. Got it. Yes. I feel like Lakshman has an example in mind that I'd love him to share with us.
Well, there is this one meme where there was the office, and I think they had something along the lines of, you know, how teamwork is dreamwork or some. Something like that, which was completely. And using that particular frame to kind of help explain was, like, weird, because we know the dysfunctions of office, so let's. Yeah, we love both, but they have to live in separate universes. Yeah, 100%. Yeah, that.
That's always my pet peeve, too, is the pithy, like, sayings that come out on LinkedIn which, like, apply to every leadership situation and anywhere in the world. That always drives me nuts, too. All right, well, thanks you both. That closes up. Happy birthday today to Amelia Clark, Ryan Reynolds, and to the woman who is the reason I have rewatched step up to at least half a dozen times, Brianna Evagan.
And remember, if you can only read or listen to one retail blog in the business, make it Omnitonko, the only retail media outlet run by two former executives from a current top ten Us retailer. Our fast five podcast is the quickest, fastest rundown of all the week's top news.
And our daily newsletter, the retail daily Minute, tells you all you need to know each day to stay on top of your game as a retail executive, and also regularly features special content that is exclusive to us and that Ann and I take a heck of a lot of pride in doing just for you. Thanks as always for listening in. Please remember to like and leave us a review wherever you happen to listen to your podcast or on YouTube. You can follow us today by simply going to YouTube.com omnitalkretail.
Lakshman if people heard this conversation, they say, hey, I want to get in touch with the A and M consumer and retail group. What's the best way for them to do that? Yeah, you can find us on LinkedIn. We have our own page on LinkedIn. Search for Alvarez and Marcel consumer and retail group on LinkedIn. Or you can visit visit Alvarez and marcel crg.com online. Awesome. Awesome.
So until next week, on behalf of Chris Locksman and myself and all of us at Omnitoc Retail, as always, be careful out there.