1) Instagram launches in-app payments for select brands, which could substantially increase its share of commerce.

What happened

  • For the in-app payments, an extension of Facebook Payments, Instagram allows users to create a profile that includes their debit or credit card information and a security pin. Then, users can make purchases from Instagram’s brand partners without leaving the app.

Why it matters

  • Instagram announced back in 2017 that the it would offer an in-app booking service that allows users to schedule reservations with some companies like Resy, as well as appointments at salons. But at a moment when mobile payments in the U.S. are on the precipice of a great leap forward—12% of mobile transactions in the U.S. are now attributed to Starbucks’ mobile app—native payments on the ever-popular Instagram app have the potential to vastly alter the mobile commerce game.
  • Right now, Instagram’s Shoppable Tags option allows shoppers to click on an image, which automatically moves them off of the app and onto the brand’s webpage. But the in-app payment feature will both allow brands and retailers to meet consumers where they already are, converting more clicks into frictionless sales, as well as boost Instagram’s advertising revenue—even if the app doesn’t (yet) receive a cut of the in-house sales.

2) Sephora opens its second Studio, merging the best of brick-and-mortar with technological innovations.

What happened

  • Sephora’s second Studio is now live in Hoboken, NJ, after the launch of the first in Boston in July 2017. The Studios combine Sephora’s sales associates with new technological ventures—the Virtual Artist App (an augmented reality tool to sample makeup and speak to reps), Color IQ (a scanning tool to match skin tone to foundation), Sephora’s Beauty Studio Check-In (for online reservations), the Sephora Client App (a directory of customer profiles and a mobile payment tool)—and in-house services like beauty classes and facials.

Why it matters

  • At a time when the beauty industry is fast-expanding, the Studios combine the best of Sephora’s brick-and-mortar presence—hands-on counseling from its sales associates—with new cosmetics-oriented technology. With their smaller square footage—the Hoboken Studio is just over 3,000 square feet—the studios serve as a concentrated hub of activity for customers to sample products, meet with store reps and embark on experiences. As the company plans to open more locations in Brooklyn, Los Angeles and Washington, D.C., the Studios could bring the brand outside of traditional locations like malls and into more densely populated areas, serving as new points of entry to Sephora without having to built out and maintain the larger square footage of a typical storefront.
  • The Studios also help Sephora stride ahead of its competitors. The company was one of the first beauty brands to embrace live video and augmented reality with its Virtual Artist App, a product from a tech company called ModiFace. But in March 2018, L’Oréal acquired the company, threatening Sephora’s future use of the app and its command over the virtual reality space. However, with its Studios, Sephora manages to bring the app onto its own turf again, supplementing the tool with its staff’s expertise and other points of in-store discovery. The Studios also counteract the expansion of Ulta—which has plans to open 100 new stores in 2018—at a lower cost than Sephora’s competitor.

3) Online returns are hurting landlords as much as they are plaguing retailers and brands.

What happened

  • Online sales are growing to represent a larger portion of total retail sales—they comprised approximately 10% of all retail sales in 2018, and are expected to climb to 24% in 2027. But the rate of returns for online purchases is also growing, sometimes four-times higher than the rate of returns on items bought in store.

Why it matters

  • For many mall tenants, which have long relied on the sales per square foot metric to report their financials, factoring online returns into their sales is the latest characteristic eroding perceptions of already beleaguered malls. But this isn’t only a problem for stores—it also affects landlords on a financial level. The majority of mall tenants pay a base fee and then give the landlord a portion of their sales, so subtracting online returns from sales means less revenue for property owners.
  • Ecommerce more frequently leads to returns because of poor fit or incongruity between how a product looks online versus how it looks in person. But despite the rise in online returns, shoppers still prefer to receive refunds or exchange items in person than print a label, ship an item and wait for their money back. This means that malls and brick-and-mortar stores still retain foot traffic, which they can convert into more sales if a customer is coaxed to browse the store, or other stores on the property while they’re there to make a return. Brands, retailers and real estate professionals should take this opportunity to maximize the foot traffic and sales from these consumers moving foward.

4) Birchbox sells a majority stake to one of its investors in light of a failed QVC acquisition deal.

What happened

  • In the summer of 2017, Birchbox, a subscription cosmetics company, began negotiating with retailers including Walmart, and most recently QVC, to sell the company. But when the latter fell through, an initial investor, Viking Global Investors, bought a majority stake, followed by a $15 million investment to keep the debt-ridden company afloat.
  • Birchbox sends subscribers a box of four to five cosmetics samples each month for $10, with the goal of converting some of these samples into full-price sales (it claims full-price sales comprise 35% of its revenue). After it was founded in 2010, the company raised approximately $90 million (and was at one time valued at $500 million), but its customer-acquisition costs remain high, and revenues stagnated in 2015 in the face of competitors like Ipsy.

Why it matters

  • The deal with Viking Global Investors means that Birchbox’s CEO and co-founder, Katia Beauchamp, will remain at the head of the company, and that employees will maintain their positions—this would not have occurred had QVC acquired the company. However, if Birchbox’s other investors—who gain nothing from the Viking deal—put up a fight, the company could fall into bankruptcy.
  • Birchbox’s revenue is now approximately $200 million, and it has a network of 2.5 million active customers across six countries. But its current state is yet another casualty of the subscription box boom, which has plagued multiple companies such as Blue Apron because of overvaluation and bad unit economics. Thanks to Viking, it now has another chance to scale more healthfully. But acquisition costs remain high, forcing Birchbox to sell mostly other brands, which in turn restricts the company’s own margins. It’s not clear if more venture capital will help the company emerge from its predicament and bring it to the zone of profitability.