1) IKEA downsizes and digitizes to retain its hold on young clientele.

What happened

  • Since 2015, IKEA has opened 24 small format stores—an average of 9,700 square feet, compared to its traditional 82,000 square foot warehouses. Customers aren’t able to bring many items home with them from the stores, but they can place orders and schedule delivery or pickup and set up a time for TaskRabbit—a startup that IKEA bought in January 2018—to assemble furniture. The storefronts also have a higher density of sales associates than at a typical IKEA warehouse, and thanks to their smaller size, can be updated more readily to adapt to changing trends.
  • Though IKEA has seen foot traffic to its site grow 10% annually for two consecutive years, in-store purchases still account for 90% of sales. The company’s changes are meant to respond to a market that is increasingly moving online—ecommerce sales for furniture and appliances are expected to grow approximately 12% annually for the next three years. It also wants to expand its delivery to a 24-hour service in order to meet online shopping demands around the clock, and plans to sell on third-party sites including Amazon and Tmall.

Why it matters

  • These changes are intended to help IKEA maintain a competitive advantage vis-à-vis digitally-native furniture and appliances retailers like Wayfair and Amazon. The company has noted that its customers—many of whom are younger or early homeowners—are both shopping more online and driving less. The smaller storefronts seem to reach a compromise: They still encourage in-person shopping—what IKEA has that Amazon doesn’t—but send the items directly to the customer’s door, which she’s likely come to expect in the age of ecommerce. This offline-online hybrid might be a better manifestation for the IKEA brand, as carting cumbersome furniture to assemble at home is one of the worst aspects of shopping at the warehouses.
  • IKEA has already received flack for its smaller storefronts—many shoppers see its warehouses as a destination and a one-stop-shop with a wide breadth of SKUs for anything in the home, plus a cafeteria. However, downsizing could start to reach new audiences, especially if the company is able to localize the offering of each store and meet the interests and needs of a smaller batch of nearby customers. Or, it could be used as an incubator to test new concepts for the warehouses—whatever keeps consumers coming back instead of reverting to Amazon.

2) The RealReal raises $115 million as it attempts to take luxury consignment offline.

What happened

  • The luxury resale company’s latest Series G round led by PWP Growth Equity brings the company’s total funds to $228 million. The RealReal stated that it plans to use the round to create new fulfillment centers and stores in addition to its Soho flagship—its second will open this week in Los Angeles, with a men’s section, a large handbag display area, a cafe, curbside drop-off and authentication specialists.

Why it matters

  • There’s no doubt that the second hand sellers and buyers are growing in number. The second hand luxury market is already worth $25 billion annually and is now growing more than twice as fast as the primary luxury market. But while the new crop of digitally-native consignment retailers like The RealReal and ThredUp have infinite online shelf space and massive warehouses to house and ship their inventory, translating the experience to a brick-and-mortar storefront comes with a number of challenges.
  • For one, consignment stores are traditionally disorganized and chaotic—certainly not the right fit for a luxury—albeit secondhand—retailer like The RealReal. Additionally, consignment shoppers go, at least in part, for a treasure hunt, while The RealReal’s in-store experience is high-curated (one chief merchant calls it a “resale department store”). Particularly for millennials, who make up around one-third of The RealReal’s customers, a department store-like setting won’t do much to lure them in to see the store in person.
  • Fundraising also continues to be a necessity for such a capital-intensive brand. The RealReal’s main draw is its robust team of authenticators—a department that must scale alongside the products, expanding as the company’s inventory grows. (These experts most likely cannot be replaced by computers either.)

3) Disney and 21st Century Fox strike merger agreement, a harbinger of the future film and TV industry.

What happened

  • Disney beat out Comcast with a $71.3 billion purchase plan for 21st Century Fox. Once it is able to integrate Fox, Disney will gain access to a slew of movies and TV shows, the cable networks FX and National Geographic, and controlling stakes in Hulu and Star, and Indian media company. Disney, which already owns Lucasfilm, Marvel and Pixar, also plans to launch its own streaming platform in 2019.

Why it matters

  • Recognizing that the future of television and movies exists online, Disney is trying to stay ahead of the pack by owning as much content and controlling its distribution channels as much as possible. As an older media company that focused on content production rather than distribution, Disney has had to catch up to the new wave of digitally-native services like Netflix and Prime Video. Acquiring production companies (Lucasfilm, Marvel and Pixar), media companies (21st Century Fox) and networks (Capital Cities/ABC Inc.) are important steps to retain its authority over the media space, as is Disney’s plan to remove its content from Netflix to its own streaming platform. Meanwhile, digitally-native streaming companies are moving in the opposite direction: they have had a leg up on the online distribution piece, but are increasingly reving up their content production—Netflix, for example, plans to make 50% of its content original programming in the next few years.
  • Disney and 21st Century Fox will not be the last merger in the media space. But another important issue to look out for will be how these mergers and acquisitions affect brand equity. Beginning in the 90s, Disney began using its acquisitions to fund and drive new projects—the company now makes the most revenue from its media networks, which has been used to fund its theme parks and resorts, in particular. Additionally, the number of franchises Disney now owns vastly expands its consumer product capabilities, which the company can use to grow its licensing business.

4) A Ma Maniére applies lessons from the streetwear industry to its hypebeast hotel.

What happened

  • A Ma Maniére, an Atlanta retailer, has opened a new store in Washington, D.C. with three floors devoted to streetwear shopping and two suites that can be rented out for a maximum of five days. One more sophisticated, and the other more vibrant, the suites are designed with the hypebeast enthusiast in mind, are completely Instagrammable, and come with a curated closet of the guests’ favorite designers in their size.
  • The retailer is also treating its hotel concept like a product drop; it wants to run the suites like the sneakerhead marketplace, using a scarcity-driven business model—booking as much as possible—to drive demand. Doing so, A Ma Maniére’s founder says, will make the suites feel like “limited-edition.”

Why it matters

  • Among the many consumer product companies seeking to become “lifestyle brands,” A Ma Maniére is creating a shoppable and—more importantly—liveable haven for hypebeast fans. Aside from offering consumers the ability to navigate seamlessly from retail store to hotel room, it treats the suites like glorified dressing rooms themselves. Guests can try on their personalized selection of outfits, snap pictures to post online, and immerse themselves in the aesthetic of their favorite designers and artists. Other companies, from Equinox to Muji are trying out similar concepts in order to maximize the emotional connection between consumer and brand.
  • Adding the scarcity play to the business model also applies lessons from the streetwear industry to the field of hospitality. In any hotel, there are only so many rooms, but the fact that the A Ma Maniére space includes only two suites (limited availability) in one city (geographic specificity) heightens the appeal of the experience, as long as the retailer is able to get the word out to its somewhat niche target audience.