1) Starbucks will expand U.S. delivery, combating falling foot traffic by meeting customers where they already are.

WHAT HAPPENED: Starbucks will expand delivery via UberEats in the U.S. after testing the service in Miami and China.

Why it matters

  • Since the company has noticed fewer frappuccino-ordering faces at its coffee shops, it’s planning to meet them directly. Delivery for a beverage-focused brand comes with its own difficulties—drippage, sealing and temperature—which Starbucks has strived to address through its pilot programs. In early 2019, the service will be offered out of almost 25% of Starbucks’ 8,000-plus U.S. stores, not only meeting consumers where they already are, but providing the increasingly expected immediate gratification. In the long run, this move will be something to watch—likely delivery in the coffee space will increase and Starbucks will have to maintain a strong brand presence in the midst of competitors.
  • The coffee space has been brewed more competition for a while, with companies like JAB Holding purchasing Pret a Manger, Peet’s Coffee & Tea and Panera Bread Co. and Nestlé selling its poorer-performing brands to focus on Nespresso, Nescafé and others—moves that attempt to follow consumer trends, like the rise in cold and ready-to-drink beverages. For its part, Starbucks is pivoting to focused areas with high growth potential like delivery—and closing down less promising facets of its business. In terms of consolidating, it has closed all of its Teavana stores, cutting down its corporate staff. At the same time, the brand is pouring more time and money into improving customer service at its shops, selling packaged and single-serve coffee that’s compatible with Nestlé home brewing devices, and innovating cold drinks like nitro brew, which now make up about 50% of its business.

2) Saks Fifth Avenue will shutter its standalone women’s shop in downtown New York as the legacy department store strives to evolve.

WHAT HAPPENED: Saks Fifth Avenue will close the experimental women’s store it opened at Brookfield Place in New York in 2016, but plans to keep its downtown men’s shop.

Why it matters

  • In the last few years, Saks has initiated some unprecedented R&D in terms of the company’s history, striving to stay relevant to modern consumers who are underwhelmed by merchandise mix—the original value prop of department stores. To do so, Saks opened the women’s-only store downtown, which helped illuminate that its female customers are more inclined to shop a combination of online and the Saks flagship. The company also began renovating its Fifth Avenue flagship in Manhattan, moving the beauty department from the ground floor, where it will be replaced by higher-margin handbags and leather goods, to the larger second floor, where it will join new spa services and events.
  • Saks’ decision to keep its men’s-only store downtown mirrors Nordstrom’s decision this year to open a standalone men’s store in Manhattan (Nordstrom also plans for a women’s version in 2019). Saks and Nordstrom’s respective segmentation of women’s and men’s departments is a novel development for the legacy department store industry—these stores have long existed as sprawling metropolises where customers can accomplish all their shopping, and where women can shop for themselves, as well as their male relatives. Though the menswear industry is growing faster than its female counterpart, it’s unclear if the choice to divide the two is a provision for men who may be more interested in shopping for themselves or a way for the heritage stores to concentrate on improving experiences one at a time.

3) Warby Parker, Everlane are some of the newest digitally-native brands to offer interest-free installment payment plans that cater to millennials without credit cards.

WHAT HAPPENED: Warby Parker announced that shoppers can now purchase eyewear with the lending company Affirm, while Everlane debuted a similar plan with Afterpay.

Why it matters

  • As more companies offer installment plans, they can choose from a growing pool of loan companies as partners, from Klarna, which is working with H&M, to payment behemoth Square. Warby Parker’s chosen partner Affirm now has 1,300 U.S. clients, including Casper, Expedia and Peloton—the latter has seen sales growth in large part thanks to the spike in new customers choosing to finance their bikes instead of paying $2,000 upfront. Meanwhile, Afterpay, which is used by Everlane, has 20,000 global merchants, 1,000 of which are U.S.-based, including the brands of Urban Outfitters, Inc. With Everlane, shoppers can use the service to pay 25% of their bill at checkout, followed by four installments over six weeks with zero interest. Those who miss a payment are charged a flat $8 fee (failure to pay back the loan subjects shoppers to arbitration).
  • The rise in loan payments illuminates the contradiction between a consumer brand’s packaging of the offering as charitable and its potentially detrimental long-term effects for shoppers. “Holiday shopping can take a toll on the budget. So we’re offering you an easier way to pay,” reads Everlane’s marketing email announcing its partnership with Afterpay. But ease of use—shoppers can sign up for a loan service online or on an app to be approved almost instantly, and can then use installment plans to splurge on items they wouldn’t otherwise buy—shadows the irresponsible consumption these services can provoke. Afterpay notes that 65% of consumers who use its service in the U.S. are age 30 on average and don’t have a credit card at all—it also mentions that late fees comprise almost 20% of its H1 2018 revenue. While an alternative to credit cards—and an opportunity for younger consumers who typically have weaker credit scores—these plans may also obfuscate a given shopper’s ability to build a credit rating in the future.

4) Influencers and celebrities ditch endorsement deals to launch their own brands—it doesn’t matter if they’re CGI.

WHAT HAPPENED: Miquela Sousa, a CGI influencer created by a startup called Brud, has announced she will launch her own apparel brand.

Why it matters

  • The influencer, affectionately known as Lil Miquela, is not the first to create her own brand—a move that earns much higher margins than those received as a brand ambassador via an endorsement deal. Just last month, Cindy Crawford, LeBron James, Lindsey Vonn and Arnold Schwarzenegger announced their new wellness brand, Ladder, and Schwarzenegger specifically pointed to his interest in co-launching a company where he would receive greater equity and exercise more autonomy. Other notable players in the space include Goop (Gwyneth Paltrow’s brand), Honest Company (Jessica Alba’s brand), Kylie Cosmetics (Kylie Jenner’s brand), and Something Navy (a Nordstrom private-label created by the influencer Arielle Charnas).
  • But Lil Miquela’s brand is different because she’s not a real person. Miquela cannot personally contribute to the brand’s development, though this doesn’t mean she has no input. Her fanbase, now 1.5 million Instagram followers strong, is keen to provide recommendations—upon announcing the project, the influencer asked them to share their favorite web developers, designers and artists, which will likely help build a team to launch the brand. Earlier this year, Brud raised $6 million in venture capital from BoxGroup and Sequoia Capital, among others, which will likely contribute to expanding the startup’s brand-building capabilities. Miquela as a brand creator and influencer circumvents problems of celebrity-led brands where business success is tied to the celebrity’s reputation (the brands can also unravel if the celebrity chooses to leave the helm). While Miquela has only grown in popularity—her following continues to increase, even after she announced that she isn’t human in April 2018—her brand will be dependent on the influencer’s ability to engage with her audience over a long period of time, and it will be Brud’s task to ensure she remains compellingly authentic, despite her artificiality.