1) Hotels abandon convenience stores in favor of branded destination retail.

WHAT HAPPENED: Higher-end hospitality companies like W Hotels, the Line Hotel and Shinola are opening their doors to boutiques, upending the traditional toothbrush-and-soda hotel convenience stores.

Why it matters

  • During a time when the travel economy is gaining speed and more shopping is done on-demand and on the go, hotels can capitalize on stores selling products that act as extensions of the travel experience. Branded apparel and accessories let hotel visitors take an element of their stay home, whether to relive their trip or gift a souvenir to a friend. These items also market the hotel to new potential consumers.
  • Hotels can create a destination not only out of their location and hospitality, but also in their shopability—whether that means bringing in retail faces that attracts supplementary business from hotel visitors and passerbys, or creating an apparel and accessories brand in their own right. Luxury watch company Shinola epitomizes this in Detroit. After building a watch and leather factory in the city in 2011, it opened the doors to a Shinola hotel this January 2019. Not only is the new hotel a destination for a curated selection of retail stores and restaurants, but it also enables consumers to partake in a 360-degree Shinola-branded experience, down to the bathroom fixtures inspired by the company’s watches.

2) Starbucks condenses its planned expansion of higher-end coffee bars, but still hopes the premium store concept will help raise revenues.

WHAT HAPPENED: About three years after announcing a proposed build-out of 1,000 premium Reserve coffee bars, Starbucks will only test six to ten.

Why it matters

  • Starting with 1,000 new stores is aspirational, but hardly pragmatic—not least because Starbucks is uncertain how the concept will perform. A small beta test will provide useful data to inform the company’s next move and future evolution given its desire to move upmarket. This is a rational push; the coffee revolution that Starbucks helped initiate has prodded more artisanal, expensive players onto the scene. This means that Starbucks’ products are cheaper, but also that it has an opportunity to gain more from raising its own prices. Now it’s just a question as to why Starbucks announced a 1,000-store build out in the first place. Perhaps it was to compete with brands like Casper that are attracting industry attention by pushing for 200 stores by 2021, or maybe it was to uphold Starbucks’ reputation as a company with a mammoth footprint (it currently operates 24,000-plus stores internationally).
  • When it comes to Reserve itself, it’s unclear whether Starbucks’ core customers will bite. The higher-end coffee bar concept might help the company recover from falling sales and its goal of raising same-store sales by 3-4% in 2019, but that might necessitate new customers who are willing to pay higher prices. And any house-roast-loving hipster that associates Reserve with Starbucks may be instantly turned off.

3) Beauty brands embrace the Consumer Electronics Show to strengthen their reputations as tech-driven companies.

WHAT HAPPENED: The Consumer Electronics Show (CES), an annual trade show bringing together developers, manufacturers and suppliers of consumer tech, is attracting a growing number of beauty brands.

Why it matters

  • While L’Oréal Group (which owns Clarisonic) has attended CES since it launched a tech incubator in 2012, Olay and HiMirror, a smart beauty mirror brand, are now following suit. L’Oréal has used the event for tech-friendly product drops; the Kérastase Hair Coach, a smart hairbrush, debuted at CES in 2017, followed by My Skin Track UV in 2018. Other brands see the event as an opportunity to spot new trends, team up with collaborators and evolve their image. This week at CES 2019, Clarisonic is releasing an unpublished scientific study to enhance its scientific and tech credibility, while Olay plans on connecting with tech media in order to raise the brand’s profile as tech-driven for its target Millennial consumers.
  • CES attendees are unlikely customers for these beauty brands, but Clarisonic and Olay’s presence at the event can still impact shopper relationships indirectly. Embedding within the tech community will establish new connections that these companies can use in their research and development, as well as marketing. As part of the beauty market—a highly competitive industry now worth more than $86 billion and expected to surpass $94 billion by 2022—these brands can use CES as another way to stand out and innovate tactfully, creating useful collaborations and products that don’t resort to gimmicky technology.

4) Stitch Fix retains strong gross margin as it prepares to enter the UK market, but must find new avenues for customer acquisition to survive long term.

WHAT HAPPENED: Stitch Fix’s Q4 2018 earnings report clocked a high gross margin of 45.1%, second only to Lululemon’s 54.4%, according to a Bloomberg survey of select brands.

Why it matters

  • Investors were initially skeptical of Stitch Fix’s unique business model, which requires high levels of inventory and is subject to product returns from customers dissatisfied with what the algorithm and the company’s stylists recommend. But the company has grown its customer base to 2.9 million as of October 2018 (22% growth year over year) and reached $1.2 billion in revenue in 2018. Now, it is preparing to launch in the UK, where it can tap into a whole new market.
  • Despite its growth, Stitch Fix needs to keep expanding its audience and retaining clients to survive. While the UK will likely reel in a good deal of new customers, overseas expansion is costly, requiring new staffing, local vendors, and warehouses. Stitch Fix’s brand also has limited reach—the number of countries whose residents are willing to pay for a personalized apparel and accessories service that ships boxes home and lets customers send back what they don’t like isn’t such a wide pool.
  • In the lead up to the company’s IPO filing in October 2017, Stitch Fix’s ad spend grew from $10.2 million in Q1 2017 to $19.8 million in Q1 2018 (94% growth year over year). Increasingly aggressive ad spend—in Q2 2018, it reached $28.9 million, or 9.1% of total revenue—suggests that Stitch Fix is spending more to make up for slowing revenue growth. But marketing is still a way for the company to strengthen and grow its connection with U.S. shoppers, as long as it can match their needs.