1) Hudson Yards is using digitally-native brands to shield its retail property from typical mall woes.

WHAT HAPPENED: As malls lose traction among consumers, Hudson Yards is betting on an innovative retail hub featuring one floor that will sell purely digitally-native brands.

Why it matters

  • Between 2019 and 2023, digital retailers will open a minimum of 850 stores, 41.3% of which will start in New York City, according to JLL, a property consulting firm. Retail property groups are increasingly turning to these brands to revive empty malls, but many rely on shorter-term leases or pop-ups that derisk the movement offline for both parties. Hudson Yards is approaching digital brands differently in the hope that they can strike a more symbiotic partnership—and an innovative retail solution—at its 18-million-square foot commercial and residential space set to open this March.
  • Applying lessons from the struggling retail industry to Hudson Yards, Related, the real estate company behind the development, is devoting an entire retail floor (77 square feet) to digitally-native brands, as well as offering them longer leases and bigger spaces. So far, Rhone, a men’s activewear brand, M. Gemi, a shoe brand, and The Drug Store, beverage brand Dirty Lemon’s cashier-free retail concept, have signed on. The property is taking a chance on these brands, many of which are recent entrants to physical retail, at the same time that these brands are taking a chance on Hudson Yards and forking over the cost of setting up owned retail. But it may pay off for both parties.

2) Rihanna transforms the concept of the celebrity brand with an LVMH deal.

WHAT HAPPENED: Global luxury conglomerate LVMH struck an unprecedented deal with Rihanna to create a new fashion brand.

Why it matters

  • Companies have been using celebrities as brand ambassadors for decades, but more recently, the tides have shifted as celebrities begin to harness their social capital, launching their own brands. Kylie Jenner’s Kylie Cosmetics is a prime example, as is Cindy Crawford, LeBron James, Arnold Schwarzenegger and Lindsey Vonn’s new supplements brand, Ladder.
  • Though LVMH has chosen to grow its business through acquisitions—the last brand it created was Christian Lacroix in 1987—Rihanna comes with a full resume of experience: previous fashion design with Puma, where she served as creative director for her own line in 2014; the Fenty x Savage lingerie line, which launched in September 2018; and most importantly, the success of her cosmetics brand, Fenty Beauty—a collaboration with Kendo, the brand incubator at Sephora, which is owned by LVMH. The specifics of their deal remain unknown, but it’s clear that Rihanna will not hold full equity of the LVMH brand, a departure from Jenner’s 100% ownership of Kylie Cosmetics. However, as the latter has demonstrated, celebrity may be enough to launch a brand, but it’s rarely enough to sustain it: After selling direct-to-consumer only, Kylie Cosmetics entered Ulta Beauty in Q4 2018. On the other hand, Fenty Beauty continues to perform incredibly well—the brand made $72 million in its first month—so trading equity or autonomy for well-oiled frontend and backend operations and profits might be worth it to Rihanna. Still, it remains to be seen how the celebrity’s past lines, which are built on accessibility and universality, will influence her work with the exclusive luxury conglomerate.

3) Consumers want to keep politics out of the Super Bowl, even as more brands embrace advocacy.

WHAT HAPPENED: Two-thirds of American consumers don’t want politics to interfere with the Super Bowl, according to a poll by Morning Consult for CMO Today.

Why it matters

  • With the Super Bowl remaining one of the year’s most sought-after advertising opportunities—last year’s game attracted 103.4 million viewers—brands are eager for a spot. In the past few years, many have promoted ideological values in their marketing, both at and beyond the Super Bowl. T-Mobile advocated for diversity in 2018 and Airbnb spoke out against Trump’s immigration policies the year prior. In one of the highest-profile cases of 2018, Nike signed a contract with former San Francisco 49ers quarterback and racial justice advocate Colin Kaepernick. More recently, Gillette ran an ad in support of the #MeToo movement.
  • Though many brands may consider politically-oriented marketing campaigns to be a sure way to win over consumers—especially younger ones—who expect companies to stand for something, the Morning Consult poll found otherwise. A whopping 77% of Baby Boomers did not consider the Super Bowl to be an appropriate platform for such advocacy, followed by 55% of millennials and 43% of Gen Z respondents. Regardless of the ethics behind co-opting a political movement to sell products, brands need to be wary of consumer fatigue, recognizing that some football fans just want to watch the game. But at the same time, it’s unlikely that a company like Nike will retreat from taking a political stance. Moving forward, it’s up to brands to gauge how they will square the price and resonance of a high-profile ad spot with the potential alienation of certain demographics, even if the message strong appeals to other consumer groups.

4) Brandless unveils a subscription, but it’s no match for Prime Pantry.

WHAT HAPPENED: Brandless, which sells $3 essentials, is offering subscription plans at a variety of frequencies, including a $36 yearly membership with free shipping.

Why it matters

  • Brandless came onto the scene in 2017, selling essential products devoid of the typical brand tax. Almost all of the company’s approximately 400 SKUs are $3, with shipping at a flat $5 (it’s free for orders over $39). However, Brandless is neither a prominent competitor in any of the categories in which it sells, nor can it boast about customer retention. Only 20% of first-time Brandless shoppers in Q4 2017 returned in Q1 2018, and the percentage fell to 13% by Q4 2018. The subscription service, which can be weekly, monthly, biannually, or at the customer’s discretion, may help remedy these numbers by helping form consumption habits around shopping at Brandless.
  • This tactic makes sense for a brand predicated on essentials, though many other retailers already offer bundles. It’s unlikely, for example, that an Amazon Prime member, who is already paying $119 a year for free shipping among other benefits including Prime Pantry, will now pivot to Brandless for its household and grocery items. Right now, Brandless offers far fewer SKUs than those included in Prime Pantry, though it hopes to expand its product assortment to about 800 items by the end of 2019. Still, as a fully private-label brand, Brandless does raise the question of whether Amazon will create a private-label-only CPG subscription once it’s built up a large enough roster of owned brands.