1) Rent the Runway subscribers will be able to drop off rented clothes at a handful of Nordstrom locations, as more digitally-native brands seek to extend a physical footprint at established retailers.

Why it matters

  • Rent the Runway plans to scale its drop off points at Nordstrom well beyond the initial four in Los Angeles. This mirrors its partnership with WeWork, where its drop off points now number 19 after initially launching 15 in October 2018. So far, WeWork has increased RTR’s number of returns (and therefore its number of rentals) by 180%. (If this is true, it’s a staggering increase in liquidity from opening less than two dozen drop off points in a handful of U.S. cities.)
  • Returns are a major hurdle for online brands today, but for a company that’s built on them, RTR is forging partnerships with companies that not only align with its customers but make renting more convenient and faster, as well as heighten brand visibility, which can help with acquisition. Additionally, if the brand’s Unlimited service is RTR’s future, more drop off points will help subscribers squeeze even more out of their memberships.
  • Amazon is pursuing a similar tactic at Kohl’s, where its customers now can make returns at all 1,150 locations, up from 100 in April 2019.

2) Costco, a retail store without dressing rooms, sees apparel sales rise by playing to its core customers.

Why it matters

  • After seeing growth in the sector since 2015, Costco now reels in more than $7 billion in apparel and footwear sales annually, surpassing sales of a range of retailers from high-end Neiman Marcus to mass market Old Navy.
  • While buying jeans at the same place one stocks up on bulk groceries isn’t necessarily glamorous, Costco offers convenience with a one-stop shop offering close-to-wholesale prices. Offline sales make up 95% of its business, a testament to the power of its membership. Plus, most apparel sales come from basics, pointing to a wider opportunity for Costco to expand its “bulk mentality” across the apparel sector.
  • With its clothing strategy, Costco seems to be playing to its core customer—someone with an average income of $100,000 who still likes hunting for deals. Its clothing and accessories assortment remains narrow, but includes premium brands like Calvin Klein and rotates quickly, taking advantage of FOMO, without being overwhelming.

3) Iris Nova wants to fold 12 third-party brands into its marketplace before 2020, moving beyond its original brand, Dirty Lemon.

Why it matters

  • In creating a third-party marketplace, Iris Nova is building a business on distribution. All of the brands that it sells will be exclusive to its platform, meaning that consumers will be able to purchase any products in the portfolio via text message, removing friction.
  • The convenience may incite shoppers to purchase across Iris Nova’s brands, but as the company downplays Dirty Lemon as its be-all-end-all and says it doesn’t want to be a consumer brand business, it’s ability to build an identity around its third-party marketplace will be something to watch, especially with so few digital or physical touchpoints.
  • Iris Nova stated last week that it will invest $100 million in the next three to five years for this expansion. But much like Casper’s announcement that the company would open 200 stores by 2021, these grandiose statements fail to provide important details on execution. It’s unclear how Iris Nova will divy out this capital over the next few years or how it will strategize creating its own brands versus investing in third-party brands that it sells on its marketplace.

4) Nearly 25% of Target’s 100 smaller format stores are located on or nearby college campuses as it attempts to create lifelong customers out of students.

Why it matters

  • Since announcing its smaller-format stores in March 2018, Target has launched about 100, just shy of its goal of 130 by the year’s end. The smaller stores aim to align with the needs of a narrower, local market—in this case with communities home to upwards of 35,000 18-to-23-year-old students with specific home goods and grocery needs, especially at the beginning of the academic year.
  • Especially for its locations that are based in or around campuses with fewer shopping destinations, Target can take advantage of younger shoppers who are more likely to be armed with their parents’ credit cards and thus exert significant spending power, turning them into loyal customers early on.
  • In shaping these smaller locations based on student needs, Target could also use these stores as an excuse to push its home goods private labels in areas that lack competing retailers and brands. Its Opalhouse line, which launched with 1,300 SKUs under $30 in March 2018, is well-poised to align with shoppers’ needs while boosting Target’s margins.
  • In contrast to Costco, which is attempting to fold more product verticals into its warehouse-stores, Target is focusing on curating stores for various customer segments. In the age of Amazon, it’s not yet clear which tactic will appeal to shoppers the most.