Blog/News

Short-Term Future for Retail: Not Looking Great

By: Carli Valinoti – Express Trade Capital, Inc.

It’s not uncommon in today’s retail market that large companies who have been around for years are forced to file for bankruptcy. With growing competition from online retailers, including Amazon, stores have continued to see a decrease in foot traffic and overall sales. Retail stores have accrued debt from overstocking and increasing rent prices. If large, well known retailers such as Forever 21, Barneys New York, and Payless can’t beat the online retail presence, what does the future hold for smaller retailers?

Even with the upcoming holiday season, retail sales are projected to decline. According to the US Commerce Department, retail sales fell in September by 0.3%, the first time since February. Concerns that manufacturing-led weakness and trade tariff challenges are hitting the broader market could potentially have a negative affect on consumers spending habits. If consumers decide to keep their spending to a minimum, retailers should prepare for the potential continuation of declining sales.

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Section 301 Tariffs Increase to 30 Percent on Chinese Goods Suspended

After meeting with Vice Premier Liu He of the People’s Republic of China, President Trump announced in a news release on October 11, 2019 that the duty increase from 25% to 30% on List 1, 2, and 3 products would be suspended. A final decision will be made later regarding the additional duties scheduled to go into effect December 15, 2019 for List 4B commodities.

Information regarding the phase one deal can be found in the White House news release here.

IF YOU IMPORT FROM THE E.U.

Following a World Trade Organization decision paving the way, the U.S. Trade Representative (“USTR”) has published a list of products form E.U. origin which will be subject to additional duty rates of 10% or 25% ad valorem, effective October 18, 2019.

We expect that a FEDERAL REGISTER notice will be published with the details including confirming the definition of the October 18 effective date; effective dates are commonly based on the date of entry. 

A link to the list of products, countries and additional tariff rates may be accessed at:  https://ustr.gov/sites/default/files/enforcement/301Investigations/EU_Large_Civil_Aircraft_Final_Product_List.pdf

As with other tariffs, close coordination with your carrier and EXPRESS representative is needed to avoid duties assessed to shipments arriving before the effective date.  EXPRESS Trade Capital, Inc. is available to answer your questions, help assess impact to your business and discuss mitigation strategies. Reach out to us at logistics@expresstradecapital.com

Recycled Retail

By; Carli Valinoti, Express Trade Capital

One of the newest sustainability trends is making old garments new again. Evrnu, a Seattle-based textile-technology startup, is making old clothes and fabrics into new fibers that can be used for recyclable fashion.

Although their products are still being tested, Evrnu has just launched a limited run of recyclable unisex sweatshirts for Adidas by Stella McCartney, calling them “EVER-new.” The hoodies will not be available for the public until 2020 but will be given to athletes to promote the new sustainable line. “Right now, in the U.S., consumers dispose of about 80% of their textiles directly into their garbage can. That’s the behavior we’re really trying to tackle,” said Stacy Flynn, chief executive and co-founder of Evrnu. Recycled textiles can be made into premium fibers which can be dyed and woven into new fabrics made for all different types and styles of clothing. In 2016, Evrnu teamed up with Levi’s Jeans and launched a prototype of jeans made only from repurposed cotton T-shirts.

Consumers are becoming more aware of certain industries’ toll on the environment, including the fashion industry. Although creating new fibers still has some detrimental impact, the process uses a fraction of the amount of energy and chemicals used to make polyester clothing. These recycled garments may end up having a higher price-point, but as more people become aware of how sustainability can help the environment, people may be willing to pay more.

ETC takes great pride in working with sustainable and eco-friendly companies. Contact us for all your factoring needs!

Ecommerce and Store Closures on the Rise

Sadie Keljikian, Express Trade Capital

Although fears of a “retailpocalypse” have mostly died down, the retail landscape is certainly shifting in favor of ecommerce, with more than 5,000 brick and mortar closures already announced in 2019. Many of the closures come from high-profile retailers like Gap, J.C. Penney, Abercrombie & Fitch, Tesla and Victoria’s Secret. Even Amazon has announced that it will close all 87 of its pop-up shops in Kohl’s, Whole Foods and malls nationwide.

A recent UBS study predicted that online sales will make up 26% of overall retail sales by 2026, from 16% today. Assuming current trends persist, roughly 75,000 more retail locations will close in that time. This amounts to approximately 8,000-8,500 closures per 1% increase in online sales. Amazon is expected to account for about half of the ecommerce market in the US at the end of the seven-year projection period. Of the 75,000 predicted closures, 21,000 clothing stores, 10,000 consumer electronics stores, 8,000 home goods stores, 7,000 grocery stores and 1,000 home improvement stores are expected to shutter.

Only time will tell whether these projections will come true, but on the bright side, Lasser and Sole say that the closures “should help the store productivity of surviving locations.”

Tech Shakes Up Retail

Sadie Keljikian, Express Trade Capital

As technology becomes increasingly present in our daily lives, it changes the way we do nearly everything, most notably how we buy and sell products. Keeping up with the intricacies of digital sales can be overwhelming, particularly given the ever-evolving nature of technological functionality. Here are a few of the latest and most prominent ways in which technology has revolutionized sales techniques.

  • Multi-channel approach.

Contrary to popular belief, physical store locations are not going away entirely. With more ways than ever to reach prospects and customers, a multi-channel approach is essential to successful sales. Whether you’re selling consumer goods, commercial equipment, or anything else, it is important to integrate your online presence with any brick and mortar locations as seamlessly as possible.

The recent trend in previously online-only businesses opening store locations (Wayfair, Warby Parker, Casper, and Untuckit among them) is a great example of this. While modern consumers appreciate the convenience of ecommerce, they miss certain aspects of the in-store experience and frequently choose to blend their shopping methods.

This has proven particularly popular in industries like apparel, where consumers are hesitant to buy items they can’t try on, or large appliances and furniture, where consumers often prefer to see the item firsthand and ask questions before they make a final decision. Some apparel retailers have even opened mini-locations with limited samples of each item for customers to try on before they order them online.

  • Personalization

Some big-box stores use augmented reality to provide an in-store experience from home. Target, for example, launched an AR feature in 2017 that allows customers to take a photo of a space in their home and see an approximation of furniture pieces and home goods as they would appear in the space. This personalizes and simplifies the selection process significantly in terms of dimensions and style and prevents unpleasant surprises when items arrive.

Additionally, methods like individually tailored sales emails and social media marketing based on curated data are becoming the most popular strategies businesses use to market and sell their products and services. Brands are also expected to not only cater to each customer’s lifestyle and esthetic preferences, but to their philosophical beliefs as well. As a result, companies that make a point of using charged imagery or pointed messages in the way they sell their products are often among the most successful.

  • In-store tech.

Many retailers that depend primarily on in-store sales have begun incorporating technology into the customer’s experience at their locations. In some cases, they use virtual reality to add an element of fun in select store locations. Walmart’s tech incubator, Store No. 8 offers an immersive VR experience followed by a gift shop.

Others offer a visual search station for customers to locate the items they wish to buy, saving them the difficulty of finding the product they need on foot. Other retailers have begun using interactive apps that allow customers to learn more about a product by simply pointing their phone camera at its label. Luxury resorts have started offering AI services to allow guests to plan their visits and personalize their experience by communicating with chatbots. Grocery stores and department stores have even started using mobile robots to monitor obstructions in the aisles and customer reactions to free up human employees to assist customers.

Systems like these not only give the customer a better sense of engagement and control of their experience, they also offer retailers similar insight into their customers’ habits and preferences. Consequently, on-site technology can be as useful to market research as web traffic and sales numbers, allowing brands and stores to further optimize the way their customers’ experience and buying habits.

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Consumers have never had higher expectations of their retail experience. For big brands, this emphasizes the importance of diversifying their offerings and allowing their customers as many customizable options as possible. For smaller brands, it means homing in on the specific preferences and values that most accurately align with their target demographics. Ultimately, there are more ways than ever to use technology to guide product development and research markets, allowing brands and retailers to come up with solid solutions that allow their businesses to thrive.

Financing for Amazon Vendors

Joseph Stern, Express Trade Capital

Amazon is one of the world’s largest internet retailers by revenue and market capitalization, providing sellers and buyers with a central marketplace to conduct trade. The platform has grown so large that many financiers, including Amazon itself, have begun to market funding solutions directly to Amazon sellers.

Amazon built two web interfaces to accommodate its sellers: Seller Central and Vendor Central.

Vender Central is utilized by manufacturers and distributors to sell to Amazon in bulk. Amazon will send weekly purchase orders for shipment to various warehouses. Vendor Central customers are partnered with Amazon, who will market and sell their vendors’ products to the best of their ability.  Access to the program is invite only so not all vendors can join Amazon’s Vendor Central program.

However, Amazon vendors have several alternative routes for financing.  Since vendors receive purchase orders from Amazon, they are financeable through traditional factoring and purchase order (“P.O.”) funding operators. Factoring companies allow vendors to draw funds against invoices to Amazon due in the future while PO funders give them access to cash to pay for production against purchase orders issued by Amazon.

Amazon’s other program, Seller Central allows merchants to market and sell their goods directly to customers. Sellers can fulfill orders on their own or outsource fulfillment. Amazon allows sellers to enroll in a program through which orders are fulfilled by Amazon (“FBA”).  In FBA arrangements, Amazon takes on their vendors’ shipping, customer service, and returns for every order.

Since sellers do not receive large purchase orders, but rather, small orders, customer by customer that must be fulfilled at once, they are not eligible for traditional PO funding operators.  Depending on the vendor’s payment terms with Amazon, factoring may still be a viable option.  In such cases, vendors who need further financing should seek cash lines against inventory or merchant cash advances.

Inventory financing is a type of asset-based lending where sellers use their inventory as collateral for a revolving line of credit. An amazon seller with his own inventory may assign his inventory to a financier while waiting for sales.  A financier may cut a deal with Amazon to target sellers using the its FBA or other programs.  

A merchant cash advance (or MCA) is a form of receivables financing where a seller takes on a cash loan by offering up a portion of future revenue until the loan and its fees are paid off. Advances are typically capped at one to two times monthly sales with a factor rate ranging from 1.14 to 1.48. In other words, a lender will take a small percentage of the merchant’s credit card revenue until 1.14-1.48 times the loan amount is paid off, depending on the MCA’s factor rate.

Amazon offers its own loan program modeled after inventory loans and merchant cash advances. With an APR of 6%-16%, an Amazon loan will be far less expensive than a merchant cash advance of similar size, which can have effective APRs above 100%. Instead of taking a percentage of sales revenue, Amazon takes fixed amounts from their sellers’ accounts over the course of twelve months or less, thus qualifying its instruments as short-term loans. By targeting only its own qualified merchants, Amazon can utilize its control of the seller’s proceeds and even inventory to ensure repayment. Amazon can also cherry pick preferred vendors based on whatever criteria Amazon believes best serves its risk appetite. In 2017 amazon issued $1 Billion in loans to its merchants.

So far, information on Amazon’s lending programs is scant. Little information is published on default rates, average funding amounts, and the programs are still young enough that available data is still in its infancy.  For now, the verdict is still out on how effective the financing programs are for Amazon and its vendors.

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Ugly Veggies Might Save the Planet

Sadie Keljikian, Express Trade Capital

Recent studies have indicated that damage to the environment has progressed further than previously believed, so numerous corporations across industries are making changes to reduce waste and increase sustainability in their production processes. The produce industry is contributing significantly to this international shift, promoting more sustainable shopping and eating habits among its consumers.

One of the most prevalent efforts to this end is the recent “ugly produce” movement. As it currently stands, approximately 6 billion pounds of produce is wasted annually in the US. Much of the wasted food is perfectly safe to eat, but doesn’t meet the US Department of Agriculture’s appearance standards due to irregular size, shape, or surface imperfections like spots or minor bruising. Several grocery providers across the US have implemented programs like Imperfect Produce, Hungry Harvest, and Kroger’s Peculiar Picks that sell these items, which might otherwise go to waste.

Obviously, this movement is helpful in the global effort to limit wastage. It cleverly addresses the food waste issue and offers shoppers access to fresh, albeit slightly blemished, produce at discounted prices. However, the movement is the subject of controversy due to its perceived harm to food banks and independent farmers. Historically, grocery stores and suppliers would often donate some or all of their visually imperfect produce to food banks, who are obviously less choosy than the average consumer when it comes to the appearance of the food they receive. The arrival of the ugly produce movement concerned several experts, who speculated that consumers in search of a bargain would dip into supplies that were previously designated to food banks. Several food banks and other charities confirmed, however, that the quantity of wasted (but edible) food far outweighs the amount that food banks need to feed the underserved masses.

Another reason to embrace visually imperfect produce is that organic fruits and vegetables are treated with smaller amounts of less aggressive pesticides and are thus more likely to naturally vary in appearance. Recently, some experts have even asserted that visually imperfect fruits and vegetables may be tastier and healthier than their unblemished counterparts. Orchardist Eliza Greenman conducted an unofficial experiment on her pesticide-free apples, comparing those blemished from fighting off pests, excessive heat and fungus, with their unmarred equivalents. Remarkably, she found that the scarred apples had 2-5% higher sugar content. Likewise, another study found higher levels of antioxidant phenols and fruit acids in organic fruit when compared with those treated with more aggressive pesticides.

We’ve suspected the nutritional benefits of organic produce for some time. Although the spectrum of factors that contribute to antioxidant content isn’t fully understood, many of the antioxidants that naturally occur in fruits like apples develop in response to natural threats like pests and fungus. This means that attempts to artificially protect crops from these natural burdens makes our produce prettier, but potentially less flavorful and healthy.

In short, public embrace of “ugly” produce is good for the planet and apparently, good for our bodies.

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