How discount shopping will shape retailers, plus what the Target and Ulta partnership means moving forward
Tuesday’s episode of Great Quarter, Guys kicked off with Andrew Cox grilling Seth Holm about what actually matters in this week’s business updates.
Here’s what made the list of topics for “You care, or nah?”:
- The massive influx of new truck orders: Seth cares, Andrew doesn’t. Both agree keeping people in the trucks and on the roads is what really matters; the volume of trucks being produced does not. Cox says he would rather see the bottleneck of hiring and the driver shortage break open before more trucks are ordered and produced.
- California’s Proposition 22: Seth does not care but he believes it will set a precedent for other companies to model their payment contracts the same way. Holm also thinks it will be important for Uber.
- Speaking of Uber, the sale of Uber’s autonomous technology to Aurora Innovation: Seth and Andrew both care, saying it’s important for Uber if they want to go autonomous in the future. If so, they will have to purchase the licensing for any autonomous tech back from Aurora.
- Chipotle built its first all-digital store: Both Seth and Andrew care. Chipotle announced plans to open a store that eliminates the dining room and the walk-up ordering counter. All orders would have to be placed online or through a third-party app. Holm sees this as a huge win for stores, especially in markets where real estate is extremely expensive.
- Walmart plans to use its distribution centers as a pop-up e-commerce space: Seth cares, calling the idea “Amazon-like” with the idea that it will support continued high-volume e-commerce orders.
- Consumer sentiment index falling 4 points from October: Seth doesn’t care about this one. As consumers still plan on spending going into the holiday season, he thinks the index is strong enough at 77%. The fall-off came post-election, with a party split showing Democrats unfazed in their sentiment and Republicans losing faith after losing the White House.
- Target and Ulta combining forces for in-shop pop-ups: Andrew and Seth both care, calling this huge for the consumer world. Target is still on fire with its profits through the pandemic, and Ulta will utilize already-high levels of foot traffic. Throw in the fact that Target will have the opportunity to reach 33 million preexisting Ulta loyalty members, and this will be big for both groups.
Much like Target, other big-box discount retailers have continued to see explosive growth despite the pandemic.
Cox believes that people are still spending and the pandemic has driven them to spend in larger basket loads to minimize trips to the store. They’re spending, and spending more when they are doing it.
Some groups are predicting these next 10 years will be the “discount store decade” as people continue to move out of tightly stacked urban population centers and spread into more rural or suburban communities.
Those people drive profits at big-box stores as they spend money on home items, furniture, appliances and home improvements, often making a one-stop trip to a discount store like Walmart to get it done.
Lowe’s is trying to capitalize on that momentum as well, shifting its business model to include things like small electronic appliances and fitness equipment for the home.
Time will tell which discount retailer will come out on top.
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