Dr. Squatch gets bought, Parachute store closures & a mid-year check in on 2025's biggest stories

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0:47Hello, everyone. Welcome to the Modern Retail Podcast, our show that covers the ways the retail industry is changing and modernizing. I am senior reporter Gabby Barco, and I'm here with my co-host, Melissa Daniels. How are you this week, Melissa? I'm doing well. You know, we're closing out Q2. Exciting times. Yeah, you do speak in earnings calendars. No, it's true. Yes. And we're in the midst of summer. Usually there's a little bit of a lull, but not this month. We have Prime Day coming up. I was just thinking about that. I feel like Prime Days has created, yeah, this sort of bump in the middle of the summer that we normally would find slow.

1:34Yeah, the retail tent poles are changing. I think we should talk about that today. What do you think? Yeah. Okay. So we are going to talk about Prime Day and just how it's sort of turned into this multi-retailer shopping event for what feels like weeks. We're going to get into that later. but we do have some other news for the rundown to get into. First up, we have another acquisition. I feel like we've been talking about M &A a lot recently, so it's exciting. Dr. Squatch was acquired by Unilever this week, so we'll look into that. And then also Parachute, the betting brand has made some changes by closing a bunch of stores.

2:16And it's just another example of a D2C brand that's sort of going back to basics and shifting back from physical retail during this time when a lot of them are struggling. But yeah, first up, let's talk about this Dr. Squatch deal. The Financial Times reported that the deal was for$1.5 billion. It seems like a lot of people are excited for this one because it's men's beauty or should I say personal care? Yeah, and I think, you know, just looking at this from a sector perspective, there's been a lot of companies and attempts out there to make men's personal care its own thing compared to a more, I guess, gender neutral personal care, which you can argue Dr.

3:04Squatch is playing a role in right now. So I think just the approach that they've had, the brand that they've developed, and the reach that they've been able to achieve makes them a really smart acquisition for Unilever here. So for those unfamiliar, the brand was founded in 2013. So at this point, it's been operating over a decade as a D2C brand primarily. And they really specialize in like natural soaps, shampoos. They've gotten into deodorant and fragrance recently. So they really have, I feel like they've cornered this market for like Gen Z or, you know, millennial men that want to elevate their routine because this is sort of famously like a white space that a lot of people think there's opportunity in.

3:53But their marketing is really where their virality came in. I've written about it a little bit and they have a really interesting playbook that kind of helped get them on the map. Yes. Our listeners may have seen the recent Sydney Sweeney's bathwater formula that they put out. That was fun. Coming right off. Yeah. So this acquisition came right off the heels of that. Yeah. Earlier this year, I talked to them about, you know, they do these sponsorships of live comedy shows by partnering with comedians where they sponsor the shows in person, sort of similar to like a podcast sponsorship, but like actually IRL.

4:33So they do all of these sort of little marketing tactics that really reach young men. So I think a lot of their success has come from that. But, you know, maybe this is a good time to talk about just CPG in general and why men's grooming or personal care has been a little bit slower than some of the other exits. But, you know, it does seem like it's picking up here. I think this is a promising deal. Yeah, I mean, I think it'll be interesting to see what sort of changes are made, if any, or if this just is something where Unilever saw an opportunity and the brand's going to keep going or, you know, the way it has, or if there will be some strategy changes like branching out into different product areas.

5:20I am curious, though, what's going to happen like for other brands that are trying to do stuff for men, because I really don't know if it's a category that there's like a ton of guys out there who really care about the brand that they're using in the shower. I think this, you know, stereotypically, I think there's a lot of men out there who still use the three-in-one shampoo, conditioner, shower gel. I think that's where people think there is opportunity. You know, there's a lot of men, especially I think there's data on like this upcoming generation caring a little bit more about that, about their routine.

5:56So that's kind of where this, you know, investors have poured some money into these categories because they really do see potential. Obviously, this deal is part of that. But I think, you know, we've also seen, you know, this type of acquisition not necessarily panning out in the long run. Unilever in particular actually has been, I guess, part of that when they bought Dollar Shave Club in 2016, it was like this huge deal where they paid a billion dollars and then they sold the majority stake in 2023, not too long ago, because it just was not profitable enough. It was just, you know, they weren't able to really get it where they wanted.

6:43And I think that's an example of like a D2C first brand that was sold pretty quickly after launching, but was also very well-backed. It was really just funded a lot. And I think whenever, obviously, there's a lot of venture capital involved, it can be a lot harder to become profitable. Whereas I think with Dr. Squatch, I don't think they've really raised that much money in that sense. Yeah, it's almost like a leaner operation that was just kind of more focused on the growth itself. I do think it's interesting, too, that we saw DudeWipes receive a strategic growth investment this week that came from the investment firm TSG.

7:26So it is like there is something here to certain brands being able to corner that niche. And maybe those are the ones that are going to really kind of succeed. I did actually cover another Unilever acquisition earlier this year with the refillable deodorant brand Wild. I don't know if you've seen them. They hit US targets recently and then were acquired by Unilever. It's a fascinating brand because you just sort of buy the holder for the deodorant and then you kind of pop in and out the product itself. And, you know, I think that's like a bet on Unilever seeing another niche here, you know, that's for a consumer who's more concerned about plastic waste.

8:06Yeah. I mean, I think especially in the men's category, like you just mentioned Dude Wipes, I mean, that's a$200 million annual business. You know, they're not like nothing. I I mean, they are doing pretty well, all things considered. But I think when you have these big CPGs like Uniliver, I feel like they also are trying to maybe strategically build this portfolio with these acquisitions because they're trying to strike that balance of acquiring these brands, you know, these sort of hip, younger, digitally native brands, while also, I guess, modernizing their own lines. I mean, I think specifically they've got Dove Men's.

8:47I feel like that's been a big focus of theirs. They have a degree for deodorant. So it is a lot to juggle. And there has been reporting that they definitely keep their eye on these smaller brands because they know they will be a competition in the long run. Right, right. It's really interesting. Well, I'm curious to see what the next M &A deal we're going to talk about on the podcast is. I feel like we should keep a running tally. Yes, I do think we should have a timeline for 2025. Yeah, so from there, we can move on to talk about store closures with D2C brands. Specifically, this has been a downer of a trend.

9:28You could say Parachute, the betting brand, just closed or is in the process of closing about 19 stores. So that's down from 26 locations in 2024. I believe that was like the peak. And now they're down to seven. This is another brand that was founded in 2013. I don't know. I personally just thought it was interesting. You know, of course, very different categories, but the trajectory between them and Dr. Squatch is obviously very different. But, you know, these are sort of D to C first brands that tried, you know, to get into physical retail. I think, you know, Parachute in particular was part of that big wave like Casper and Brooklyn and all of these, you know, very e-commerce heavy brands that then ventured out into, you know, opening their own stores.

10:18And for the most part, that's been a very expensive and not very profitable strategy, I guess, for the most part. Right. Yeah. The CEO of Parachute had confirmed to Business Insider this week and I quote, we opened stores that were too large or in regions where brand awareness wasn't as high as it needed to be, close quote. This is one of the reasons why when I'm talking to brands about getting into brick and mortar for the first time, I always ask about location strategy. What is your real estate team saying? Because it can really make or break this huge investment that you're making. And if you're an e-commerce first brand who's kind of running operations yourself, you don't have a big corporate parent to pay for your leases, you better be real sure that's always going to work out.

11:04Otherwise, you're going to light a lot of money on fire. And I think it's a hard lesson to learn. I still think Parachute's a great brand. Like, I don't necessarily think like they're going anywhere. This sounds like more strategic to me. And when they look at what their trajectory is moving forward, they don't have to be in as many places or have a footprint that smaller. Maybe there's a wholesale in their future. You know, we'll see. Yeah. I mean, I know you cover this space pretty extensively, but they, you know, they opened stores, but they also have these growing wholesale partnerships that they're going to focus on now after, you know, being able to pare back the physical retail.

11:45So they have Nordstrom as a partner, and then they have that new Target partnership that seemed pretty exciting, you know, where they have kind of like a diffusion line, more affordable entry point. But yeah, even categories wise, I'm kind of curious to hear your thoughts on this, because this was something that I think a lot of homeware brands fell into, which was the pandemic. They saw a lot of growth and it was encouraging. And so, you know, Parachute, for example, went into furniture. You know, that's not really, that's a really hard category and was not really necessarily in their wheelhouse.

12:18Now they're kind of going back to basics, which is bedding and bath. Yeah, I think that's a great observation because a lot of companies, when they're doing well, do want to start diversifying their product launches. They want to start seeing what they can do in other areas. And I think that's a natural progression for a business. But in this particular market, in this particular sector, there is so much competition that you really have to have a lot of capital to experiment with if you want to get into furniture, get into brick and mortar, and really start to build out versus are you still just even doing the basics that you need to do to be a great brand operating online in 2025?

13:01Another thing with stores that I think is interesting is like, you know, you get a halo effect when you open a physical retail store if you're an online business. And so like you can get more sales that are online, but that's not necessarily going to be enough to recoup what you're spending on the physical operation. So I just think sometimes the numbers don't always work. Yeah, I mean, especially when you think about where these stores are, right? They're almost always in these big, expensive metropolitan cities or areas for the most part. I mean, Soho is not the cheapest area to open a store.

13:37Doesn't sound like it, yeah. So I think that's where, yeah, you're right. Maybe the numbers don't match up, especially when the category is slowing down, for example. It's not just parachute. This has been something that I've written about, actually, where really well-funded D2C brands have paired back their physical presence. I mean, Parachute itself raised about$47 million in venture capital. This is as of last year that's been reported. So, you know, of course, when you have the capital, you're able to test and try all of these different retail strategies. Totally. That's really like there's no free capital anymore.

14:21A similar thing happened with Allbirds, which had 58 of its own stores in 2022. And they closed about 14 in the past two years. Another example I've written about, which is Outdoor Voices. They closed notoriously every single location. And now they basically are just back to just selling D2C online only. So it is a little bit of a trend where sometimes they are overreaching. I think that's how the parachute CEO put it and are not able to recoup a lot of that investment. It's a tale of two brands. Probably everywhere you look and every company is going to have a different calculus that works for them.

15:02I'm still a big believer in brick and mortar for D2C brands. I just think there's a way to do it right based on your business, right? I mean, it's not like a groundbreaking insight. But I will say, it's like, you know, maybe it's just one really key location, you know, and that can drive then a ton of social content for you, or it can drive a ton of events for you. And maybe that is enough to give you that foot traffic sparkle. And you go from there versus, you know, maybe some of these plans that expand really far, really quickly. I don't have the answers that's above my pay grade. I don't run a D to C brand, but for those who do, I'm sure they're working very hard at figuring out that calculus.

15:46All right. Well, from there, let's move on to talk about Prime Day or Prime Days, I should say. I'm trying to get into the habit of saying that. But, you know, for the last few years, we've seen this become sort of an industry-wide event. I think it's kind of an interesting phenomena where you have pretty much every major retailer having like their own version of Prime Day. because if Amazon is having a big sales event, chances are you are probably gonna lose some customers to them. So let's get into what we can expect in the next couple of weeks from some of these companies. Yeah, so this year, as we've reported, this is the first time that Prime Day is a four-day event.

16:27Prime Days are July 8th through the 11th. And this has really just become a marquee mid-year event every summer. While retail season has always peaked in Q4 and we think holidays and that's the time that can make or break a lot of retail and brands. Thanks to Prime Day evolving over the last few years, everybody else sort of has to have a summer sales event too. And it's just spread a ton of spending. Competitors have created their own promotions and those have had varying degrees of success. But it's really just to keep up with Amazon. Yeah, I think so. I mean, of course, you know, there's a lot of factors.

17:03You've got your argument that there's a lull in the summer. This has become a little bit of an unofficial, like back to school start, right? Definitely. Of the shopping season. So you just have a lot of, you know, factors and timing wise, it makes sense. So, you know, of course we always talk about price conscious customers right now that maybe sometimes are waiting. They have things in their cart that they're waiting on to pull the trigger. So with that, you know, you've got Walmart and Target, I feel like are two big examples, right? They kind of have their own branded Prime Day competitors.

17:40This year, Walmart is also doing a longer version. It's funny, everybody elongated their Prime Day or yeah, their sale. So, you know, they're doing a lot of their deals are going to be like on tech and outdoors and fashion and back to school, as I was just saying. But yeah, that will be from July 8th through the 13th. That's pretty, pretty long stretch there. It's a long sale. Yeah. Yeah. I mean, Target similarly, I always feel like the Target one is going on for like a lifetime. I think that one's going to be from July 6th through the 12th. We talk about Target a lot. You know, this is probably a big test for them, you know, foot traffic wise.

18:22So, you know, if you're like a Target Circle member, you get a little bit more perk and early access. But they are also going to be focusing a lot on like back to school savings and electronics, which, you know, is sort of in the spirit of Prime Day, right? Like that's kind of how it started out was always gadget focused. But now people expect deals on really everything from like toilet paper to like a Kindle, right? So that's, I think that's why we're seeing just these events widening across the industry. I mean, Best Buy is doing what they call Black Friday in July. I thought that was an interesting spin on it.

19:05And then Kohl's also is doing summer cyber deals. So these are just the first ones I really came across. I'm sure there's more, but it's just what we're saying, which is that it almost feels like necessary for every retailer to participate now. Yeah, it's almost become mandatory for these larger brands because if not, they're just going to lose people to Amazon because the customer is now trained to expect Prime Day and to expect Circle Week. So, you know, we're just in this now, I think, until everybody decides to stop doing a summer sales event. But, you know, it's not necessarily a bad thing.

19:44I think what happens is that I think one analyst put it this way, which I thought was pretty astute is that like when you're shopping for Prime Day, a lot of people that are looking for deals have, you know, these extensions on their browsers and they're comparing deals. And so if you're another website or another retailer, you know, there's already eyeballs on e-commerce for that day or that week. So, you know, why not try to undercut Amazon if you can in certain categories. So people are going to go at least check out Walmart.com maybe. I think that's where the thinking comes in. Yeah, that's a very good point.

20:21And it almost makes me want to go like behind the scenes at one of those like data tracking companies in real time to see like, how much are people comparison shopping? And like, how does that change on, you know, July 8th versus any other, you know, day of the week where there's not a bunch of sales going on? Like, Like, because I think we're just training people to expect this. Training people to expect deals. What could go wrong? All right. Well, from there, we can move on to our segment portion of the episode. But we have a little bit of housekeeping. Next week, we are going on hiatus for the July 4th holiday weekend.

20:58So we don't have an episode for the weekend. But we will be back the following week to discuss what else? Prime Day with our reporter, Alison Smith, who's been covering this area a lot for us lately. But yeah, for this week, we've got our segment on the biggest trends that are shaping retail so far. So Melissa and I will be back after the break to talk about what we think are, you know, the biggest stories of 2025 in retail.

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22:22Somehow we are already at the mid-year point of 2025. Here we are. It's the end of June. And from a retail perspective, there's been so many external factors affecting the industry this year. There's been things that impact brands, so many changing consumer behaviors, and we're starting to really see the effect of it all. Right now, May spending edged down and consumer confidence is declining. So today we are going to unpack some of the biggest forces that are shaping up retail this year. We're going to go in reverse order, just kind of looking at the effect that different things have had. Gabby, what would you say is the third biggest force or trend affecting the retail industry this year?

23:08Yeah, so I would say deal-hungry shoppers. It seems obvious, but we were just talking about it earlier with the Prime Day Hoopla. But yeah, it seems like no matter what type of shopper someone is, they are all, you know, at the very least looking out for promos or any sort of discounting on anything they're buying. And in turn, I think a lot of retailers are trying to cater to them. They are running consistent sales across the board. And so, yeah, we can take a look at, you know, what kind of promotions and including like bundles and loyalty program offers. Some of these retailers are offering in order to bring people in because it's been pretty slow in retail, all things considered.

23:59Yeah, I mean, I can even just tell you from my sponsored ads I'm getting showed in my feeds and the emails I'm getting from brands whose newsletters I subscribe to. I'm seeing a lot of like 70 % off, 80 % off, just like really, really steep discounts. And a lot of that does sort of feel like, yeah, maybe they're pushing out inventory that was excess or just because they didn't have enough demand for what they thought. And it also has the byproduct of maybe getting the shopper at a moment where that kind of deal is attractive. I'm curious if there's anything you've seen specifically in the CPG industry.

24:36Yeah, grocery, pretty similar. There's a lot of deals. Of course, expensive groceries have been in the news for a while now, kind of a contentious topic. But when I do talk to brands, you know, whether big or small upstarts, they do admit that there is a lot of pressure because the customer does expect some promo or discounting on the shelf when they're picking things up. Because as we talked about recently, if not, they're, you know, they may or may not look over and grab the private label counterpart. So yeah, it's, that's what I mean by across the board. I feel like people just expect promotion these days.

25:20Yeah, exactly. I think like the quote unquote inflation weary shopper is like, AKA everybody. You know, like I think everyone's really tired of seeing prices stay high and it's hard to know, you know, if there's any going back. So, you know, I think in response, you start to just really look for deals where you can find them, whether that's on a big ticket purchase or on an everyday essential. And, you know, people are just getting a lot more conscious, I think, of where their dollars are going. And even how they're spending it. Like, I think this is also partly why you're seeing a higher utilization of Buy Now Paid Leader programs and other sort of financing programs.

25:58And it's because people maybe still want to shop or have certain needs that they need to fill, but don't feel comfortable shelling out a bunch of money at once. So with that, there's also the challenge for brands where when everyone is discounting, then you have to like figure out how to stand out, right? It's like a sort of a secondary challenge. So you still have to create some sort of excitement, whether it's newness, whether it's seasonal around these deals. So for example, you know, with Target holding the line on school supplies this year, like that seems to be just like their big focus.

26:33They're trying to really go deep on that. And then you've got, you know, your value-based private labels, You've got Dealworthy from Target. You've got Better Goods. So these are the types of offerings where it's diverse enough that each type of customer that is shopping there could find what they need from those brands. But yeah, I've got that. I think in-app flash sales, I know I get them, it feels like on the hour from a lot of retailers. Those also, they say help a lot, SMS notifications. Yeah. Anything that kind of creates a sense of urgency, which, you know, can also create fatigue, to be honest.

27:14But right now, I think it's kind of an all hands on deck kind of situation. Yeah. My go-to brand to talk about on this podcast, who I will continue to talk about until they respond to my invitation to come on the podcast, Portland Leather Goods. They just did a triple points day recently and really then extended that out for shoppers who wanted to take advantage to build up more loyalty points. And every dollar you spent and every point that you earned became an entry to win a car or something. And like these really luxurious prize packages that they were giving away. Okay. Anything to get people in, right?