Modern Retail Rundown: Amazon is reportedly launching a Temu-like section, Fancy Food Show takeaways & Walgreens store closures

0:05Hello, everyone. Welcome back to the Modern Retail Rundown. As always, we'll be recapping some of the headlines that caught our eye this week. I am senior reporter Gabby Barco and here this week I am with our reporter Julia Waldo, first time on the podcast. Welcome, Julia. Thank you, Gabby. Excited to make my podcast debut. Yes, very exciting. Okay, well, we have a few topics that you and I picked out this week to chat about. So first off, we're going to be talking about Amazon building a new discount section with goods that are shipped straight from China to people's doorsteps. If that sounds familiar, we will get into that.

0:50And then we're going to be talking about my attendance of the Fancy Food Show in New York this week. It's a trade show, has all the foods, very exciting. I will recap it all. And then lastly, we are going to be talking about Walgreens pulling back its store count. So it is closing a number of locations after years of being on an expansion spree. But yeah, first up, let's talk about Amazon. So Amazon's new quote unquote discount section. So this week, essentially what happened is the information found a pitch deck where they reported that Amazon is planning to launch a section on its website that has just really cheap items that are shipped from China by sellers.

1:41So these will include like unbranded fashion pieces, home goods, daily necessities, and everything will arrive in about 9 to 11 days. If that sounds familiar, yeah, like I mentioned, this is very similar to the way Shein and Timu operate. but Julia you will get into that and I mean one of the reasons it's such a big deal this week specifically is because Amazon also hit a two trillion dollar market cap so yeah a lot going on for them but I think it is kind of a a little bit of a preview of them worried that they do need to keep up with the times and the way that these new emerging players are competing with them Julia, what do you think?

2:32Why don't you tell us what you know? Yeah, so a lot of this comes down to the matter of low prices. Shein and Timu, who are some of Amazon's main competitors, they are able to sell things like$10 shoes and$2 hair scrunchies, really cheap backpacks, really cheap jeans, things that are often much lower than a lot of other places on the market. and a lot of them are inspired by TikTok trends. So they also have been able to, you know, gain a lot of momentum that way. And if Amazon wants to take on Shein and Timu, it really needs to keep their prices competitive as well. We have no indicator right now as far as what things would cost in Amazon's new section.

3:19It already has much lower prices than many big box stores and has a lot of discounts through, you know, its prime program and such. But Amazon will reportedly allow sellers in this new section to set their own prices, which actually is something that Timu does not do. Timu actually tells sellers how much to sell things for, and they take over the marketing on seller's behalf. So, you know, a lot of this is still being ironed out, but it seems like it's going to be a bit of a numbers game for Amazon. and it's likely going to have to stay flexible if it wants to remain competitive and build its $2 trillion market cap even more.

3:58Yeah. So one of the things obviously on a lot of people's minds is how is Amazon going to execute this? Because it's pretty different from the model that they've built out for decades at this point, right? Where everything is micro fulfilled locally, a lot of big batches that these sellers are offering. And of course, what we all now take advantage of or take for granted, I should say, is one to two day delivery. So this is not going to be that at all. This is obviously retraining some of their shoppers if it does go through. But the way this is going to work is that sellers in this section are going to produce in small batches rather than large quantities.

4:41And this will allow them to test demand for certain products. I think you were alluding to TikTok trends, for example, on Timo or Shein being a big influence for that. So basically, if like a t-shirt or a dress is going viral, it sells out, a seller on Shein will replenish it and sort of go by that demand. That's not usually how Amazon works, but this sounds like they're going to be taking that sort of approach to this section because it's kind of the only way it could really work when you think about it. If you are going to be doing dropshipping, But yeah, like you said, pricing seems to be key here.

5:25And so I guess now that we know, you know, the last couple of years, shoppers are really looking for cheap prices, deals everywhere. There's a lot of markdowns everywhere you look with inflation. um these so yeah having the items not that are not only cheap but also on trend and attractive to the shoppers is going to be important for amazon because uh yeah it's like what you were saying earlier about needing to constantly be on trend which you know i'm sure amazon does some of that already but it's not really no it's nowhere really as close as the sort of lightning speed that Shein and Timu sometimes produce certain products by?

6:08Yeah, definitely. And I think the thing is that, you know, the landscape in e-commerce, it changes so quickly. Amazon, you know, obviously knows that it has to keep up with emerging models for fulfillment in order to stay competitive. So, I mean, it's really no surprise, I guess, that they're courting sellers to implement this dropship method if that's what other big players are doing. But we'll see if it actually comes to life. This is still being reported out. So we'll have more details, I'm sure, in the coming weeks and months. But moving on from Amazon, moving on to food, Gabby, you were at the Fancy Food Show in New York earlier this week.

6:45How was that? What did you see? What did you eat? Okay, well, I ate so many things. I think I ate just a bunch of cheese as my lunch, which, you know, not a great idea, probably. But that sounds great. It was great. Yeah. So the big sponsor was Spain from the International Coalition. And that was so they had a huge pavilion with a lot of cheeses and meats and snacks. And so that was what I was doing as quote unquote research. But I will be going into actual, you know, trend forecasting, which is what I saw. So this is, you know, the summer edition of the trade show by the Specialty Food Association.

7:28There's one that happens in Vegas during the winter, but New York gets the summer one. So I was at Javits walking around the floors. And what I saw, which is something we've covered a lot of recently in the food and beverage space, is global flavors, better for you, sort of formats continue to dominate. Like what I gauged personally, I felt like I mentioned international flavors, especially from regions like Asia, Latin America, Middle East, obviously Europe. A lot of these were getting a lot of the big buzz. And I should mention it makes sense because this is actually a very international trade show.

8:05There were people from all over the world who are coming here, pitching buyers, wanting to get on shelves of, you know, Kroger, Whole Foods, all the retailers here. So you can kind of walk around and you hear some of the buyers, you know, you overhear them talking about what they've tried and what they think. And so that's kind of the fun part. But yeah, a lot of sort of better for you startups and brands. We've covered a lot here on Modern Retail. You know, there's like Truff and Fly by Jing, all of the go to hip startups. But it's not just them. There's also like you see Hershey's and Cheez-Its.

8:43Like you see all the big national grocery brands as well kind of just showing off and having their little installations and booths. But yeah, some of the – I mean I'm curious to hear what you think. But two of the big flavor trends I also saw was honey. Like it seems like there's a lot of honey-infused products. And then spice. Like we are still kind of on this hot sauce kick. I mentioned trough. fly by Jing, but I was also at the Flying Goose Sriracha booth just watching someone cooking live. That was really fun and soothing. But yeah, we saw a lot of that, but I think that was no surprise. It's sort of building on these flavor trends or flavor profiles from the last few years.

9:31But yeah, have you seen anything kind of in that vein lately that kind of plays into this? Yeah, well, I think some of these hot sauces have been kind of trending for a while. I think people got really experimental during COVID, just trying out different types of recipes and adding new sauces, new flavors. I think, you know, the other thing that maybe is adding to this is the popularity of hot ones. I feel like everybody I know is watching hot ones. There's so much discussion about the hot sauce they use on there. So I feel like definitely there's all eyes on hot sauce. I personally am a spice wimp, so I can't really do hot sauce.

10:09But I mean, adding honey into the hot sauce, like a lot of these companies are doing, I think that would maybe make me more, you know, eager to try it. I think I have to still get there, but, you know, working on that. But yeah, definitely. And I mean, I know you were talking about, you know, some better for you brands as well. A lot of things have been coming out in that space just in the past couple weeks. We've had, you know, this new organic zero sugar soda from Nixie that is launching this summer. That's going to be in Sprouts, you know, really kind of taking advantage of summer barbecues, summer picnics, everybody getting together and, you know, maybe swapping out sodas or beers for something lighter or, you know, more healthy.

10:55And, you know, I've also seen a lot more dairy free creamers just at my local bodega. I know that Elmhurst is launching a cashew creamer. Um, so, you know, the alternative milk category continues to be really big. You know, we're, we're at this point going beyond just dairy milk and, you know, almond milk, and now we're branching into all kinds of, all kinds of nuts and beans. And, um, I mean, I know you, you also saw a lot of, uh, you know, protein packed things at the show. Yeah. The, the Elmhurst booth was a buzz in. There's a lot, a lot going on there. I passed by, um, they, they've really invested in milk.

11:34nut milks lately. So for those who don't know, Elmhurst is actually a pretty big legacy dairy producer. So they've, they pivoted to not or, you know, added nut milk the last few years and based on trends. But yeah, a lot of high protein and low sugar is I feel like is like all I write about because we've seen, you know, like, just picture like sort of like the bonzas of the world, You know, you have chickpea base, you have beans, anything that kind of boosts the protein and lowers the gluten makeup of the product. So those are all kind of still going strong, I guess, is what we're trying to say based on what a lot of people are gravitating towards at the show.

12:23And this was also coming off of Expo West recently, sort of very similar trends. A lot of like convenience-based products. I felt like a lot of things were like formatted as like to go or grab and go. And that obviously fits our post-COVID lifestyle. Yeah. And then the other thing, just kind of looking out for attendees and what they're looking at. I felt like there was a big emphasis on actual taste, which sounds really obvious. But when we talk a lot about branding and marketing, that can kind of get lost a little bit sometimes. But one of the, I talked to somebody who's in influencer marketing, and she mentioned that the reason she goes to the shows is because they want to actually taste the products to be able to vouch for it before they, you know, sign on all these campaigns and influencers to go out and promote it.

13:14So taste is still king, obviously, you know, you can kind of, you know, tout all of the health markers of a product. But if it doesn't actually taste good, then it kind of doesn't really matter at the end. Or at least I don't know if you could really build a brand off of that. So I thought that was interesting. But yeah, it seemed like a lot of the emerging brands were vying for buyers attention. And like she mentioned, you know, sleek and fun branding is kind of like the default at this point. So you can't really just count on that to get on shelves. So, yeah, I'm sure we'll see a lot of those products in stores coming up in the next few months, like you mentioned.

13:57But, yeah, I thought it was really interesting. And it just seems like a lot of the trends we've been seeing are just going strong. I don't think we're going to get away from healthy soda for some time. I'll tell you that. I know for a fact that there's a new one launching very soon. I was just told. Oh, sneak peek. We shall see. Yes, yes. A little bit of a scoop there. Lastly, we will end with some news from Walgreens. So like we said, first, let's talk about what Walgreens actually announced. Julia, you can tell us a little bit about, I mean, there's some numbers. involved if you want to run through them.

14:36What did they mention this week about their stores? Yeah, definitely. So the big headline here is that Walgreens announced plans to close as much as a quarter of its stores in the US. Right now it has about 8 ,700. So, you know, pretty large footprint. It has been closing stores for a while now in an attempt to cut costs. So actually as of February, Walgreens had closed 625 stores in the US. So, you know, also a sizable number. But I mean, clearly they didn't think that was enough if they're going back and cutting even more stores. Yeah, we've definitely seen a lot of store closures over the last year or two.

15:18So, you know, it's probably worth asking, why is Walgreens doing this right now? There's been a lot of changes in the last few months there after they've done a lot of investments, like I've mentioned, in physical retail? Yeah, it's a good question. So basically, this news came after Walgreens reported its third quarter earnings on Thursday. Its CEO, Tim Wentworth, he went on CNBC after the earnings came out and gave an interview. And basically, he talked about how Walgreens had assumed that the consumer would get somewhat stronger in the second half of the year. be able to make more purchases or spend more, just really churn out, you know, sales and lots of traffic.

16:02But that really hasn't been the case. And so that's kind of what's leading Walgreens to take these drastic measures like closing stores. Wentworth did say that there was some room to kind of, you know, relook at the number of stores in the store portfolio. he said during the interview that actually 75 % of Walgreens stores drive 100 % of the business's profitability, which is interesting. So there's that extra 25 % that I think they're taking a closer look at. And he mentioned, you know, that in the future, they're going to be finalizing a number that they would close. They haven't said exactly what that number will be.

16:41But I think we can assume it will be, you know, a few hundreds or so. But Walgreens earnings were actually OK in some areas, despite this news. Their revenue for the past quarter was$36.4 billion compared to$35.94 billion, which was the expected number. And Walgreens also reported a higher net income than last year. Its net income this third quarter was about$344 million. And that same period a year ago, it was$118 million. So obviously, they have made a lot of progress there, you know, more than doubling that. But Walgreens did not provide a new revenue forecast for this year. You know, I think they're still kind of trying to figure out the financial landscape as so many companies are.

17:34And, you know, I think Walgreens is still trying to suss out what the consumer sentiment is because it's been a little bit shaky lately. And so I think they're kind of waiting for, you know, things to crystallize a little bit more before giving a bit of a prediction to investors. Yeah, it feels like that's what we're hearing from everyone right now. the last whatever feels like a year or two maybe they're just saying that consumers are cautious or being cautious and the retailers are just trying to figure out what where people are spending their money you know the categories tend to kind of toggle back and forth but what else is Walgreens doing right now I'm kind of curious about anything else that's maybe impacting their business yeah so Walgreens has been kind of jumping on this train that Target and Walmart have been on in terms of cutting prices.

18:28So, you know, earlier this spring, Walgreens said that it was actually going to be lowering prices on about 1 ,300 products. And, you know, sometimes we think of Walgreens as, you know, mostly bath products or, you know, the pharmacy, but they sell so many different things, including candy and greeting cards. So, you know, they're actually going to be cutting across their entire portfolio. but Walgreens did say that, you know, they think these moves will helpfully encourage traffic. You know, people might be more eager to come in if they see that prices are down, especially compared to competitors.

19:03But Walgreens did say that they expect this to kind of hurt short-term profitability. So, you know, they, again, are going to have to kind of adapt with the times. Their retail sales this past quarter were down 4%. So, you know, I think they're going to need to come back from that in some way. And I think that they're betting on these price slashing methods to really help with that. Yeah, I just feel like it's tough right now for to just to be a drugstore chain, period. One thing I get frustrated by is all the locked up merchandise. I think I have mentioned it on the show before. It's really frustrating to be shopping and then waiting for somebody to come and unlock, I don't know, a$5 shaving cream, I think was my last one.

19:52But yeah, does this happen to you? I mean, it seems to be really turning off a lot of shoppers. And we know, you know, we don't need to get into the whole security and theft issue that they claim is why they've locked up everything, you know, even under a certain amount of dollars. But yeah, it's annoying to say the least. Yeah, no, this is something that I have been dealing with for a while, as I'm sure a lot of our listeners have been. You know, I went to Duane Reade the other day, just wanted to get a tube of toothpaste because I was running low. And, you know, the the store had the little button near the toothpaste that I had to press.

20:33So I did that. I waited for somebody to come. Nobody was coming and I had to press it again. And I felt bad, like bothering the store people, you know, to come unlock it because I'm sure it's not fun for them to run around and have to go from case to case. But it's tough because, you know, that's really the only way now that you can, you know, get products at a lot of these drugstores if you want to go in person. I mean, obviously you can order some of this stuff online, but if you just want to make a quick purchase, you know, it is tough. You are going to have to be waiting around in a lot of cases.

21:06And yeah, it's just, it's not, it's not fun. Yeah. I have tried to figure out whether that hurts sales. It's kind of hard to quantify, I guess. But just talking to analysts, they say at the very least, the image and the sentiment are great. So we'll see what happens. there. But did they say anything related to that on the call? Not really. I mean, they did talk about doing some things to improve the store experience. And some of that is them removing some brands to just kind of simplify everything. They talked about removing national brands, for example, to focus on their private label. A lot of those national brands are the ones that tend to be locked up.

21:50And so, you know, perhaps if they're switching to more emphasis on private label, those may not be locked up, maybe more accessible to shoppers. But they're also investing more in areas that have done really well for them, like beauty and pharmacy. And that includes trying to reduce the wait time in pharmacy lines. I feel like every time I go, there's always a very long line, at least like five people or so. So, you know, I think they're working on that. But, you You know, staffing, I think, is still, you know, a concern for a lot of brands. And I think it's just challenging because there's a lot of different parts of the business that Walgreens needs to invest in right now.

22:30Yeah, I think, like we said, it's tough to be operating a pharmacy business right now. And that's why you're seeing companies like Walgreens experimenting with all of these cost-cutting and sales-driving methods. But yeah, it is a big contrast, I was thinking, to what we were experiencing at the height of COVID when a lot of the foot traffic was really boosted by people going to get their vaccines and then making purchases while they're at the store. But obviously, you know, that momentum has died down and we're now at this sort of other end of the spectrum. So they do have to figure that out.

23:09So, yeah, we'll see. We'll see what happens. We will keep an eye out on those locked cases. at least Julia and I will be. Yes, yes, we'll report back. All right. Well, that is a wrap for our show this week. You can rate and give us a review anywhere else you get your podcasts. Please follow us on social. We're at Modern Retail to read our coverage. I myself am at Gabriela Barco. Julia, do you want to plug your socials? Sure, I'm at Julia Waldo. Great. And then on Thursdays, you can hear Kale's interview show weekly with uh just retail executives let's come back for that and as always thank you for listening and we hope we'll see you back here next week