Rundown: Hoka competes with Nike, Amazon adds Grubhub perk to Prime & private label is still growing

0:05Hey, everyone. Welcome back to the Modern Retail Rundown, where we recap some of the major headlines of the week. I am senior reporter Gabby Barco, and I'm here with editor-in-chief Kale Guthrie Weissman. Good morning, Kale. I am back. You're back. We missed you. It was me and Anna despondent talking the news last week, being like there's a Gabby-shaped hole in the podcast. I know. I did listen. I was FOMOing. But I am excited to be back. Yeah, we are going to be talking about some fun topics today, including I feel like we both really find this category very fascinating, which is like, I guess, footwear trends and the fact that we are just more and more moving towards, you know, these like dad shoes or ugly shoes, whatever it is that we refer to them.

0:59We all are slowly slouching towards being dad. Yes, exactly. And I think it's part of the bigger trend of cargo pants coming back and just more comfort in general. And I think a brand like Hoka, for example, which we're going to get into soon, has sort of benefited from it, but also is trying to strike a balance between becoming a fashion brand and also its core assortment. And it was really all about running and performance. And so, yeah, let's get into it. First, this week's stories, we are going to be talking about Hoka and the vision that the company has for its customer base in the future, now that they're coming off of a really big few years.

1:51We're also going to be talking about Amazon Prime benefits. So Grubhub subscription is going to be one of the latest benefits that Prime members are going to be receiving. It's just the latest in a series of perks that Amazon is adding. And lastly, we are going to be talking about private labels. And they just will not stop growing. Private labels. People love them. They're so big right now. Yep. Yeah, I feel like we've been saying that for like four years. Yeah, I feel like what's funny is a lot of the topics that we talk about are things that, you know, and it's a credit to modern retail, but we've been writing about this for a long time.

2:33But then you see major publications pick it up, but also you just see the trends that were early on two years ago become national trends. And I think a couple of those stories, the stories we're talking about today, fit precisely that. So that's cool. Yeah. All right. Well, one of them is Hoka, which is seeing its customer base widening. So at this point, it's clear that Hoka is not just for runners. I think anyone who lives in a big city or really anywhere at this point sees a lot of athleisure being paired with the shoes. They are very mainstream at this point. But I was actually surprised to see that they were founded in 2009.

3:16They're older than I always think. But really, the last few years, especially coming off of COVID or during, is when they broke a lot of records or, I guess, hit some milestones like the billion-dollar sales mark in 2022. And so this on a call last week, the CEO of Deckers, which is the parent company of Uggs and Hoka discussed the brand's evolution, which, you know, went from this. They really made these shoes specifically for runners, I think specifically for running downhill is what I was reading. But now, like I said, it's just kind of become, yeah, I'm not a runner, so I'm just getting all of this secondhand.

4:05But yeah, I think it's kind of evolved into this lifestyle brand that the company obviously embraced because that means that equals sales usually. And so the CEO said, yeah, there's no doubt we are a performance innovation driven company, but we obviously have been adopted in a pretty substantial way from a lifestyle perspective. And that's because of the performance that's built into the product. It's not just that they look good, but they feel good. But yeah, like I said earlier, the pandemic did push these trends into more casual. I think everyone is just dressing more casual generally. And so hookah kind of fits into that aesthetic pretty well.

4:44Yeah, no, it seems like, and this is not a new phenomenon. We began talking about how athleisure was going into mainstream fashion years ago, kind of really got jumpstarted during the pandemic. But now all of these companies that kind of because they were well placed at the time are becoming really big fashion and apparel players and not just niche like you have Hoka, you have On Running. All these companies make performance-based shoes that, by some accounts, people think aren't the most stylish. They are focused on comfort and performance. And now they are becoming something else without these brands really changing the way they are presenting their products.

5:32And so that's an interesting thing. And I think that there are other interesting side currents with it, side effects, whatever you want to call it, where this is definitely having an impact on a company like Nike or Adidas' strategy. So it's super fascinating. Yeah, there's the last few years there's been talk of these two companies specifically taking market share away from Nike, New Balance, all of these other big shoe brands that also do make a lot of these sort of dad shoe styles that kind of become the sort of default style at this point. But I think there is something to be said about the premium aspect of Hoka.

6:19I mean, you're talking about, I think, you know, their shoes start at something like$140. Like, this isn't just a run-of-the-mill shoe, hence the performance focus. And so if you're just somebody that's coming in because you saw them at Free People, for example, that's their latest collaboration, you know, on the fashion side, you're most likely, I can speak for myself, They're probably just buying them to run errands versus running, but it still counts because they're still comfortable. And I think people are willing to invest in something like that versus, you know, just kind of like a general shoe brand.

6:55Yeah, well, I can just speak personally. I have a pair of Hoka's. I bought them. This was many years ago. They had a clearance section or a cheaper shoe section on their website. And so these were affordable, nice shoes. I bought them for the gym. And now I've only worn them in the gym, but I realized I could wear these out and it would be totally fine. And it's, I don't know, we could talk into about, and probably this, we won't go into this now, but maybe a future story is just, there are all of these markers that people have for what they wear out in the world. And I'm thinking specifically about how like every founder for a very long time was wearing all birds.

7:35And that was the style of the shoe that everyone was wearing. And now that has completely gone by the wayside. And now people are wearing Hoka's or they're wearing On or they're wearing New Balance or something like that. A little bit less of a statement, but a statement nonetheless. less. Yeah, I mean, that contrast, you know, we don't need to go into all birds too much, but there it is, it's such a fascinating contrast between the trajectory of these two companies and how, you know, people gravitated towards their styles. But Hoka is, you know, it's, Assortment is still pretty tight. Generally speaking, they don't really diverge too much from their core, you know, true line.

8:17And so, because I mean, it's very easy to just build out a lifestyle brand around this brand, but that's not what they want to do, which their CEO mentioned is that while they have been adopted into sort of like an athleisure, by an athleisure geared shopper, they are welcoming them, but they will still be kind of, you know, focusing on performance, like I keep saying. But I do think it's interesting that one of their strategies is actually colors. So they release a lot of shoes in a lot of different color combinations. And I I think that's where the limited edition clearance comes in, where you could probably find something that you like at any given point.

8:56And so that's kind of one of their retention strategies is instead of constantly creating new products, they just kind of go back and literally just change the colors and people collect them. I mean, that's a big thing. Yeah. And it's speaking of the collection, I think that there is a very interesting thing that's happening specifically with Oka and on all these players, which is that now we are seeing and this rarely happens, but you're seeing Nike respond. I don't think Nike has specifically called out these companies, but, you know, Nike has always focused, you know, has had a lot of different things going on.

9:33But for example, Jordans were its major shoe. That was the one that they really focused on. That was the one that, you know, on resale websites, it would be skyrocketing. And it's true that like Air Jordans sell fine at Dick's Sporting Goods. I'm looking at some stats from, I think, March of this year. But Nike's CFO, I think in March, told investors that the brand is scaling back its classic shoes and focusing on new products. And I think that is a very, very clear message that it's seeing, it's like other companies are eating its lunch and are coming up with new products that are resonating more with customers.

10:15And as a result, Nike needs to come up with something new, probably something performance focused that maybe has the look or feel or the marketing of a Hoka product. And to see such a big and important brand like Nike change its product development strategy to that, I think, is very noteworthy. Yeah, that is interesting, though. I think one thing about Hoka specifically is it actually has a very distinct look. I mean, even within the sort of chunky datchew look, it's got really thick foam soles that stand out really well. And so it does have, like you said, that look that we see a lot paired with whether it's athleisure or even in the office.

11:02And so I wonder with Nike, it's got such iconic silhouettes itself. It would be very obvious if they start moving into the sort of direction the other way. Same with on, you know, I think those kind of stand out, you can find them a mile away. And so that that seems to kind of be where the just fashion is going, you know, because sneakers are now just part of streetwear and athleisure. And so I don't think we're going to be going backwards, which bodes well for brands like Hoka. Yeah, it'll be. Yeah. And this has been this isn't a surprise. This has been a long time coming. I think we had a story and I want to say 2021 that pretty much said that like that it wasn't about dad shoes.

11:47I'm trying to remember exactly the term that we used, but essentially it was all about comfort. And these new companies were really seeing major growth. And now we're seeing that pay dividends. What? Three years later. Yeah. And at the time, it was very much about hiking and outdoor sports, very deep in the pandemic. But coming off of that, obviously, they have a lot of new fans. So it'll be interesting to see how they expand. I think the assortment is going to be interesting to watch, whether they will really stick to their guns about that. All right. Moving on to Amazon, we are talking today about Amazon is continually trying to boost its prime membership benefits.

12:29You know, at this point, this is$139 per year membership. It's gone up pretty consistently over the last few years. And so, you know, the latest benefit that they're adding is Grubhub subscription, which is basically this a pass that you have that gives you perks like free delivery on orders,$12 and more, for example, and some other discounts. But yeah, I mean, Amazon does have a stake in Grubhub. So that makes sense that they're kind of trying to, you know, optimize all of their acquisitions and investments into these perks. But what are your thoughts on this kind of pressure to constantly revamp Prime?

13:17Because most people associate it with two-day delivery. And I think Amazon would like us all to just think of it as more than that, obviously, to warrant the price. Yeah, I think there's a lot of thoughts I have. For one, it's just I feel like every week we have a new announcement about a new Prime perk. And so pretty much some weeks it is a partnership with a company like Grubhub. Other weeks it's something to do with a service. And this is all part of just a really big marketing push by Amazon to try and get not only more people to sign up for Prime, But pretty much as you said, to think of Prime as more than just a vehicle to get free delivery of Amazon packages.

14:05And I think that's because Prime is getting more expensive, but also because there's a lot of competition out there for other premium services like Walmart Plus is the one that's coming to mind. And Walmart Plus itself is doing a major push for people to sign up for Walmart Plus. And I think you're actually seeing kind of, I'll say like a war between the two where I think Walmart, I got, you know, I've seen some, I think Walmart's having a big deal day focused soon about what for Walmart plus shoppers where they're focusing on the shoppers and they'll get specific deals. we've seen Walmart you know make inroads you know it's it's not apples apples but Walmart you know made a bit is trying to buy Visio to have which people think would be a way to sort of boost its ad platform that would likely play into the types of streaming content that Walmart plus members would get and I also just anecdotally like I was on TikTok yesterday and I saw an ad specifically for Walmart Plus.

15:13And I do think that we are seeing these two players, along with other companies that are also trying to get people to sign up for their subscription plans, really try and grow and show that they have a better service than the other. And so when you see Amazon announce that it has a partnership with Grubhub, and this isn't a new partnership, it's an interesting just sort of tweak to it because Amazon Prime members did get Grubhub subscriptions before this, but it was only for one year. And then after that, there would be an automatic renewal that they would then be charged for Grubhub Plus. And now it is free.

15:51It's part and parcel of the Prime membership. And I think that pretty much the play here is, A, to have all of these things, these parts of Amazon Prime that aren't just a part of shopping on amazon.com so that people are thinking about Amazon Prime and knowing that there are other services. You know, you're seeing this with Amazon Prime Video. It's really trying to position itself as a media leader and a services leader, and you're getting your shows because you're an Amazon Prime member. But also so it can prove that all of these other services that don't have the traction quite yet aren't necessarily as big as Amazon Prime, but so that they don't grow and really compete with it.

16:32And so it's definitely an interesting moment now because I do think specifically Walmart and Amazon are really duking it out with each other over their plus memberships, prime memberships. Right. And, you know, Target just launched its own paid loyalty membership. But like you said, it's kind of it's always been Amazon versus Walmart. You know, it's kind of very obvious. And Walmart, of course, has the footprint and the physical retail to be able to fulfill that, especially in grocery. I think that's one place that Amazon is, yeah, is not. I mean, I think speaking of prime benefits, we just saw that.

17:15I think we even talked about it on the show a few weeks ago where they are now adding like$9.99 a month to get free grocery delivery on, I think, like fresh, Whole Foods, all of that. And so it's kind of like this constant recalibration to get people to optimize or get the most out of their membership. Some of the other latest ones we saw is One Medical, which Amazon acquired for$3.9 billion last year. It's sort of this like primary care service. It is now also kind of baked into your Prime membership. And then Amazon Pharmacy, which I believe it's kind of was spun out of PillPack, that acquisition from a few years ago.

18:02That's another benefit, you know, sort of prescription delivery. And so I think one thing that I always find is that it's interesting is there are so many benefits that a lot of people probably don't know about, honestly. I mean, there's the obvious ones like Whole Foods discounts, for example. And then, of course, you know, Prime Video streaming, although now it's ad supported, as we've spoken about. And then try before you buy, for example. There's a lot on the wardrobe side or fashion side where you can try things for seven days and decide if you can keep them. And I wonder if Amazon is realizing like maybe a lot of people.

18:42That's why I think there's such a big marketing push behind it is that maybe people don't really think about a lot of these day to day. Well, I will let you know that Amazon is thinking about this. They came out with a big marketing push last year sometime. And I spoke with Amazon about this. And pretty much they said exactly what you're saying. They're like, we have all of these many different services and people aren't aware of what they are. And so they have all of these commercials that you're seeing where the idea is that it's showing someone going about their day to day and they're using all of these different services that you might not know is from Amazon, be it listening to music with Amazon, Prime Music or whatever it's called, or ordering food from Grubhub.

19:30But it's a really interesting problem, I guess, where Amazon – I don't think Amazon's going to slow down adding the perks that it can. But also, there isn't necessarily a really cohesive thread or through line that ties them all together. And so it's all about the company just trying to remind people, like, you know, it's worth the whatever$139, this is why, this is why. And I mean, like, I suppose I'm sure I've seen these commercials when I've watched TV, but I've never really, I wonder if it is having an impact on average people just watching who are Prime members realizing all of these different services.

20:11Some data I would love is if, you know, are these different services that Amazon is offering, are they seeing increases of usage or more people signing up or more people opting in as a result of Amazon really trying to remind people that they can use them because they are Prime members? And I don't know. Yeah. And I mean, long term, chances are the monthly or annual membership will probably continue to go up, especially as delivery times get shorter, logistics get more complicated. And so I do think there will constantly be sort of like this back and forth between what Walmart can offer and what these other services can offer versus Amazon.

21:00Because at some point there is a threshold. I was talking to an analyst about a year ago about this where it's like there is a price point where people, which is maybe around, I don't know, it's kind of arbitrary, maybe$200 where you're like, okay, well, at this point, what am I really paying for? And so I think this is maybe a way to get ahead of that is really emphasizing these benefits. Yeah, I think that that is true. But I also think that a lot of the benefits aren't primary benefits. And they're all like, nice, nice, like, sure, like, okay, that's totally fine. But if you are signing up for Amazon Prime, it's because you just want free delivery.

21:39And so I imagine that people are comparing the price to that service and not necessarily to the other things. Maybe the video part. Like, you know, that seems pretty big. But I don't know. People are going to use Grubhub no matter what. Or they're not. And so I don't think they're going to sign up. Maybe – do you disagree with me? No, I was just going to say I wonder what this will do to Grubhub's business. Because, you know, of course they compete with Uber Eats and the other guys. And so it's an interesting partnership. Yeah, the app part, the fact that I think you'll be able to access Grubhub and the Amazon, I think is interesting.

22:15But that's for another portion of, you know, we won't talk about that now. But like, you know, we're talking about Uber Eats, talking about DoorDash. Like, there are a lot of questions I have. All right. Well, now we can move on to private labels. So as we were saying, private labels are having a moment. Once again, it seems like they always are. But I think just with inflation, it just seems to really be emphasizing it. But there's new data that the Wall Street Journal came up with that showed that increasing number of Americans are grocery shopping, choosing store brands or generic private labels, whatever it is that each retailer calls them.

22:56And I think they now represent about 22 % of the U.S. CPG dollar shares. That's up from 18 % in 2006, which I guess was already pretty high. I did not realize it's always been pretty high. But I guess the reputation that private label has has changed since then. The expectations are higher. So maybe that's what it is. but yeah uh what are your thoughts on these surveys that they also have where people just love store-bought yeah no i mean like so there's one survey from this uh from this wall street journal story that i thought was interesting it said 65 percent of shoppers said they choose private labels over brand names um because of lower prices and this isn't surprising but it also there are things that we have talked about that we have written about that that this is sort of just cementing into place.

23:52Prices are going up, especially name brand prices. We've been writing about quote unquote shrinkflation. We've also been talking about companies like PepsiCo who have just consistently been raising their prices because they could essentially because people continue to buy their products. And now we're seeing the reaction to that where people are beginning to rebel and you know the the truth of the matter is that brands are still reigning you know it is private labels are growing but 78 percent of overall food and beverage dollar sales um are brand names according to surkana um but there are areas that are seeing specific uh specific growth um like uh dish care so you're not buying dawn you're buying whatever walmart brand that grew 16 % over the last year.

24:44Pet food sales, so you're not buying Alpo anymore, but you're buying Target brand Good & Gather. I don't know if Good & Gather makes it, but Pet Food, that shot up 7.5%. And there are things, and maybe I'm drawing from my own experience here, but there are products that you would always buy with a private label. Not always buy, but you wouldn't really give it a second thought. Like, for example, maybe a sponge, maybe a paper towel. You know, there are things that like, you know, but I think the people are seeing the prices go up so much as a whole that they are now widening their choices for other products that they would usually buy brand names and deciding to go for a more generic one.

25:28And I think it's not surprising, but it's interesting to see the numbers actually lay out and say that. Yeah, like you said, the categories definitely make an impact. And I think in some cases, there's like picking and choosing. So some people prioritize chips, you know, national brands. Some do pet food or whatnot. And so that's interesting, like I said, because the quality just continues to improve. And a lot of these, I mean, we know how this works. You know, the co-packing is pretty much the same. It's all coming from the same sources. So and I think consumers obviously have woken up to a lot of that.

26:04And so I wonder how that will impact the big CPGs. We've also seen in the last few weeks the retailers that are announcing all these price slashings on thousands of items. I think we are seeing now that the result of that backlash that we saw of a lot of the price increases for profits, really. Yeah. I mean, and just the general numbers, like grocery prices in this past April were 26 % higher than they were in 2019. And so I think we're just seeing people overall respond to the fact that things are way more expensive. And now we're seeing these retailers respond. This week specifically, Walgreens made the announcement that it was cutting the prices of 1 ,300 of its products.

26:52Last week, Ana and I talked about how Target was also slashing its prices. And this is something I found really interesting. I was going through these announcements. all of these companies are named name brands that they're slashing the prices for. And so Target gave an example of Clorox wipes and that those are going to be cheaper now at Target. Walgreens said that one a day who makes vitamins or eucerin, those products are going to have their prices slashed. So it's not just, you know, with these retail announcements, it's not just that they're going to be focusing on their private labels, which probably have better margins for them, but that they are actually cutting the prices of the brands that they're also selling.

27:32And I think that's of note. And I was just thinking, do you remember, I think we talked about this a few months ago, but do you remember when Carrefour, the European-based retailer, got into a huge fight with PepsiCo over prices and pretty much said, we're going to stop selling you? Yeah, yeah. They kind of boycotted PepsiCo. So we were talking about how you go to a store and you see like$8 Doritos. And I think that is a shock to the system. And so Europeans were not having it. And so, yeah, I think this will be interesting to see, you know, hopefully as prices come down, it will be interesting to see whether private labels can continue that momentum of, you know, competing with these, the big guys.

28:20Yeah. And I think we are seeing a new dynamic at play where it is the major CPG brands are probably going to have to respond. I will be very interested to see what Coca-Cola and PepsiCo say in their next earnings because we're seeing a very clear backlash both from shoppers and from retailers saying like the prices are too high now and they need to go down. And so that will be something we'll be looking out for. Yeah. All right. Well, that is a wrap for us this week. You can write and give us a review anywhere you get your podcasts. And please follow us on socials. We are at Modern Retail to read all of the coverage we've referenced.

29:00And then on Thursdays, come back for Kale's weekly interview show. Kale, do you know who you have on next week that you can preview for us? I certainly do. I am talking with the CEO of ThredUp. We talk about resale and all the things that are going on. It's a fun conversation. Great. Also, as an aside, I want to plug this week's episode, Century 21's comeback. It's a very personal thing for me. I'm very excited. It's a New York icon. All right. So, yeah, that is it for us. Thank you for listening and hope you'll be back next week.