Rundown: HomeGoods gives up on e-commerce, Walmart eyes digital growth & Goop goes mass market

0:05Hello, and welcome to the Modern Retail Rundown. I'm your host, senior reporter, Gabby Barco, and I'm here with our editor-in-chief, Kale Guthrie-Weisman. Hello, Kale. How are you? I'm doing well, Gabby. How are you? Yeah, doing really well. We can get into this week's news, which is very e-commerce heavy. I'm very excited about it. First off, we're going to be talking about TJX doing away with e-commerce for home goods specifically. I do think it's really interesting that it's home goods out of all their entities, but we'll get into that. Next up, we will talk about Walmart pushing for a bigger marketplace.

0:47They have this marketplace for third-party sellers that's been quietly growing over the last few years. And it looks like we're sort of at a turning point right now with that. And last but not least, we are going to be talking about Goop going mainstream. I am very excited for that one. I knew you would be excited for that one, Gabby. Listen, everyone has a complicated relationship with Goop, but we love to hate her. Okay, so first up, let's talk about HomeGoods. So essentially this week, TJX, which owns HomeGoods, TJ Maxx, mentioned that Marshalls mentioned that they are going to be shutting down the HomeGoods website, which is their shoppable website that only launched about two years ago during the pandemic.

1:41Well, actually, I think it was a little too late for the pandemic, but that's beside the point. And it essentially sounds like it doesn't really work for home goods. So I'm curious to hear why you think that is. I mean, the obvious answer is that it's just not, it doesn't do as well as the stores. But yeah, curious why the furniture side. Yeah. So, I mean, there's a lot of things at play here. For one, it's important to note that the TJX umbrella company as a whole, as well as nearly every off-pricer, has really not focused on e-com at all. And there are reasons for that, and we'll go into that probably in a few minutes.

2:24So the fact that HomeGoods tried to do online in the way that it did was pretty interesting. And clearly, I mean, I think the number one thing is that people have certain expectations out of those types of stores, namely that they buy them, you know, in brick and mortar rather than online. And also they have a different way of shopping. You know, we'll talk about the treasure hunt probably in a few minutes. But, you know, it was a big experiment by HomeGoods to see could they have people buy their things online. The company really touted it when it launched in 2021. it said, you know, this is going to be a really good complementary part of our business.

3:04It also touted how it was more set up for success than the other brands like TJ Maxx and Marshalls in terms of online because it had a more streamlined merchandising strategy. And also, just parenthetically, e-com is better when the prices of things are higher. And so, you know, TJ Maxx and Marshalls, they're mostly known for their cheap clothes. HomeGoods has, you know, furniture and other wares like that, which is slightly higher price point. So that gave it the trappings of potentially being viable. But it clearly didn't work out. I, you know, we don't know the inner workings of exactly why.

3:39My guess is that it's really hard to launch e-com for legacy retailers. And so to do it for one brand and then, you know, you probably really need to go all in, have an entire team, work with all aspects. But I bet you that's not what happened. And it probably just kind of languished over the last two years. And the company, as every company is realizing now, needs to focus on the areas of its business that are profitable. And probably e-commerce wasn't one of them, you know? The thing with home goods is like the sheer volume is so big. I can't really imagine. I mean, if you go through the catalog, it's really overwhelming.

4:17And there's constant newness. So I always did wonder how, I mean, yeah, it would take a lot of people to keep up with that and to constantly, you know, keep the inventory updated, the fulfillment, all of that, because so much of it, there's so much overturn, right? I mean, that's what off price is. And so with that, I think the discovery aspect, we can talk about that because we're always hearing people go into off-price because they just want to look around and find something that they wouldn't find anywhere else for that price. And it's the treasure hunt aspect of things where on a website, it's very hard to replicate.

4:59I do think there's one interesting feature that I found on the TJX websites, which is that they hide the designer until you add it to the car. So that's like their version. I didn't know that. I love that. Yeah, yeah. I know my late night sleuthing brought me to that conclusion. So they do try to kind of, you know, mimic that. experience. But again, it's really hard to do with e-commerce because the other thing I think is people can very easily Google and compare prices with any other retailer. So you're not sitting at a register at a store where you're like, okay, I'm just going to grab this because it might not be here next time, which we can maybe agree that that's what happens at HomeGoods.

5:41Yeah. And I think that part of the point of a brick and mortar, quote unquote, a treasure hunt shopping experience is that it's cluttered and messy. Like you go through and you're sifting through a million things and trying to find that perfect thing that matches with you. And that truly cannot be replicated online. And so, you know, we can talk about there are other online platforms that are focusing on value. Some of them do focus on the treasure hunt aspect of things, but do it more in a gamified setting like Timu, you know, but it's not the same experience. And I think that what TJX as a company is very good at and what it's known for is that it has a lot of shoppers, but they all have the same expectations.

6:26And those expectations are specifically going into the stores. And so I think it makes sense why they would try to do e-commerce. But it would have to be a really robust architecture to it, and you'd have to do a rethinking of how to retrain customers to think of them as a place for me to buy those types of items online. And I bet you that was just what happened, where the people who would usually shop at HomeGoods to look for a good deal on, you know, some kitchen or furniture thing didn't have the muscle memory to go to the website. They probably bought it on Amazon, you know? Yeah. And, you know, of course, the e-com side takes a long time to grow.

7:15We saw that a couple of months ago in the earnings, TJX mentioned that digital only makes up 3 % of their total sales. I mean, it's probably still a lot, but compared to what they do in the stores, it's not much. So maybe I think maybe this points to the fact that they just want to pull back on that investment because it's just not growing as fast. Because right now, I think it's important to mention, too, that off price is maybe like one of very, very few segments of retail that's actually doing well. And that tends to happen during economic downturn. So, yeah, I'm kind of not surprised they want to focus on that.

7:56Yeah, and I think that even though they're doing well, I'm sure they are feeling the economic pressures that every company and retailer is feeling. And so I'm sure they've had boardroom meetings where they had to make strategic decisions about what to invest in and what not to invest in. And when you have an expensive endeavor that represents only 3 % of your sales and isn't growing with triple-digit growth, then you probably have to cut that. And I do think that there are competitive pressures also at play. So I mentioned Timu. There's also Shein, which Shein would be more towards the apparel side of things, of course, although it is getting into other products and is launching its own third-party marketplace, which is totally a different can of worms.

8:37But my point is that when HomeGoods launched in 2021, it essentially was trying to be one of the only, quote-unquote, off-price value-based platforms out there. to do this. And now there are others that are doing well and have very, very different business models. Their entire business is online. And so I think that for HomeGoods to try and compete with a Timu, for example, probably just wouldn't work. It wouldn't happen. And so I think that probably those all came together for them to realize, let's focus on what we're good at. And what we're good out, I do wonder what this means for the general group of retailers that do in-store but don't really have shoppable websites, which of course, that was a disaster during lockdowns, but they kind of quickly recovered once people went back into stores.

9:38There's a lot of surprise behavior changes, but I don't know. Do you think, can you survive as a retailer forever this way? It's so hard to tell because are people just going to keep going to the store no matter what? I mean, I think maybe. And I think, you know, Primark's a great example where, you know, Primark has, you know, forever, they were on the podcast a few months ago and said, you know, we're not going to be really an e-commerce platform. They do invest in digital, but all of those digital investments are about driving people to the store. So it will show what the inventory at a certain location is.

10:13And I think that that's a sign of retailers knowing, A, what their customer behaviors are, and B, showing that they know what they're good at. And maybe one day one of these companies will hire a great CTO and bring in an entire team. But I bet you that would cause a huge cultural shift, especially with how these companies do merchandising. Like buying these products is great for stocking stores. It's not great for having a unified online experience. And so, I mean, I won't say, never say never, but it is kind of smart for these companies to know what they're good at is in store. People still are going to their stores.

10:55It's not like that is diminishing at all. So why not focus on that instead of trying to do something that has yet to be proven, you know, as a viable strategy? Last thing, this is just kind of an aside, but I do think it's really interesting. Recently, I came to this or I came to find this out during my reporting on off prices that there's an entire subculture on TikTok that is very dedicated to documenting what's at a HomeGoods or a TJ Maxx for people. So, you know, they'll tag the store, the location, and tell people like, just found Le Croset here, like, you know, run, don't walk. And so I wonder if like a lot of that is probably doing the heavy lifting for these retailers, right?

11:41Like you don't probably don't even need to advertise your own merchandise because there's just too much excitement about it already. Yeah. And maybe the e-commerce strategy that HomeGoods should do is just be a TikTok shop. That's giving them an idea. I will check that again. I would love that. Well, speaking of e-com and marketplaces, we are going to be talking about Walmart next. This is, you know, it's nothing new, but they do seem to be pushing more for their third-party marketplace to grow, especially coming up on the holiday. They have a decent amount of sellers, but it seems like this is a play to compete with Amazon, which, you know, the Walmart versus Amazon wars will rage for the rest of time.

12:30But let's talk about what this specific push means. Yeah. So, I mean, this isn't a new push. Walmart has been trying to get more sellers to be on its third-party marketplace for years now. But it seems that maybe things are more or less reaching ahead. And this is based off of a CNBC article that came out this week that just sort of gave a roundup of all the updates that Walmart has made to its third-party marketplace. And one of the really interesting things that stood out to me is that last week was the October Prime Day, which we talked about last week as well. You know, it was the Amazon second Prime Day that they say is trying to be a lead up to, you know, the holidays.

13:11It's unclear if that's actually the case or if people were just buying cheap things because they were on sale. But whenever Amazon has a sale, competitors also have a sale. And so Walmart had its own quote-unquote prime day sale. And according to the company, more than half of the items sold at its competing sale came from online. And that's, you know, you have to think about Black Friday and Cyber Monday when that happens. Usually or traditionally, you know, pre-pandemic up until whenever, Amazon would have its prime day sale. Walmart and Target would have their sales. And while there would be an online component, a lot of it was focused on in-store, like doorbuster deals.

13:49And so now it seems that Walmart is trying to say, hey, we can play in the same arena of having an online sale that, quote unquote, competes with Amazon. And I think that that's interesting just on its own. Right, because I think in order to compete with Amazon Prime for those countdown clock in real-time shopping experience, yeah, it is a little bit hard. It's almost the opposite of what we were just talking about, where it's harder to replicate in-store because people are just clicking, adding to cart, checking out. And so I can see why Walmart wants to grow this part. Should we talk about the numbers?

14:29I mean, just like the sheer size of Amazon's 3P is insane. They have over a million third-party sellers, whereas Walmart has 100 ,000. So just for context, it's like 10x what Walmart has. Yeah, and I mean, even the revenue is pretty astounding, where Walmart's net sales from e-com in fiscal year 2023 was$53.4 billion. Nothing to sneeze at. But then what was Amazon's 2022 marketplace revenue? $315.88 billion. So, you know, it's orders of magnitude bigger. But at the same time, you know, also in comparison to the home goods thing, the Walmart bet is actually showing signs of life and is, you know, there is growth there.

15:14Walmart said that U.S. online sales grew 24 % year over year at its August earnings. I think this is really interesting because Walmart has been pushing to use more of its fulfillment services rather than just dropshipping. And it said recently that 50 % of its products sold online in the last quarter were fulfilled via its stores, meaning using Walmart's fulfillment. And then this is another crazy stat from Apptopia, which, you know, it's a third-party stat, so it's always hard to know where exactly the truth lies. But it shows that Walmart's app has more daily average users than Amazon, which was wild to me.

15:51So all of that to say is that probably the data is showing Walmart that it should continue pressing the gas on e-com. And thus, the best time to do that is in the lead up to the holidays when a lot of people will be shopping. Yeah. I want to talk a little bit about what this could mean for brands that are trying to get into Walmart, because this has actually become a pretty popular tactic where a brand is encouraged to get on the marketplace of a certain retailer and then maybe grab the attention and eventually get into their stores. this it yeah it seems like a pretty decent way of you know a path to get into Walmart which you know could be pretty hard for a lot of smaller brands one brand told CNBC that after being on the marketplace for a year they did surprisingly get a purchase order from Walmart so I think Walmart buyers are obviously monitoring these numbers so that's an interesting aspect too Yeah, it's a really smart strategy from Walmart, both in terms of new merchant growth, but also a lot of these brands want to sell online, but then they also do want to have national in-store distribution.

17:08So the idea that I can join first this third-party e-commerce marketplace, sell my things, and if velocity is proven, then I'm going to get a purchase order from Walmart is a real competitive advantage to Amazon. With Amazon, it's just that you have most of the world being able to buy from you, but it's only on the Amazon marketplace. I thought that was a really interesting tidbit in the article. I think it was Solo Stove that they spoke with who pretty much said, yeah, we've been doing this for a year. It's been going fine. Now we're going to be selling in stores. We'll see how that goes. But that was because of how we did selling on the third-party marketplace.

17:45Right. And it does seem a little bit of a lighter lift versus dealing with a lot of inventory. You're trying to get it to Walmart, which can get pretty expensive and hard to do. So, yeah, I think with this, it'll just maybe, it might just be one of those things where it's a matter of time. Like, just plugging away at it and seeing how much it can grow. It's hard to tell whether it'll ever get to Amazon size. Also, just given Amazon's global reach. But thoughts? I mean, I'm sure Walmart wants it to get to Amazon size. But given that it is, you know, the biggest retailer in the country, it's not that it doesn't matter.

18:25But it's not like, you know, I think any growth from e-commerce is good. But it's still, you know, when you take into account it's in-store business, it's doing just fine. And so it's really interesting to watch. It's a lot about consumption shifts and whether you can get more people to think about Walmart as an online platform as opposed to just a store you go to shop in. But clearly that seems to be working. So, yeah. And we could have a conversation, which we won't, about the advertising aspect of this, which I think is the really big thing that all of them are vying for. And so, you know, but I think that will be where the real dollars are for, clearly, for Amazon, but also for Walmart on the line.

19:02Right. Yeah, that's a whole different can of worms. we don't need to get into today, but maybe at some point. Let's move on to our third story of the week, which is about Goop. Goop is going mass market. So this week, the company, I mean, Goop is so many things. Is it a brand? Is it an outlet? It's a lot of things. But they They announced that they are launching a sort of affordable line on Amazon and in Target this week. It's called Good Clean Goop. And the products are ranging from$20 to$40, which, you know, if you know anything about Goop, that's like a pretty decently priced range. But yeah, it'll be, you know, cleansers, moisturizers, serums, pretty skincare heavy.

19:54But I think this is a really interesting departure for Goop, right? Because we'll talk about this, but they are known for just being a purveyor of luxury really is what it comes down to. Yeah, it's a very interesting move because I would say that Goop is a very coastal luxury type of brand, especially like L.A. It's where all the, I mean, L.A. and New York, I guess you could say. But it's, you know, it's about spending more money on, you know, nicer items that, you know, that will make you feel better about yourself. And clearly this is a move to get a mass audience. People who maybe had never heard of Goop before.

20:35Maybe they saw a Gwyneth Paltrow movie in 2003. But it seems very much like they're trying to expand their domain. And I don't think rebrand is the right word, but not be considered the same as what they've been known for for the last few years, which is more exclusive. A very certain type of generally female shopper who's in a higher income bracket. That's not what this is. And so it's super interesting. Yeah. Yeah, either never heard of it or, you know, you know Goop, but you just know not even to not even go on that website because you can't really afford 90 % of the product. So this is, you know, it's a very typical sort of like diffusion line launch where you try to go after the customers that, in this case, you know, can only afford you in this format, which I think is pretty smart, especially in this inflationary climate.

21:32I think maybe it'll just come down to how well the products do or how buzzy it gets. But yeah, I think it's an interesting move. And it's hard to tell whether this is a direction that Goop will continue to go in. Or, you know, are we just going to keep seeing$30 ,000 Rolexes on their holiday gift guides, which that's what they've become known for? Well, I think what the really interesting thing to me about this is obviously there's the diffusion line aspect. the fact that, you know, they're watering it down, quote unquote, for, I keep saying quote unquote, I'm going to stop that. The fact that they're watering it down so that they can reach more people.

22:11But the fact that they're selling on Amazon is super interesting just because that shows that people think of Goop more as a store you go to or a website you go to. And so the fact that they're trying to launch a line that is for Amazon, although I'm looking now and— They do sell on Amazon. They do sell on Amazon. It's not the same perception, yeah. It's not the same perception, and it seems like it's a way to sort of maybe have another brand that grows its sales and reaches the Amazon target audience, but isn't the same as going to the Goop website or going to the Goop store. I think it's a really interesting thing.

22:54And then with that, you know, this is they're all about clean beauty. Actually, you know, some would argue was the very early player in this space because Gwyneth Paltrow is obsessed with getting toxins out of everything. That aside, they they are coming into a really competitive market. I mean, clean beauty, I feel like is everywhere and there's, you know, dubious claims we can talk about. But it's not. Yeah, it's not at a white space by any means. Oh, no. And it's also not a white space for more affordable brands either. And that's been a huge thing going on if you go to Sephora, if you go to Ulta, if you go to, I don't know, Amazon.

23:35Right. Even like, for example, Elf, the biggest drugstore brand, just reformulated its products to be clean. So, yeah, it just runs the gamut. Yeah, so we'll see how it goes. I don't think that this is going to be Goop's be-all-end-all new strategic focus, but I do think it's notable. Yeah. All right. Well, that is our show for this week. Please rate and review us on Apple Podcasts, Spotify, or wherever else you're listening to us. And don't forget to subscribe to the Modern Retail Podcast to hear interviews with industry leaders on Thursday. Cale, do you want to give us a preview on who you have on next week?

24:16I speak with Justin Gold, who was the founder of Justin's Peanut Butter, which is that natural peanut butter brand that everybody sees in every grocery store ever. But he's now working for a bakery called Rudy's Bakery and talked about all the interesting things about being in the CPG space. It was a really great conversation. Yeah, I'm excited for that one. He's also become a really prominent investor in a lot of food startups. So that'll be fun to listen to. and yeah, just come back next Saturday for the Modern Retail Rundown. Thank you for listening.