Rundown: Non-alcoholic White Claw, Amazon slashes apparel fees & NRF walks back retail theft claims

0:06Hey, everyone. Welcome back to the Modern Retail Rundown. I'm senior reporter Gabby Barco. I am here with our editor-in-chief, Kale Guthrie-Weissman, to break down this week's news stories. Good morning, Kale. Good morning, Gabby. How are you? I'm good. I am just running on adrenaline of holiday coverage at this point and coffee. I know. A mile a minute, new holiday things happening. Can't stop, won't stop. Yeah, so this week we have some really interesting stories I thought we're going to be covering. First up is White Claw getting into the non-alcoholic space. Well, I know it sounds weird on its face, but we'll get into why that is.

0:54Then we are going to be talking about Amazon slashing apparel fees and in turn prices. So that should be expected to come soon. And lastly, this is a topic we've covered on the show before, but it's constantly evolving, which is retail theft and the NRF walking back some of the claims based on the data there. So, yeah, first up, White Claw getting sober curious, question mark. Yeah, so I think this is, for those who haven't heard, White Claw this week announced that it is launching a line of 0 % alcohol hard seltzer. And it's not just seltzer. It actually does mimic the White Claw taste. And some actually claim that it's got a little more complexity and flavor than the original.

1:56but it's interesting in the sense that, you know, of course we're having a huge NA craze right now. So it seems natural for everybody to want to get in on it. But yeah, what are your thoughts on this arriving just in time for dry January? I mean, it's a very smart time to launch it because dry January is coming up. And also, So it seems like a lot of alcohol brands, and especially beer brands, are trying to figure out what their mode for growth is. And NA is very, very hot right now. And it's very funny. And I don't know if ironic is the right word, but coming from White Claw, because White Claw represented the last wave of spirits growth, where it was hard seltzer.

2:42And every company tried to make a hard seltzer for a few years. And then hard seltzer stopped being cool. And so now the new cool thing is to do non-alcoholic. But then it's also, you know, just personally kind of funny coming from White Claw when the entire point of White Claw is that it's a seltzer and it tastes, quote unquote, non-alcoholic. So is it a seltzer brand now? Like, is it the same as Polar? Like, you know what I mean? Right. Yeah, because it's, of course, you know, their originals are a malt-based alcohol. so it's not hard liquor and it's pretty much low ABV already. So yeah, it is interesting that they're going full, kind of like distilling all of the alcohol out to make it these.

3:29I think of it, I guess it's probably more of an RTD than a seltzer at this point because according to the ingredients, there is a lot of fruit and natural flavors in there. So in that sense, yeah. But we should get into hard seltzer. there was a bubble. I think you and I probably knew that was coming a couple of years ago, because at one point you would walk down an aisle of any store and it would just be like wall-to-wall seltzers. And I think it's kind of going in the same way as beer among Americans. We're seeing decline in both those ends and then actually premium spirits and wine continue to grow because of, I think, probably millennials and Gen Z.

4:12So it's an interesting. And then NA being kind of in the middle of that. So there's a lot of different trends going on. But in the case of, you know, we can get into some of the numbers of the heart seltzer makers, because a lot of them are actually owned by the major alcohol conglomerates. We saw, I think the beginning of this year, that a couple of companies reported heart seltzer being down by double digits. Yeah. Do you want to give us the Evercore ISI and Boston Beer Company figures there? Sure. So Evercore, analysts at Evercore ISI found that traditional hard seltzer sales dropped by 10.4 % over the last four weeks.

4:59And I believe that this was during this past summer. And sales of Boston beer companies truly, which is its hard seltzer brand, were down 19.5%, so pretty much 20 % on its own. So pretty much, this is a major hard seltzer company, and it's seeing a pretty big decline in popularity after nearly every company has tried to go into it. And we had a lot of other companies that went into it, like Topo Chico, etc. So it seems like there were a lot of companies putting a lot of emphasis into this. And then suddenly they were like, oh, now we're seeing sales drop. Yeah. And some of those did get discontinued, I think we should say.

5:41So that's, yeah, that's on par. And then on the other end, like I mentioned, non-alcoholic beer, wine, and spirits have increased by 32 % so far this year, according to NIQ's tracking. So yeah, that's a huge jump, especially coming off of, I've reported on this category a lot. It's kind of polarizing because some people think, the price point, all of that, why would you charge the same amount if there's no alcohol? But the idea is that you want to offer more options to people who maybe don't want to drink all the time. But it sounds like this is maybe what White Claw is going for, but it's a crowded space, right?

6:27So I don't know. Is the White Claw name itself going to help maybe give an advantage? Yeah, I mean, maybe. And also, like, it's a crowded space, but there are already clear winners. There was a story only a couple of months ago about how non-alcoholic beer is on the rise. But, like, the biggest player is Heineken. Heineken Zero has dominated that space. And so, you know, White Claw is a pretty well-known brand. People turn to it for a very specific use case. which is just guzzling down a lot of liquid, usually during the daytime, though sometimes during nighttime. And so it's probably hoping to encroach on the space that Heineken Zero has been able to carve out for itself.

7:07Whether or not it's able to do that, unclear. But that's what I imagine some of the market research it did pointed to was, you know, this is doing well. We might be able to also dominate this space. And we should mention that this is coming off of Truly, which is owned by the Boston Beer Company, doing a big relaunch earlier this year because they want to really emphasize that they're made with fruit, that they're, you know, with the packaging. And they also brought back the Truly Vodka Soda, or relaunched as Vodka Soda, because I think that's maybe a more clear bar call of what it actually is.

7:51But yeah, I think the idea is that these brands are playing in a lot of different categories. And we were talking about this earlier. It's great because you're serving a lot of different customers, although it can be a little confusing on which brands are selling what. like as far as, you know, brand image and customers. So we'll see. Yeah. And with White Claw specifically, it recently earlier, I think earlier this year, maybe it was last year, went into this more of the spirit space with its vodka sodas and its vodka as, you know, product as a whole. And so these all seem like different types of expansions that maybe are going after different customers.

8:32Like you would think the vodka soda was more We're going after the high noon crowd. So it'll be interesting to see what type of, you know, who they're able to reel in and whether or not it works. I think it'll be interesting to see whether some of these changes help bring those numbers back up, especially after the new year. But, yeah, we'll see. It's another white claw on the shelf that we're going to keep track of. okay so next up we're going to be talking about amazon and apparel this is a big tie-in with uh some something actually our colleague julia covered this past week which is this you know she and and timu kind of spooking a lot of retailers when it comes to fast fashion and so uh yeah amazon released a new fee structure specifically for apparel brands uh and it seems like it might be helping move the needle, right?

9:32Because this is more in line with fast fashion, as far as the price points go. Yeah. So it's rare that Amazon ever lowers its fees. Usually every year, it's a drum up with a slightly bigger fee. And there were overall fee increases, is my understanding. But for clothing that is priced less than$20, so here's the fee structure. products, you know, apparel products that are priced below$15 will see a 5 % fee. If you're between 15 and 20, you'll see a 10 % fee. And this is all a drop because the fee before that was 17%. So this is a very big change in terms of what Amazon is charging these brands to be on the platform.

10:14And it's clear that it wants more brands to sell cheap clothes on Amazon. And so that if there's ever a clear indication that Amazon is feeling threatened by Shein, that's it. Yeah. And a spokesperson saying that we're reducing referral fees for apparel in order to drive and incentivize even greater selection for customers and competitive prices. We could read between the lines what that is. But yeah, I think this is something we're always talking about, which is Amazon's journey with apparel is so interesting to track because it always feels like there's a lot of different things going on. But I don't know, maybe they, I mean, if anybody's going to compete with Shein, I think maybe Amazon could be the one.

11:02Yeah. And Amazon's been trying to figure out its apparel strategy for a while now. And clearly it sees that Shein is able to have a dent. And like, it should be said that Shein, while growing and probably, you know, on the road to IPO is still not a drop in the bucket, but only a small percentage. I believe we said this either last week or the week before, like Sheehan's, according to one estimate, Sheehan will bring in$32 billion or between$32 billion and$33 billion in revenue by the end of this year. It's targeting a valuation of$90 billion. But like in 2020, Amazon's apparel and footwear sales were estimated to be$41 billion.

11:40So it's, clearly Sheehan makes a lot of money from this, but Amazon still makes a lot more money, you know? Especially, you know, coming off of there was some reshuffling going on. I mean, Sheehan becoming the number one most downloaded shopping app was a pretty big deal a couple years ago because Amazon held that spot for a long time. So I'm sure there's a lot of that into play too. But I guess as far as the structure of the fees, what do you think this means for Amazon's apparel categories? Because at the same time, they're always trying to also court higher end, more luxury, or at least mid-market brands at the same time.

12:24And they also have their own private label that's been criticized by some of the third-party sellers. So yeah, there's a lot of different avenues. I mean, I think that Amazon is trying to have a more cohesive and rounded apparel strategy. Amazon had its style stores, which were this weird attempt a couple of years ago, and then it stopped doing that. They closed them a month or so ago. I think Amazon is trying everything and trying to dominate in everything, but also is keeping a watchful eye on where the areas of growth are. And so Amazon will still be trying to court luxury brands. I've heard reports that that's going generally well.

13:00More brands feel comfortable selling on it. But also, Amazon has tried to really become a destination for essentials and, you know, cheaper goods, you know, cheap shoes, underwear, that type of thing. And it's been overall good at that. But I think probably what's going on here is that it's seeing these other, you know, platforms and apps like Shein really able to dominate and get a lot of users and get users excited to use it. And so I I think Amazon is trying to also do that. Pretty much it's trying to tell cheaper apparel brands, you should sell with us because we have a lot of people, but also we're clearly caring about growing our apparel business as well.

13:45And so I think all of these recent moves show that apparel is trying to implement a new type of strategy with clothing and one that sort of includes all types of price points into it, which is not surprising, but kind of interesting. Yeah. And then we can circle back to what I alluded to, which is there's this kind of simmering industry sentiment on these two big players from other retail executives that we've been keeping track of here on Modern Retail. It's interesting because I don't think I'd ever really seen specific call outs before this. Etsy CEO mentioned she and recently Gap also. So it's pretty obvious that they see them as a threat, at least when it comes to specific, you know, these fast fashion model that you'd have to essentially build out from scratch.

14:43And like Gap is not that. Yeah. And I think that a lot of especially apparel retailers and brands are clearly very fearful, but also using them as a convenient reason for why any of their business is not doing well. And that's why they're calling it out. But what interesting about Etsy is that they said she and Antimo are leading to rising customer acquisition costs, which I think is true because both of them are spending boatloads on every social media platform. But there's also just, you know, another added element, which is, you know, Timu sells a lot, a lot of different things. It's not just apparel, but Shein has been trying to grow its marketplace beyond just apparel, even though many people think of it as a fast fashion platform.

15:23And that's a clear swipe at Amazon specifically. And so all of these companies are clearly getting anxious about, A, how fast is Shein going to grow? And B, what will its next expansion be? And you're actually seeing that play out with executives saying, these companies by name. I don't think Amazon has said Shein by name, but we'll see what happens in the next few quarters. You know, a lot of the stuff we alluded to last year, the ad spend, all of that, it's probably just a lot to handle for some of the legacy brands, especially when it comes to SEO and surfacing. We were talking about that. You know, it's very rare you search anything these days without a Timu product coming up on top.

16:10Okay, great. So next up, we are going to be talking about retail theft. This is something we've been talking about a lot because there's a lot of conflicting takes and data and, you know, political takes, I guess, also baked in there. But this week, NRF essentially was called out on some overblown past data that they were basing a lot of the retail theft reports on. And it's kind of a big deal because those were spurring headlines literally daily. And people, you know, a lot of the media, including us, were citing NRF. So for that to be walked back, it's like this is going to take a lot, I think, to undo a lot of these sentiments.

17:03Yeah. And this is a very in-the-weed story, and we'll try to explain it as succinctly as possible. But pretty much the long and the short of it is that NRF has been ringing the bell about retail theft going up for years now and saying that that's one of the big problems hampering the industry. And overall, the data just doesn't support it. And the numbers that NRF was citing were misattributed and not used correctly, and was also circuitously citing its own data, calling it an external data source, which was kind of funny. And pretty much all of this is to say that, like, overall, it seems like there have been, it's very difficult to track exactly what the problem of data theft is.

17:50And a lot of people have been complaining the problem of shrink, which, you know, is something that has been around in retail for decades now with theft. And that is not the correct way to attribute it. Because shrink, as you've written about somewhat recently, is much more than just theft. So we'll go into that. But it's a really the fact that NRF responded and actually edited a report that it wrote from earlier this year is noteworthy and shows that maybe maybe they're going to walk back some of these these big claims they've made. For example, in an NRF report, just to give context to the numbers, they claim that shrink was$94.5 billion in 2021, which is nearly half of which was attributed to ORC, according to them.

18:37But that is not necessarily true, I guess. Yeah, so pretty much. Yeah. And so the big thing that they were looking at was ORC, organized retail theft. How much is it? And the stat that NRF was citing came from the National Coalition of Law Enforcement and Retail, CLEAR. Not to be confused with CLEAR, the TSA competitor. But the stat that NRF used from Clear was from a congressional testimony that was citing an NRF estimate. And that estimate was talking about shrink, not theft. So pretty much the NRF was saying, hey, here's an outside group that has an estimate about retail theft. But actually that outside estimate was citing NRF, but also NRF's stat about shrink.

19:28And so it's very difficult to explain exactly, but it just shows that the numbers are really fuzzy and also the definitions are really fuzzy. And it's been very obfuscatory, to say the least, in terms of what the problem actually is and what's happening with what's just very, I guess, ringing the bells about a growing problem and making people more agitated about it. Yeah, and because, like you said, the theft is used interchangeably with shrink, and it's actually only a small, or not a small, but it's a fraction of what shrink or what retailers allocate to shrink annually. It becomes pretty clear, and I think a lot of people were calling these numbers out for the past year or so, but now it's official.

20:25Um, this, this study from last month is also interesting, I think, uh, with shoplifting reports. Um, it shows that, uh, you know, shoplifting was up 16 % in the first half of 2023 compared to 2019, but this is where we get in the weeds. So if you exclude New York city's, uh, specific stat, the number actually fell by 7%. So this is where you're just like, mind blown if you're trying to create a headline around that. Exactly. And I think that the issue and this was there's a CNN article that I think really highlights this very well. But pretty much, you know, retail theft, it's not to say that it isn't a problem, but to say that it's a national problem that's rising is incorrect.

21:13And so there are pockets where potentially there are increases in theft, but they are isolated to specific cities like New York City or maybe San Francisco. But there's been a lot of hand-wringing about nationally, shot-splifting is increasing, and the numbers just don't support that. And I think that that's where a lot of the contention has been, where people have tried to cite numbers, but when you actually dive into them, they tell a slightly different picture. Yeah. And going back to what you were saying, which is there's always a scapegoat, I feel like, every couple of quarters. This specific issue has been called out by a lot of executives on earnings calls.

21:57So obviously, it's like you were saying, I mean, it's, you know, it's why they were doing bad, even though if you break it down, I mean, your sales are down, right? Like, you can't get around that. But sorry, that got a little spicy. No, but I think that you're exactly right, where one of the big places that theft is talked about is drugstores. And that's one of the reasons why drugstores have been locking up all of their products. But also, maybe the reason why sales are down at a lot of national chain pharmacies and drugstores is because they're locking up all their products and people don't want to go through the rigmarole of having to ring a bell to get someone to do that.

22:31And even, you know, I think it was earlier this year, like at the first quarter, the The executives at Walgreens said, you know, maybe we cried a little bit too much about theft. And it just shows that it's the circuitous problem where, you know, there probably is an issue and there are ways to combat it. But they have been taking very draconian ways of doing it. And it has led to probably a greater drop in sales as a result of that when it's not actually combating the actual problem, you know? Yes. And to read all about that and the different ways that you can combat it without locking products, you can read my story on modern retail that I learned a lot about shrink writing that was very confusing.

23:17Everything from inventory management to obviously AI now coming into it. It's a lot. And yeah, it's not all just somebody walking with a product off the shelf. Yeah, and I think that a lot of this comes down to definitions and not having a clear definition. Shrink is very over-encompassing, and a lot of it has to do with administrative things, inventory lost. Theft is part of it, but it's not all part of it. And a lot of organizations just see shrink and think it's theft, whereas Organized Retail Crime, or ORC, does not actually have a standardized definition. And that's where a lot of these headlines have stemmed from, where a lot of these organizations aren't giving clear-cut definitions of what they're talking about or how they found the data and are instead just doing very overarching, you know, this is a problem, numbers go up, blah, blah, blah.

24:11And I think that's why we're seeing a bit of a reckoning right now is because people are asking for the definitions and for the sources of data and they're not adding up. Yeah, but like stores closed because of that. So I don't know what's going to happen. You know, Target, Walgreens, they cited these issues for exiting certain markets. So I don't know. Do they reopen if things settle? I mean, they'll need to figure out a better store structure and like overall business strategy is my guess. Yep. That is our show for this week. You can rate and review us on Apple Podcasts, Spotify, or wherever else you're listening.

24:51And don't forget to subscribe to the Modern Retail Podcast. That's hosted by Kale on Thursdays. I know we're going to be having a little bit of scheduling reshuffles later this month that we can alert you to. But Kale, who do you have on this coming week? I have the CEO of Hexclad. And we talk about all things pots and pans, which I love. I love cooking with a pan. Yeah, this is going to be an instant classic. So please turn it in because Gail loves cookware, as I'm sure a lot of people know. Yeah, but come back next week for another one of the Modern Retail Rundown. Thank you for listening.

25:48Thank you.