Rundown: Ride Aid faces delisting, Cooler Screens sues Walgreens & former Etsy sellers launch a competitor

0:06Hello and welcome to the Modern Retail Rundown. I'm your host, senior reporter Gabby Barco, and I'm here with editor-in-chief Kale Guthrie-Weissman. Hello, Kale. Hey, Gabby. How are you doing? Good. Welcome back from your European adventures. Thank you. It feels good to be on U.S. soil once again back in my apartment in New York. Perfect. All right. Well, let's get into it. On this week's show, we are going to look into Rite Aid's latest troubles. A lot going on there. After that, it's Walgreens being sued by cooler screens. Pretty drugstore heavy episode here. I like it. We love drugstores here.

0:50Exactly. And then a new marketplace that is looking to challenge Etsy that was created by former sellers. First up is Rite Aid, which is facing delisting by the New York Stock Exchange. Yeah, this has been a long time coming. Rite Aid has been troubled for a little while, but it looks like things are getting pretty dire. Yeah, things are not looking good for Rite Aid. I just checked its stock price. It's Friday. So who knows? It might close different, but it's at 54 cents. And to be on the New York Stock Exchange, you need to average at least a dollar for a 30-day period. And so that's not good.

1:33Rite Aid, and I think at a press release earlier this week, was pretty much like, it could happen. Yeah, this is all a lead up from Rite Aid having$3 billion in debt, and it has considered bankruptcy. A lot of the issues, and we can get into this, are not unique to Rite Aid, as many people probably know. A lot of the pharmacy chains have had a lot of trouble with opioid crisis-related lawsuits, of course. And so out of all the big chains, it just so happens that Rite Aid is the one who has the biggest issues and the biggest debt to begin with. So, yeah. Do you, Kale, what are your thoughts on that?

2:20Because, you know, of course, like Walgreens and CVS were part of these lawsuits and Walmart also were part of these lawsuits, but they seem to be weathering the storm. Yeah, I think probably the issue is that Rite Aid of the major three drugstores has been the one that has had a bunch of other business issues plaguing it more so than Walgreens and CVS, which isn't the same. We'll talk about this probably in a few minutes. Like Walgreens and CVS, especially this year, their earnings have not been great and they've been trying to right size their business in a few different ways. But Rite Aid has, you know, it has a huge amount of debt beyond the opioid settlement.

3:04And it just has not been able to really, I don't know, show itself to be a modern drugstore retailer the way that the other ones have. And so it seems like this delisting is a confluence of many issues that have been percolating for years now. And I'm sure that like a couple of years ago, it probably saw a bump because of all of the interest in pharmacies and drugstores due to COVID. And now most of that is settled and it just faces a lot of headwinds. Right. Yeah. COVID kind of put a little bit of a bandaid on things. But even as far back as 2017, it was trying to merge or be acquired or sell itself to other chains.

3:49Those kept falling through. They were pretty major. In 2017, there was a Rite Aid and Walgreens Boots Alliance deal to merge, but that was terminated. And then the following year, 2018, there was a similar deal with Albertsons. that was also terminated. So, you know, those were due to various factors, but it just so seems that, yeah, Rite Aid's business itself is just not viable right now. They have been trying different things in the past few years, which is like, I know their thing is, you know, centering pharmacists and, you know, kind of focusing more on the actual pharmacy than, you know, the sort of, yeah, convenience and other products, but it just doesn't seem enough.

4:40And now their losses are just mounting quarterly. Yeah. From their most recent one, which was in June, revenue was 5.7 billion, which was less than a year ago. 2022 June revenue was 6 billion. Net loss this past quarter was 307 million, which is nearly three times as much as the loss from a year ago, which was$110 million. And so pretty much it shows that it hasn't been able to grow sales. It hasn't been able to cut losses. Clearly, something isn't working right specifically for Rite Aid. And it should be said that I think the opioid lawsuit probably plays a lot into A, its stock performance and B, its consideration of bankruptcy.

5:25And there have been a bunch of others, not the other pharmacies, but there have been a bunch of other companies that have filed for bankruptcy as a result of the huge, you know, multi-billion dollar settlement. They include Purdue Pharma, Malincarod, and Endo International, all pharmaceutical companies, and they all filed for bankruptcy essentially as a way to deal with the billions of dollars that they owed to plaintiffs for the, you know, the national lawsuits for the opioid crisis. And And clearly Rite Aid is thinking about doing that, might be forced to do that. But also, there are a lot of unknowns about how those debts will manifest in the bankruptcy proceedings, what it exactly will do.

6:08I don't know. It just is a really big mess specifically for Rite Aid related to this. Right. And I think it does point to the bigger picture, as you mentioned earlier, which is drug stores are just generally, you know, slowing down or have slowed down. Recently, it's, I mean, again, it's all retail has, right? So you can't really say it's just drugstores. But, you know, it's a pretty sharp drop from, yeah, 2021, where everybody was lining up to get COVID vaccines. So Walgreens, CVS, also cutting guidances and having layoffs. So, yeah, pretty rough out there. Yeah, no, Walgreens. I was looking at it.

6:55So Walgreens cut its guidance by about 50 cents for earnings per share at its most recent earnings. CVS, I think it was able to grow. I need to double check this, but it posted okay earnings. But one of its major focuses right now is cutting costs. And it announced that it was laying off 5 ,000 workers. And so, I don't know, it all just, there are many things at play here. We could talk about how all of these drugstores are dealing with, you know, quote unquote, the rise of shrink. All of their retail formats are pretty outdated. They've announced over the years, many times over that they're thinking of revamping their retail formats, but they still, if you go to any of these drugstores look like boring old drugstores from the nineties.

7:37And so, uh, I think Rite Aid of all of those three is the one that is probably the most outdated. When's the last time you went into a Rite Aid and were like, this is a great shopping experience. Um, but I'm probably the wrong person to ask. I actually live on the corner of a Rite Aid. And listen, it comes in handy, but is it depressing in there? Yes. Yeah, well, that's exactly it. And I think all of the locked coverings, especially in New York, but in other cities, all of this probably leads to less sales, less consumer interest. This is something I think about whenever I go into a drugstore.

8:16But does a shopper really have allegiance to a drugstore chain anymore? I think people used to. I remember my mom kind of would be like going to the CVS and she really liked CVS. And then Walgreens was considered sort of a new entrant decades ago. But now it just is very, very different where they all look generally the same and you go there specifically because you need something and it's right there, not because you're planning a trip to that specific store or that specific retailer. Right. I mean, even if you talk about more regional names like Duane Reade, which, yes, is Walgreens, but I don't think anyone loves to go to Duane Reade because a lot of them aren't the most value -driven.

9:05Right. You're not going to get the cheapest price there. You're really just going either to refill, which is what they count on, the traffic of refilling your medication and then maybe picking up some things. But this is why they've tried so many things like delivery and pickup and all of that to help boost that. But, you know, at the end of the day, you're a drugstore and people can just go to Target probably down the street for other things. Yeah, absolutely. And I think that there have been a lot of, and I said this earlier, but there's been coverage on Modern Retail and other publications about how every few years, one of them announces how they're doing a new, you know, either customer-centric revamp.

9:45They're going to do small format stores. They're going to focus on wellness or revamp their merchandise so that it's filled with better, newer startups. But then when you look at the execution, I've never seen that executed well. And actually, we'll talk about in a few minutes another update that a drugstore made that has ended in shambles. But yeah, so we'll see how this plays out for Rite Aid specifically. But it's not the best news for the entire pharmacy chain space. Yeah, I guess we don't really know much about what the next steps will be. I presume it will include closing stores. But who even knows?

10:26Maybe bankruptcy filing of some sort. But yeah, I don't know. A lot of retailers shutting down even major ones that we didn't think would happen. So it's not outside the realm. Well, speaking of outdated drugstore aisles, do you want to talk about Cooler Screens versus Walgreens? Sure. So Cooler Screens, this is a fun one. The Wall Street Journal broke the story earlier this week. and cooler screens is a company that I've always been super interested in on an intellectual level just because it's one of those I guess you could call it those solutions in need of a problem where it the cooler screens for those who don't know you've probably seen it at a Walgreens where you you go in and there's a a refrigerator a cooler but it doesn't have glass instead it's an actual screen.

11:24And usually what the screen is showing is a fake inventory of what's behind. And so it'll show bottles of Coke and Pepsi. And then every once in a while, it'll flash an advertisement too. And the idea, and this is a huge gold rush that's been happening for a while now and is trying to gain more and more steam, is digitizing physical retail space to sell ads. And so Cooler Screens purports to have, you know, hundreds, I believe, of brand partners that work with it that can then sell ad inventory on there. But then there's also the added thing with Cooler Screens, which is it's supposed to show what the actual inventory of drinks are behind it.

12:04So we'll go into this, but, you know, often people will go into a store, see a digital picture of a drink cooler filled with drinks only to open it up to find like three things in there, which is not a great consumer experience. But the news is that CoolerScreens and Walgreens have been working together for a few years now. It started out as a beta test. It rolled out a little bit more. And now it's not going any further. And CoolerScreens is suing Walgreens, saying that Walgreens obstructed its agreement to roll out the technology into more stores. Again, the Wall Street Journal first reported this.

12:44The Walgreens response is that, yes, we're not putting into more stores, and that's because the technology didn't work, which I think is a great response to that. Right. And like you said, the screens themselves, I mean, it is pretty dystopian to look at when you're walking around. But yeah, I mean, the last thing you want to see at like, I don't know, an 11 p.m. Walgreens run is like not the actual things you want behind after watching an ad for 30 seconds, you know, behind the screen. So like you said, it's in theory on paper. It's great. Yeah, media networks growing more revenue. But is it actually helpful or do customers like it actually know?

13:29The answer is no, because there's been reporting on this. Yeah, there's been many different stories. It's always a really fun consumer-y story where it's like, Walgreens says this is the future of the shopping experience. These screens everywhere. But we found on Reddit and Twitter and we talked with shoppers who say they hate it. And I mean, I've been in there and I don't like it. I just want if I want a drink, I want to go to a refrigerator with a glass so I can see what the drink is instead of having to. I remember once I had to open up like five different refrigerators just to find like the Schweppes seltzer I wanted because they didn't actually coordinate with what the actual thing was.

14:06Anyway, so all that being said is that all of these retailers are trying to boost their retail media networks. And this is one vendor that tries to do that in a somewhat unique way. But it also hinders the shopping experience in a really specific way that has not been met well by shoppers. Mm hmm. Yeah. And I do wonder what will come out of this lawsuit, because I believe Walgreens was Cooler Screens, one of its biggest customers, right, at least on the mainstream side. Yeah, no, that was a lot. Whenever you would talk to Cooler Screens, they would talk about their Walgreens trial as one of their big areas of growth.

14:52And so, and like Cooler Screens also has had other legal problems. I believe its ad broker was Yahoo, and then Yahoo sued it, I think in 2021. So there are a lot of different, you know, the real issue, there are two issues specifically with a technology like this, which is one, is the shopping experience good? Do people actually enjoy being around this? But also, too, the entire business model around cooler screens is selling ads and highly contextualized targeted ads. So it should be, you know, it can work with brands and it can know, ideally, the general demographics of either the people in the store or precisely who the person is walking in and be able to, you know, target them with an ad.

15:37And one of the things that Walgreens said is that it was, you know, the advertising technology did not work the way that CoolerScreen said it would, allegedly. And so, you know, it's all a question of data, implementation. It's a big mess. yeah so that'll be interesting to watch to see what will come out of that because uh again this was like you said one of the moves one of the investments that walgreens made to to like liven up their stores um so i guess they'll be going away soon yeah and i think that there's an interesting thing which is a lot pretty much every retailer is trying to bridge between it their digital retail media networks and their physical offerings.

16:22And, you know, in the olden days, the advertising you could offer were in, you know, coupon handouts or in, you know, signage down the aisle. But now, you know, there are screens there that you can sell ads to. Ideally, they could be more highly targeted because you can update them in real time. But this was one of those this was one of those technologies that was supposed to really take in-store advertising forward. And if it has not been received well, it means that other retailers probably aren't going to add similar types of technologies to their advertising stacks. And so as all of these companies tout how they're building out their retail media networks, it's traditionally focused on their online presence.

17:07And they're trying to say that it also focuses on offline, but now it It probably won't manifest the way that people thought it would. Next up, we are going to be talking about Etsy. This is a story I've been following for, I guess, a couple of years now. Jeez, that feels crazy to say. But yeah, there's this new platform marketplace called Artisans Cooperative that launched this past week. It's basically made up of former Etsy sellers that went on strike last year. Maybe if some people remember due to the increased fees that Etsy's implemented and they wanted to create their own marketplace. They were talking about this when I spoke to them last year and it's finally live.

17:57It's in beta phase two. Not quite sure what that means, but it's still growing, I guess. It's not phase one and it's not phase three. It's phase two. Okay, perfect. um but i it's an example of uh maybe the just need uh for some of the sellers to even go outside of you know even creating their own shopify page which some of them have uh and to kind of maybe come together and try to do some kind of co-op uh version of it but like we're going to be talking about that's it's not easy to go up against etsy which has the name recognition and the mark you know, the growth, just the size and the traffic that this, you know, collective may get, you know, from just plugging it to their own followers.

18:47But it's going to be hard to scale that up to Etsy size. It's an interesting idea, but we'll see how they're able to approach customer acquisition, specifically, as you mentioned, the fact that Etsy has been around for decades. People know what it is. People seek out Etsy for a very specific thing. and so it will be a difficult task for a brand new platform to try and and be able to do that as well there are a bunch of there are a bunch or there are a few other platforms out there that focus on local or smaller artisans like society six that use a similar model the idea is that they're you know smaller artisans who can list their their items for free um and so or not for free, but who can list their items.

19:33And so this is the latest one. I think it's really interesting that it was made in response to Etsy's increased fees. But it's a difficult road out there for this type of marketplace. Yeah. And we should mention some of the qualms that the sellers had that drove them off. So, oh, and I guess I should mention that right now the platform has about 70 shops and over 1 ,200 items, according to the collective. And so, you know, it's growing pretty gradually. But we should mention that one of the reasons they, the big major reason that they left Etsy was because last year, the company increased transaction fees by a pretty decent percentage.

20:23I think it was up like 5.6 % on each transaction. And so if you have a low cart size, that's going to be a pretty hefty price to pay. And then there's, of course, the need now, from what I'm told, to use Etsy's ads in order to even drive traffic to your store. And so there's been a lot of, you know, a series of issues that the sellers have with Etsy that drove them to this. And so this platform is promising, essentially, the solution to that. So according to them, there's a one-time buy-in cost to become a member, and then there's multiple options for payment plans. So it's meant to be a lot cheaper than it is to list on Etsy.

21:08Yeah. I mean, it should be said that there was a lot of coverage and a lot of backlash to Etsy increasing its fees and prices and things like that. But it didn't, at least if you look at its most recent earnings, make a huge dent in its overall numbers and growth. I'm looking at its Q2 earnings from I think last month or August. Etsy's active buyer base increased 2.5 % over a year to 96.25 million active buyers. and then the seller base the active seller base was 8.31 million which was a 12.3 percent year over year bump and so there are there are definitely some clearly because we have this new platform some you know etsy merchants who weren't happy with it but also the company was still able to grow its active seller base which i think you know shows just how big it is and how difficult it is to make a competitor in that space.

22:07Yeah. So yeah, I think as it rolls out, we will see how much buzz the sellers or the organizers are able to drive to it. But until then, it does seem like, at least for every time I speak to a seller, it's like, well, at the end of the day, Etsy is probably the most viable platform. And it's got, yeah, just the built-in audience for sellers like these who are selling handmade or vintage items. Yep, exactly. I mean, Etsy has been around for so long that I think people know who it is. They use it. And so it'll be really interesting to see what ways the Artisan Cooperative goes about trying to eat into Etsy's huge market.

22:59I wonder, will it do any marketing? Just, you know, all of that, because it'll be really difficult to try and change consumer patterns where I myself, if I'm like, I want to get a candelabra or I want to get a piece of ceramics from someone I don't already know, maybe I'll check out Etsy. You know, I've bought throw pillows because I didn't know where people buy throw pillows. Etsy was the place that I guess you do that. So, you know, that it's a very specific type of way of shopping that, you know, another company could be able to sort of take over for that. But it will be quite difficult. Yeah, because you even see like Amazon Handmade was supposed to be the answer from Amazon.

23:42But I don't know if it's just because like the Amazon is in the name that just, you know, it's an antithesis of what Handmade is really supposed to be. I don't, it has a pretty decent size, but it's not anywhere near Etsy. And I'm sure Amazon has a little bit more money towards marketing than Artisan's Cooperative does, but you know, I could be wrong. All right. Well, we can wrap up here. That is our show for the week. Please rate and review us on Apple Podcasts, Spotify, or wherever else you're listening. Also, don't forget to subscribe to the Modern Retail Podcast to hear interviews with industry leaders every Thursday.

24:23Cale, do you have a preview for us for next week? I sure do. I spoke with Monica Royer. She is the co-founder and CEO of the kids apparel brand, Monica and Andy. It was a super interesting conversation about the state of apparel being DTC, expanding into wholesale like Walmart. I loved it. You should listen. Yeah, sounds great. And of course, come back on Saturdays for the Modern Retail Rundown. And as always, thank you for listening.