Rundown: Shein raises prices, TikTok tests image search & GLP-1 drugs boost supplements sales

0:05Hey, everyone. Welcome back to the Modern Retail Rundown, where we recap some of the major headlines from this week. I am senior reporter Gabby Barco, and I'm here this week with our editor-in-chief, Cale Guthrie-Weissman, to talk news. Hey, Cale. Hey, Gabby. How are you doing? I'm good. I'm good. Just adjusting to this weather. How about yourself? Yeah, exactly the same. It's hot, which I like, but it still takes some acclimation, I guess I could say. All right. Well, this week we are going to be talking about Shein quietly raising their prices over the past year. It's a pretty interesting move on their part, given everything that's happening.

0:51And then we're going to be talking about TikTok launching the image search capabilities that had a lot, that made a lot of headlines this week. I think a lot of people, you know, jumped, of course, right to the Google comparisons. We will get into that. And then lastly, we will be talking about how weight loss medication is boosting a pretty unexpected category, which is nutritional supplements, as people look for, you know, to replace some of those nutrients that they're losing by not having a big appetite. Okay, so first up, let's talk about Shein. So this seems kind of like one of many of the latest news to come out about the company as it prepares to go public.

1:45It seems like any minute now, but a new report from the research firm Edited showed that the prices of Shein's items have increased substantially from last June to this June, this month. And so it's interesting just given how the company really built its following on cheap, fast fashion, really trendy, quick turnaround production. And so, for example, the average price of a dress right now in the US on the site has jumped up 28 % from$22 a year ago to$28.51. Yeah, that is a lot. Obviously, this is the average, so there's definitely a lot of cheaper options still, but it seems like it is a bigger increase than the relative rates that H &M and Zara implemented, for example.

2:48So, yeah, what do you think? I mean, this is obviously pretty intentional. Yeah, it's very interesting. And I suppose it's not surprising. And I imagine there are a couple of things going on here, which, you know, for one, Shein wants to bolster its financials. It wants to show that it is, you know, doing well in business. But I also, there's something that's in the back of my head while reading all this, which is, you know, I've talked with Shein. I've read a lot of stories about Shein. And one thing Shein has said that is one of its, you know, I guess, core competencies or, you know, core things is that it's been profitable.

3:25Like, it's not like it's a money losing operation. I was trying to find it. And I think in its latest disclosure, which all of this, as you said earlier, is in the run up to it trying to go public. But it said it made$2 billion in profits, according to the Financial Times. And so it's interesting that even with a business model that it claims is working, it's raising the prices. I do wonder if a lot of this has to do with assortment and trying to expand its customer base. So I think Shein is trying to become more palatable to more people and be considered less of a platform where people buy just the cheapest clothing as quickly as they can.

4:10And so one thing I would love to look into, and I haven't done this yet, is just like, is the average price of the dress going up because it's trying to showcase more expensive dresses as well as the cheaper ones that it has? So those are the first two things that I am thinking about. But also, this is just what happens, especially in this economy where prices do have to go up. We're seeing this across the board with every other retailer. But I'd be interested to hear what your thoughts are. Yeah, I think so much of pricing, especially in fast fashion, is also probably about perception. So, you know, not kind of moving away from being associated with$5 to$10 items.

4:51But I did think it was interesting from the edited report that footwear actually is the category that saw the biggest hike, where the average went up from$25 per shoe to about$40. and they did cite that this is actually more to do with bringing in outside brands, which is, you know, maybe we'll talk about that a little bit because that's something that Gene's really been bullish on is, like, for example, Skechers is one of the brands that's helping raise that average. And so obviously that's for credibility, but of course, higher prices, like you said, higher profit margins, revenue, and all of that.

5:35But yeah, I feel like this all kind of fits into that rubric of becoming a little bit more high-end to be able to compete with the so-called higher-end players like Zara. Yeah. And I think you're exactly right where one of the big focuses that Shein has had for the last year plus is this marketplace, which is trying to get brands, not the things that Shein itself is manufacturing, which is what it's most well known for, but actual brands to upload their products in a fashion similar to Amazon. on. And, you know, it is, we've been looking to try and talk with brands that are doing it for the most part.

6:16It has been smaller ones that you don't really know a lot about, but they're happy to try out new sales channels. But the fact that Shein is able to get Skechers to upload products and have an actual branded presence on Shein is noteworthy and naturally would raise the price compared to the products that it was there before. There is also the other caveat, which I'm pointing to an earlier modern retail story we did, I want to say, a couple of months ago. But it's good. I don't know if it's good, but you're seeing brand presence on Shein, and that's something that Shein wants to have. But you're also seeing, and this is a problem that every platform has, but especially Shein, which is the gray market.

6:55You're seeing a lot of products that look or are saying they are from these brands, and it's unclear if they actually are. And so I think that is something that Shein is trying, is going to have to contend with, but it's trying to make itself into a very legit marketplace with real brands, with a selection that is both on the more value-based side, but also some nicer things. And I, you know, the fact that its prices are on average going up gives some credence that maybe that this new strategy is working. Yeah. And, you know, of course, as an update, this is coming on the heels of the IPO prep I mentioned, which is now moving to the London Stock Exchange.

7:42We mentioned this a couple weeks ago. There's a lot of tension during the U.S. filing phase over the past year. And so, like you said, it's not because, I mean, the price increases isn't probably really about hurting for margins. I mean, I think the IPO is reported to be about 50 billion pounds. And then financially, Xi 'an, according to CoreSite Research, because obviously their financials are still private right now, they are expected to see$50 billion in revenue just this year. And that's up 55%. So the top line is obviously doing very well still. But again, I think this may be just more of a long-term investment in, you know, just everything they're doing about rehabbing or improving the image, I should say.

8:36Yeah, it's all about improving the image and making people think of it as a different shopping destination than what it has been originally considered to be. And, you know, that's a long process, and it'll be interesting to see if it works. And, you know, there's something to be said about probably the reason why Sheehan's financials have been so good up until now, why it has$50 billion in revenue and$2 billion in profits is because it has created, it manufactures its own products and has these partnerships with suppliers that there is not a lot known about them. And there have been a lot of allegations about the conditions of those working.

9:17And so if it's trying to get into the higher end goods and get more brands onto the marketplace, that's going to change the overall business model. So that'll be something interesting to watch. It's just like, is that going to alter the makeup of its very, very efficient business model as it tries to become more legitimate? I don't know. You know, maybe not. Maybe it will. But the reason why it's been so successful right now is because of this very opaque, very quick, and very mysterious supply chain that it uses that can make clothing for really, really cheap and then send them to people in a matter of days or weeks.

9:54Yeah, and I'm sure some of it is just out of necessity. So the biggest markets are the US, the UK, and Germany. And so this is where a lot of obviously the antitrust hoopla is coming in. And so, yeah, we'll see how it turns out. But I think maybe the big one that we kind of think about is whether this will attract more brands to want to get on the marketplace. Because, you know, you are now next to quote unquote higher quality private labels. They do have higher end products. It's not like everything is, you know, a cheap product. But again, those are obviously the algorithm is going to be serving people certain things.

10:42So, yeah, we shall see. Okay, so from there, let's move on to another, you know, much talked about platform, which is TikTok and TikTok Shop more specifically. So TikTok shop this week, there were reports that it is basically testing out some new features that take direct aim at Google's search functionality. This is a TechCrunch report that says that the video sharing app is letting some users use the image search feature. So this is very much like the feature where you grab a photo somewhere out in the world, upload it to the way you would like, you know, reverse search an image on Google, and it will serve you a different video or content or I mean, really listings is what it is, I should say, of products that look like that.

11:43And so this makes a lot of sense, but the fact that it's being tested quietly is very typical of TikTok, we should say. This has been kind of a strategy of theirs for the last couple of years. Yeah. I mean, TikTok loves to quietly test products, have people write about them, and then often they'll get shelved. But this is interesting because of exactly what you said, where it's a feature that is very similar to what Google, but also we should say a lot of others have this visual search. The idea that you're out in the wild, you see something and you're like, what is that? And then you snap a photo and then you can find it and then ideally purchase it.

12:22And there are a few things that I find specifically of note here, which is there have been headlines. And I understand the headlines. I've always been slightly dubious about them. But like people saying that TikTok is going to be the new Google, at least in terms of the Gen Z. So the idea that if you want to know an answer to a question, younger people aren't going to Google to type in what is X. They're actually going to TikTok. As someone who uses both Google and TikTok, I can say that TikTok's search functionality is awful. And if I want an answer on something, it's actually very hard for me to figure that out.

12:58So in my humble opinion, there's a lot of work to be done on that. But I do see what people are saying in terms of search being very critical to its competition with the other platforms. And so the fact that TikTok is doing something similar to Google that isn't just text-based, but visual-based is very interesting. And it's also all about TikTok shop. So it's all about getting people to look at a product, take a picture, and then buying that product specifically on TikTok. And Google has had some similar for over the years. This is nothing new with Google. Google has been building out its reverse image search for a long, long time, but it's been adding features to it.

13:37I believe just this week, if I'm not mistaken, it added a new Google Lens feature on the Android app. I believe earlier this year, it showed video search. So people could take a video and then search it. I don't know if that's been rolled out yet, but it's part of Google Lens. But, you know, I've talked with Google about this over the years. I've seen many different, you know, beta tests and things like that. But pretty much the idea is that Google wants people to use the Google app for pictures. And then even in the app, I've seen some different things where it'll, you'll take a picture of an item and it, while you're still in the screen of the app, it'll show like little pop-up listings of what that is and where you can find it and things like that.

14:17So this is a big mad dash by all of the platforms to try and connect, you know, you seeing something with you buying something and it remaining in that app platform experience. So this is super interesting. And I'll be interested to know if TikTok goes forward with it more fully. It is interesting that it's getting compared to the Google Lens tools when I think it's probably more comparable to what Amazon is trying to do with its search capabilities where people start their journey there when they're looking for products. You know, most likely if you're looking on TikTok, if you put in, you know, whatever it is, a skirt I saw on the street, what's the likelihood that I'll end up on a TikTok shop page of a brand I trust and will actually purchase from.

15:07I mean, it's a little bit of a long tail of a journey. But again, these are obviously long-term investments. But what are your thoughts actually speaking of that, which there was that New York Times report a couple of years ago of Gen Z is using TikTok as a search engine. And so I guess this is obviously a bet on that. Although searching product could be a little bit different than trends or memes or whatnot. Yeah, I think that there are, it's definitely, you know, it's interesting to think about. And I think that there is some credence where I do believe that, you know, people of different generations have different consumption patterns and interact with their technology differently.

15:48So I buy that Gen Z, Gen Alpha, whatever, the younger kids are probably on TikTok more and using it more for research and information gathering than we do, or I don't want to speak for you, than I do with Google. Um, but I also both, I do think it's of note that both Google and TikTok seem to be using image search for commerce capabilities, um, or to get people to drive purchases. At least that's what's I, that is my, I'm sure Google has other reasons, but it seems like it really wants to have image search be part of the Google shopping experience. This feature very clearly seems to be part of TikTok shop.

16:30And I also, I don't know, it seems like people on TikTok might think of it more as a commerce platform or a place where people might buy things than Google. Like Google has been trying to push shopping for years. People definitely use Google for researching products and going to other marketplaces. But it has yet to become a truly dominant place where people actually think of it as a way to shop for products or to trust it when you're in that platform experience looking at products on those listings. But you mentioned this earlier, and I think this is important that those aren't the only two players.

17:06Like Amazon, you're completely right, has been pushing for all kinds of search features. And Visual has been part of it. And also Klarna. There are a bunch of other major companies that have been trying to do this exact same thing. In some ways, TikTok might be a little bit more better positioned just because it has the user base who are interested in it. And TikTok Shop isn't huge, but it's growing, which we'll talk about in just one second. But more people seem to be buying things on TikTok Shop and considering it as a place to buy products. yeah this is a good time to check in on what's going on on tiktok shop so uh you know of course we should say this is all coming uh amid this uh i guess we're waiting for a potential ban of the app so i i guess it's kind of interesting that all these investments continue to be happening under that guys but um even with yeah a potential u.s ban uh tiktok has been really pushing their TikTok shop goals.

18:10So Marketplace Pulse reported earlier this week that a TikTok user hosted a live stream shopping event that made over a million dollars in sales. I think that was the first on the platform. And then TikTok loves to send us stats about how shops is doing. So they recently said they had more than 15 million sellers on the platform. I mean, that is a lot considering that are only really launched less than a year ago at this point. Yeah, in September. Right. And so, yeah, I guess, like, what are your thoughts on that? Like, this is obviously something that they've continuously said they are very bullish on and do think that this is how people will be shopping in the future.

18:53Yeah, I think they're, I mean, just the fact that TikTok has 15 million merchants doesn't mean that they're all actively selling or making an income. So it's a lot of people. But also, if only one person has been able to exceed$1 million, it means it's still relatively small. But, you know, it does mean that there are people on the merchant side who are interested in selling products, although I imagine a lot of them are just individuals who are trying to push, you know, affiliates, etc., who aren't necessarily major brands. And, you know, we have done a lot of reporting about how the brand onboarding for TikTok shop has been bumpy at best, though, you know, some say they're seeing good results.

19:33Others say, eh, I don't know. But, you know, it's becoming a more robust platform by the day. And you're seeing more people do that. And but I think the real thing that TikTok wants to do is just drive more sales. And so there was one estimate, I think it was written in Marketplace Pulse, but that TikTok is hoping to drive$13 billion of GMV through TikTok Shop in the second half of 2024. And that's a lot of money. And so it is clear that one of the main ambitions, even with this backdrop of will it still be available in the ass, what's going to happen is that TikTok wants to be this shopping center where people buy things.

20:12And, you know, the visual search, the image search plays into that. And, you know, we'll be keeping an eye out more for other features or other ways to sort of legitimize it and make it more amenable for the everyday TikTok user, TikTok person to actually buy a product. Yep, exactly. Also, I mean, I do think just to kind of wrap up the idea of the sort of like this image search does feel like it could be a game changer because so much of why people go to TikTok is because they're looking for, I don't know, specific. I mean, I don't know. In my head, I'm associating it with apparel and fashion, but obviously this could be really anything, even a recipe.

20:59That is where people go for inspiration. And then obviously you end up in this sort of scroll frenzy for hours. And so the fact that you can kind of, you know, tailor it more to what you're looking for on that given in that given moment could really maybe change, yeah, the perception of TikTok. Like, for example, I know not to do that because I know myself that I will be on there for hours. So if I can just pluck one search to go by, that might be a little bit more encouraging the way you would with Google or Amazon. So from there, let's move on to another hot topic in the media these days, which is weight loss medications.

21:44So we are going to be talking about this new report we got from the vitamin shop, which is like their wealth, health and wellness report that shows that GLP one medications, you know, Ozempic, Wegovi are boosting the sales of like very nutrition packed products. So like protein, meal replacements, fiber, probiotics, all of that good stuff. Because, you know, and again, this is so early because the science is literally being researched in real time. But we do hear a lot about people on these medications losing weight because, you know, you're just basically your appetite is pressed. But then that could also lead to a lot of loss of nutrients.

22:32So when they do eat, they want to eat something that, yeah, is nutritionally beneficial. We talked about how some, we'll talk about that a little bit later, but I think it's such an interesting inverse of what's happening to like the big quote unquote junk food CPG brands that are like worried about people cutting back on these products. Whereas like if you're a protein bar brand right now, like this could be a good time. Yeah, you're in the right spot at the right time. Yeah. Yeah, so what are your thoughts? I mean, these are some interesting numbers. Do you want to run them over? Sure. So this is from, as you said, the Vitamin Shop's 2024 health and wellness trend report.

23:13Meal replacement products and unflavored protein powder sales were up 13 % and 12 % respectively in the first four months of 2024. And there was also a 10 % sales bump in ready-to-drink protein powders in 2023 over 2022. And so it's exactly what you said, where these replacements, these protein-packed, nutrition-packed supplements that are meant to not be meals but just give people a shot of nutrition are on the rise. And, you know, what you said earlier, I think, is, you know, in line with some things that you've written about and other people at Modern Retail have written about, where pretty much you're seeing kind of a mad dash from the CPG and like snack space to try and cater to this rise in GLP-1s.

24:05And so some of them, you know, are talking more about being protein packed. They're adding new ingredients to make it seem healthier. There's like, you're seeing a lot of sort of reaction because a lot of these companies are scared that people will be buying these supplements instead of their actual snacks. And so it's definitely an interesting reordering of the players right now just because of this phenomenon. Mm-hmm. And then, of course, this is really interesting because it comes right as the vitamin shop itself just launched its latest telemedicine program, which offers weight loss medications like Ozempic and Wigobi.

24:47They announced this in May. So this is an interesting way. And part of it actually does have, quote unquote, nutritional support aspect where I'm sure there will be a lot of opportunity to promote all of their in-store protein supplements, vitamins, and all of that. So yeah, this is not a bad way, I guess, to build out a program. But I do think, you know, the stats, just how quickly they have gone up and, you know, the fact that it's just coinciding with the whole weight loss drug craze is interesting, especially because the CEO actually mentioned that a lot of these products had taken a hit during the pandemic.

25:29So this is almost seen as a rebound. So that's also interesting. Yeah, no, that is super interesting. And like, it just seems like, I mean, obviously, the vitamin shop wants people to, I guess, if they're selling Ozempic to buy the Ozempic, but also buy the supplements. But it just, you know, there's a lot of interesting things going on in terms of the overall terrain. And just to sort of put a cherry on top of what we're talking about, I was just doing some research where you're seeing this rise of supplements, etc., go crazy from the vitamin shop. But then, you know, to give some examples of what we're seeing on the CPG side, I just found this article from March where you're seeing like Annie's Mac and Cheese now has a Super Mac with 15 grams of protein.

26:18Or you're seeing General Mills introducing new products that have lower sodium and lower sugar to Betty Crocker cakes. And pretty much what all this is saying is that, A, they need to—and it also ties into some of the reporting that you've done, Gabby, about the rise of better for you, where it's not like there are better for you drinks now because people are on Ozempic. But I do think that there is definitely a movement towards trying to portray your food item in a way that is with the lifestyle that is very popular and with these people taking these medications to lose weight. And so it just seems like, you know, you're seeing a big change in the marketing and you're trying, you're seeing a lot of the bigger brands try to respond by either offering something that seems like it would fit within the lifestyle of taking Wigobi, taking Ozempic or, you know, being able to, you know, not being as junky as it was considered before.

27:15Right. It's, there's a lot of emphasis on snacking, you know, it's just like smaller meals throughout the day. And then, of course, you know, just wrote about cottage cheese, if you guys would like to read about that. Having a moment. But yeah, I think it's not a coincidence that I call it like optimized food right now. Everything is being injected with protein and fiber. And it kind of, you know, it fits pretty well with, yeah, with the weight loss medication side effects, we should say. So, yeah, we'll see. I mean, I think, you know, obviously as the drugs, you know, take off, I'm sure, you know, that market share will get bigger and bigger.

27:56I'm just really interested to see how food companies are adapting in real time to all of this. Absolutely. Me too. Well, that is a wrap for our show this week. You can rate and give us a review wherever you get your podcasts. You can also follow us on social at Modern Retail to read some of the coverage we've mentioned. And on Thursdays, come back for Kale's weekly interview show where you interview a lot of execs with a lot of insights. Do you have someone on next week you want to plug? Sure, yeah. I talk with Lucas Dirksen. He's one of the co-founders of the Venture Studios Squared Circles. and we just talk about what it means to be a venture studio and the state of brand building and especially sustainable brands.

28:48It was a really fun conversation. Check it out. Okay. And thank you, as always, for listening. We will see you back next week.

29:12Thank you.