The much-hyped NikeSkims collection and Michaels' bid to fill the Joann and Party City voids

0:02e-commerce customers need instant effortless support and anything less leaves your sale at risk So with peak season coming soon, check out Finn, the number one AI agent for e-commerce support. Finn scales with your business from seasonal surges to growth and expansion, delivering the highest resolution rates and highest quality experiences across every step of the customer journey. But if you're wondering whether it really works, just ask the thousands of customers like Nuuly and Avocado who are using Finn to provide end-to-end e-commerce support every day. Check it out at fin.ai slash modernretail to learn more.

0:55Hello, everyone. Welcome to the Modern Retail Podcast. It is our show that covers the ways the retail industry is changing and modernizing. I am senior reporter Gabby Barco. I am here this week with co-host Melissa Daniels. I am back, Melissa. How are you? And how has everything been? It's been great. We're so happy to have you back. Out of office time is always refreshing. But yeah, it's great to have you back and keep doing our thing on the podcast here. Oh, thank you. Yeah, no, I'm definitely excited to be back. I feel like we're really ramping up to get into Q4 coverage. And yeah, so later, Melissa will have a conversation with our reporter, Mitchell Parton, to discuss the ways that Michaels is diversifying.

1:41Basically, the retailer is trying to fill gaps that were left behind by Party City and Joanne Fabrics. So very excited for that to get into later. But first up, let's talk about Nike Skims. Yes, after months of speculation about this drop, the day is finally here. The collection is live. And I think this has been probably one of the most hotly anticipated product drops of the year. I don't think that's a stretch to say. Yeah, I think, you know, they announced it at the very beginning of the year. I believe we spoke about it on the show, but then it kind of went away. And now, you know, it's back and dropping just in time for fall.

2:24So as expected, you know, it's minimalist colors, a lot of blacks, like some oxblood that I found really interesting. I think that's a trending color this fall. But, you know, I want to really just get into, yeah, maybe we could describe the collection. And then we're going to really talk about where Nike Skims fits within the overall athletic wear or athleisure space, which to a lot of people feels crowded, but clearly these two brands feel like there is a gap that they can fill. Yeah, absolutely. And it's interesting because this arrives at a time where the athleisure category really has been dominated by a few major players, right?

3:06We've had Lululemon and then Nike and Adidas have also been in this performance wear sector for a long time. Then there's smaller brands like Aloe and Athleta that have really played a big role in popularizing athleisure. Now there's set. Now there's Adenola. And, you know, pretty much every fast fashion retailer also has their answer to athleisure as well. You know, I can, like, I think Old Navy's actually done some really great stuff in the space, kind of modeled by sister company Athleta, right? You know, I often see them as referenced as a dupe for Athleta. But I think what's interesting to me about this collection is just how sleek and modernist it really is.

3:46Like at first blush, it doesn't seem like there's a lot to these clothes. But then when you look at it, there is a lot of detail and it does seem to be very specifically engineered for the female body, right? There's lots of lines and seams meant to accentuate pieces of your body and areas. And I think that's a look that is just really, really on trend and is, you know, almost a little bit reflective of this, like, I don't know, human as machine aesthetic in a way. I don't know. What were your thoughts when you first saw it? Well, it's definitely very Skims. I'll say that. It's, you know, if you're familiar with the brand and its aesthetic and basically Kim Kardashian's look, right?

4:31You've got these high-waisted, very sleek, skin-tight lines. We're going to talk about skin-tight later, but, But, you know, and then you've got this high shine fabric. It's not necessarily anything we haven't seen before, but it's definitely showing that there's this big emphasis on using that skims look and aesthetic, but then applying the Nike performance fabrics. It seems like it's very thought through the way that they have kind of married the two brands and what each of them bring to the table. So yeah, this is, it's definitely, what I find the most interesting is that it's not really, if you look at the campaign, I mean, you've got Serena Williams and you've got gymnast Jordan Childs.

5:16So it's clearly trying to message that this is a serious workout brand. The models are doing like weightlifting and there's Pilates. I mean, some of the tights actually have the grippy Pilates socks attached to them. So, you know, it's, of course you can go out and get a matcha with it. That's kind of how a lot of the brands kind of style, have styled their assortment lately. But it's definitely also positioning itself as a serious contender to, ironically, I guess, the Nike and Adidas of the world and, of course, Lulu. Yeah, and I think when you look at this collection and you see the shapes and the styles, it makes it so clear that this is stuff you're really supposed to move in and even layer.

6:01Like I can see some of these things that they're calling weightless layers be great for, you know, runners who maybe layer up when they're on long runs. There's a lot of high waist and, you know, sort of a mid-thigh short. Great for when you're doing squats or when you're weightlifting, right? Because you don't have to worry about anything coming out and showing. I am curious, though, to see like where this pops up in culture in a way. Like, you know, I think you mentioned you already saw some ads with Serena Williams featured in them. I haven't seen any ads yet in my rural area. But I am wondering how much of like a pop culture moment this is going to become, say, the way Lululemon has.

6:44Yeah. So I do think, you know, how big of a blockbuster launch this is, is going to probably be determined by how well it's received by the actual customers. because, you know, this is something that if it is successful, I think you and I both know, like when you like a pair of leggings or a sports bra, like you just tend to repurchase it or double or triple up on a set and kind of like, you know, for laundry purposes throughout the week. And so, yeah, I think that's going to maybe take a little bit of time, but as far as the look goes, it is probably what most of us expected. And then I think the attention to detail is pretty interesting.

7:24But I mean, I guess all of that to say, is there enough room in the current scene for Nike skims to stand in line with all these other brands? I mean, we're seeing even Lulu seeing some softness. Although I don't know if you saw, but there's some speculation that people are moving away from skin tight workout clothes. Right. I don't know. You know, anecdotally speaking, I do see a girl or two in my classes in the cargo pants, which Skims does have a couple of. But for the most part, I think, yeah, the tight look is really not only for aesthetic purposes, but it really is the most ideal if you are trying to do squats or lift without constantly pulling up your pants.

8:14Yeah. And I think we're sort of seeing them place their bets on where tastes might go, because as you mentioned, they do have a bag of your pant. They also have sort of a basketball short that looks really interesting. I could see that coming into play in certain classes or certain types of, you know, workout gear. I could see that being good for running maybe. But yeah, at the end of the day, like, you know, a good workout legging is kind of what we all now know that we work out and train in. And as you say, also grab a matcha in. So obviously, a lot remains to be seen. But yeah, I think when I look at this, I see them kind of placing their bets a little bit on where they think this is going, but still managing to deliver on, you know, the basics that people really are going to want that are just high quality and engineered for performance.

9:06It's not going to run. And yeah, I think price point wise, they're landing in an area that consumers are somehow comfortable with, you know, this sort of Lululemon aloe price point. I think Like the leggings are running, what, like$128 for a slim flared legging here. I'm seeing that there's a triangle bra for$48. I'm seeing high-waisted shorts for$68, which all feels in line, you know, with the competitors that they're playing against. Yeah, I think so. So, you know, Aloe just did a price increase recently. And then Lululemon has been a little bit on like a discount run or promotional run recently.

9:54But yeah, no, this definitely falls in line. I mean, I was even thinking they probably could have gone higher if they wanted to. But yeah, you can get a pair of leggings for around the$100 price point here. That is something I wanted to ask you about because, you know, we hear a lot about price conscious consumers right now. And from what we can tell, it seems like the Skims customer is pretty resilient because, you know, it's a lot of basics, a lot of undergarments, things that most of us kind of replenish pretty often, you know, like other categories. So, yeah. So, I'm excited. Although, okay, I did note, did you notice there's not a skirt in the collection?

10:35I don't know why this has been on my mind. But, you know, we hear a lot about pickleball and golfing and a lot of the brands have gone into like the tennis skirt look, which, you know, I have fallen victim to. I do like the tennis skirt look. Oh, I love that for you. Thank you. But they don't have a skirt. And I don't know if that says anything. Maybe one is coming. But again, I think it goes back to like, yeah, the sort of really focused on the strength, the quote unquote real workouts. I don't know. I don't want to offend anyone, but I just got really into lifting lately. So maybe it's my own projection.

11:16Yeah, I love it. Yeah, I mean, the hero image right now on the landing page is Serena Williams with those like CrossFit ropes, those like battle rope things that you can move. And yeah, it's like this is when you're like really grinding it out at the gym versus maybe on a court somewhere. But that is interesting. I didn't know that. I totally miss that. As someone who does like skirts and workout dresses, I wonder what they would come up with. But man, maybe that's what they're saving for a future launch. But I think aesthetically, it was right for them, I think, to pick a lane and stay in it.

11:49I think that made sense. I also love the timing of this coming out at the end of September here. I think it's teeing you right up for holiday shopping and this time of year when people spend a lot. So, you know, when we think about that macro and that value-driven, price-conscious consumer or whatever, her. I mean, yeah, I'm already buying stuff for Christmas and I'm already planning for what I want to buy for myself and my family and my house for my sort of end of year spending that I do. So I think they're probably considering, you know, the overall macro as part of the timing of the launch.

12:29Yeah, I think so. And, you know, this is, of course, we need to mention that this is coming at such an interesting time for Nike. We kind of alluded to it at the top, but Nike, you know, it does need a win. It is in the middle of this turnaround plan to revamp the business. And I think women's athletic wear, or athleisure even, is a really important category for them. So it makes a lot of sense. And then with SKIMS, I think an expansion into this more of an athletic wear category makes sense for them too, because they do need more growth levers. Do you remember there was an IPO that was supposed to be coming?

13:11One of many that we'd never heard anything else about, right? That happens. Yeah, but you know, they, yeah, I think it makes sense for both brands as far as sort of like the next logical step is what I was trying to say without sounding shady. Well, you know, there was one more thing I did want to touch on in this conversation. And that is, it just feels to me like gym wear and workout wear is now being made so you can look great in your gym selfies. And this idea of dressing for the gym at all is kind of crazy to me. Yes. But, you know, they do say there's a lot of evidence that if you look good or you feel good in the look that you, I mean, I know for me, Whenever I'm like dressed in something I don't like, I'm like very, it's like any other outfit, right?

14:04When you go out in an outfit you don't really like, you're just not as confident. And I don't know about performance. I don't know if it's making me push harder, but no, there's, I mean, I think the matching set, like, you know, I know we don't really talk about them anymore, but Outdoor Voices, they've kind of popularized that look. And, you know, we, like during the pandemic. You had all of these outdoorsy activities and hiking. I know, Melissa, you're a fan. And yeah, I think the whole like taking a photo in your look or selfie, mirror selfies at the gym are definitely a modern concept, but I don't see that going away anytime soon.

14:44No. And I think when you look at this collection and you even think about the way Nike is kind of borrowing Kim Kardashian and Skims' brand equity in this collection. You know, you think about that and you're like, yeah, this is just about the look. This is about how you look, how you share it. And, you know, I think the performance maybe is almost secondary for some customers. Like, they're going to buy it because it's cute and makes them look hot. And then if they work out in it and feel great, then maybe they'll buy more. You know what I mean? But like, I think the aesthetic is what's going to get people in.

15:19I think so. Yeah. It's very focused on the female form. You can see it in the lines if you go to the site and look closely. Okay. Well, with that, next up, we have our featured segment with Melissa. Melissa, you went in-house for this one. We don't have an outside guest this week, but I am really excited to listen to you and Mitchell talk about Michaels and fall crafting and Halloween and everything, all the fun stuff. Well, I don't know how much we got into that. Although, sneak peek, we did get a little bit more about Mitchell's own experiences with Michaels. I'll leave it at that and let him explain.

15:59But yeah, so Michaels has this really interesting in-store strategy happening right now where they're basically dedicating a quarter of their floor space to Joanne Fabric's IP that they bought earlier this year, as well as Party Decor, because they know there's sort of a market that's been vacated after the Party City bankruptcy earlier this year. So Mitchell spoke with them this week, and I thought it was a great opportunity to highlight his reporting and get into the weeds about this thing that I think we see a lot in this industry, which is, you know, how when legacy brands leave the market because of bankruptcy or what have you, other people kind of try to come in and capitalize on that white space.

16:41Cool. All right. Well, looking forward to it after the break.

16:55E-commerce customers need instant, effortless support, and anything less leaves your sale at risk. So with peak season coming soon, check out Finn, the number one AI agent for e-commerce support. Finn scales with your business from seasonal surges to growth and expansion, delivering the highest resolution rates and highest quality experiences across every step of the customer journey. And no matter how complex your tech stack may be, Finn seamlessly integrates with your existing tools like Shopify, Stripe, and more to take action instantly, delivering accurate on-brand and real-time answers to your customers that feel genuinely personal all while you maintain complete control.

17:37But if you're wondering whether it really works just ask the thousands of customers like Nuuly and Avocado who are using Fin to provide end-to-end e-commerce support every day. Check it out at fin.ai slash modern retail to learn more.

17:59Back in June, craft retailer Michaels made headlines for buying Joanne's private labels after it filed for bankruptcy. But that's not the only white space they're going after. They're also doing more with party supplies since Party City also went under recently. That's why today we're checking in on Michaels and their latest in-source strategies. They've got new dedicated parts of their store set up to meet the demand left by those two retailers. I think it's a great example of a retailer branching out from their core audience and really responding to the closure of legacy retailers, which is going to have myriad downstream effects.

18:35So here with me to unpack all of this is Mitchell Parton, who just met with Michael's CEO, David Boone, this week to tour one of the recently revamped stores. Mitchell, how are you? I'm good. So glad to have you on the Modern Retail Podcast. You published a story this week called Michael's Transforms Its Stores to Fill Voids Left by Joanne and Party City. So tell me about what you saw. What does this transformation look like? Yeah. So Michael's new CEO, he came in in February. His name is, as you said, David Boone. He came in February to be the new CEO of Michael's. And his first kind of order of business, he was talking about his priorities.

19:19The first thing he wanted to do was make up for the fact that Joanne and Party City had just gone out of business due to various financial challenges. So what they've been working on, which they announced this week and gave me a little show off in the Dallas area, conveniently for me, I live in the Dallas area. They showed off two new things they're doing in, I believe, every store. So this is the Nidin Show Shop and the Party Shop. So there's like two different like new sections of the store. This will make up like about 25 % of the footprint. Like this is a, and it's very visible when you walk in here.

19:56Like you walk in and you immediately see a balloon station and you see a party area. And then in the, near the back of the store is the Joanne logos everywhere. So it's like the didn't show, so shop by Joanne. So it's very prominent within the store and really shows how they're really trying to bake these concepts into what Michaels is moving forward. Very cool. Well, let's catch up on what happened and how Michaels got to this position. We can start with Joanne. You wrote about this earlier in the year as our man on the big box beat. You know, what happened with Joanne Fabrics? How did its IP land in Michaels' lap?

20:35up yeah joanne's been struggling for a few years um i'm getting my bankruptcies mixed but um there's so many in this world isn't there yeah yeah they emerged they did emerge from bankruptcy in april 2024 but then they later filed for bankruptcy again and then they ended up closing all their stores so yeah and it was basically just a lot of the same macroeconomic challenges other retailers have been facing in the craft space. And the company itself had a lot, like a huge mountain of debt and some unanticipated inventory challenges as well. Right. And that's where, as I mentioned, Michaels came in, bought the IP.

21:19I think Michaels was adding over 600 Joanne products out of what it was able to buy. And that includes a yarn brand called Big Twist that has a really big following. I am not a knitter necessarily, but if you nose around the world of knitting online, people were really upset to see Joanne go out of business because they really relied on it. And it seemed like this was an area and a niche that not many other retailers were filling. So from my perspective, it just kind of opens up Michael's aperture on who their customer is. Yeah, and you bring up big twists. That was such a big component of this.

22:00When I was talking to David, he mentioned customers are really excited for this big twist, which is apparently a big yarn brand. I'm not super familiar either, but that is coming back next month within the stores. So that's a pretty big deal. I talked to a crafting association expert as well who also acknowledged that this is a big popular brand that's very important within the industry too. So they are bringing back Big Twist, they said over and over again. But yeah, so it's these really kind of important brands within Joanne, not even just Joanne itself, but like these brands within Joanne that are pretty critical for this knitting and sewing space.

22:44that otherwise there's not really too many venues to buy these things at. That's why Michael saw such a good opportunity to jump in on something that's pretty important to people who are involved in it. Yeah, absolutely. And I feel like that's kind of a similar story with Party City and the void that that left. But I think they kind of come at that maybe from a different angle because there wasn't necessarily an IP transfer or any brands being moved. It was just sort of Michael seeing the white space and merchandising accordingly. You know, what did you see in the party space? What did David Boone tell you about what they're doing there?

23:22One good quote he came up with was, they're not stepping in exactly where Party City was, but they saw kind of a need to meet these celebration or party needs within their stores. The balloons being a big part of it. And that's another, I didn't get to the cutting aspect of Joanne, but they're going to be cutting fabric there. They're going to be blowing up balloons, all these different things within the store now that employees are going to be doing. But as far as the party side of things, like, they're really leaning into it. They also, like, in addition to just selling a lot more party stuff and party decor, et cetera, He also talks about how there's other stuff in Michael's stores, including in the Joanne department, that can be used to either make decorations or even make costumes now.

24:15So that kind of makes Michael's into this bigger destination for parties and celebrating things. Another big focus for David as he's entered the role is they wanted to lean into events. They hadn't had birthday parties for several years. I had a Michael's birthday party as a kid. But... Oh, we're certainly back to that. But that's coming... That came back, I believe, last year, definitely since the pandemic. But they lowered the starting price of that in half. And if you know what a Michael's birthday party is like, it's all about craft projects or you'll have a collection of themes to choose from and all these different things.

24:58So they're really leaning into celebrating parties. That is really interesting in so many ways. We will circle back to your party experience. However, I want to just kind of think about what it means to go in store to buy these things. Because I think just from my sort of personal experience, especially, you know, I'm a mom, people are always having birthday parties for their kids. Everyone's buying stuff online for party decorations. And a lot of times, you don't really know what you're getting, right? When you have that actually get, or you're not really sure of the size, you're not sure what the colors might be.

25:35And I think there's something about buying those things in person that can be so efficient. And I feel like this is something we talk about time and time again, when we talk about omni-channel retail and that delicate balance between online shopping and in-person shopping. And yeah, I think decor is one of those things that might be easier to buy in person. Well, definitely fabric, too, because you want to, I would assume, fabric heads can get at me, but I assume you want to know how it feels, what it looks like, how soft it is, how not soft it is, etc. Yep, yep. So this, I think, could drive a ton of foot traffic for them.

26:11What did David share with you as far as any kind of bottom line on what this will do for Michael's business? You know, did they tell you what proportion of their business they think these new areas are going to take up of how much estimated revenue they're thinking? Well, about 75 to 80 % of their fleet is going to have fabric in the stores by next quarter. They're already, I think, rolling out the knitting and sewing to all the stores and party to all the stores. Definitely party to all the stores. This is going to be almost the whole footprint on both of these things. And fabric cutting table is going to be in more than 650.

26:51Read my story for the exact numbers so I don't screw it up here. And they also said that this was interesting. This was hidden in a piece of paper they gave me. But they said searches for fabric on michaels.com increased by 77 % over the past year. So the Joanne people are coming to Michaels. They have pretty solid evidence of that. So it's no question that they acquired the IP from Joanne and started to bring that stuff over. And he said that's something that's not replicable. The brand itself isn't replicable. And that Michaels really thought they had to serve that customer. Yeah, I think it makes a ton of sense.