Issue #93: Superstore (Not The TV Show)
Before we dive into this week’s issue, I just wanted to plug the revamped website, https://retailisnotdead.com/ (and the new URL 👀). Still a work in progress, but if you have any feedback, I am all ears! Web design is certainly a new area for me…
In-Store Retail Sales Still Dwarf eCommerce Sales
Superstore (Not The TV Show)
The first paragraph contains spoilers for the show, Superstore. Please skip to the second paragraph if you want to avoid them!
Just over a decade ago, the first episode of Superstore, a The Office-style workplace drama about a group of retail employees at Cloud9 (most likely supposed to be Walmart), debuted. It went on to run six seasons and over 100 episodes. I recently finished watching it, and it combined my love of retail with my love of workplace-ish comedies (The Office, Parks & Rec, Community, to name a few). I am going to assume no one else is watching it, but I will do my SPOILER ALERT, warning anyway. Spoiler alert: the show ends with the store being converted from a traditional big box retail store to a pureplay eCommerce distribution center after being acquired by a social media tech company.
A fun show nonetheless, but I want to connect everything back to last week’s Issue #92, since it has a very specific perspective on retail. Superstore shows a world where eCommerce and in-store sales are totally separate. As we can see from the top 10 retail stocks growing nearly 5x more than the top 10 CPG stocks, eCommerce plays a big part in retail success, and vice versa. Going forward, I expect these trends to continue. CPG will continue to fragment, and the top retailers will continue to consolidate power. I do not believe the total pie will grow or shrink for each business type, or if it does, it will be a very similar pattern. Instead, we will see different mechanics because that is what is best for each type of business. However, I do think we are going to see a big shift in the way these large retailers operate, so I wanted to dive into that in today’s issue. The way large retailers are today is going to move more towards a hybrid warehouse/eCommerce model. The lines are not going to be so distinct between eCommerce and in-store.
Before we dive too deep into the future of large retail, I think it is important to remind everyone how commerce happens in the United States. Right now, about 16-17% of all retail sales happen online, and that has stabilized after rapid growth these past couple of years. To put it another way, out of every ten retail transactions in the United States EIGHT still happen in store. The visualization at the start of this piece is pretty powerful. Looking at the numbers at some of the top retailers we discussed, it is all over the place:
I think we can all agree there is room to grow in terms of eCommerce penetration, but there is a limit to what can happen under the current system, especially when considering consumer behavior and preferences. With Amazon getting into the super center game and Walmart getting into the sub-hour delivery game, I think everyone sees the benefits of both.
The industry will continue to shift. Here is a random list of things I see happening, as commerce transitions more to the warehouse model:
Average delivery time levels out around 40-50 minutes, one-third for packing and two-thirds
Companies push more and more eCommerce volume to the actual store, whether it’s shipping, delivery, BOPUIS, or curbside
There is a major cost reckoning around the additional cost of doing a non-in-store order
Self-driving cars have way more of an impact on delivery than drones for retail (might be different for restaurants)
Advances in AI and Supply Chain technology allow these companies to get more goods closer to the customer
Internal deliveries from Distribution Centers increase in frequency to service more goods in smaller quantities
Companies that significantly neglect the in-store experience for eCommerce will struggle more than those that don’t do eCommerce in a meaningful way
These changes will be much more exclusive to the United States, global commerce is going to be very different
Every big box retailer is going to need a full grocery assortment, where someone could do a weekly shop
Price/value will still always be paramount
Subscription fatigue will continue to be a big problem
Robotics will not meaningfully be involved for ten plus years more than it already is
The path forward is omnichannel, a mix of in-store and eCommerce. In order to do that, retailers are going to need large warehouses close to customers. Lucky for them, many of them already have these buildings. The hard part is ensuring the operations and assortment are tight enough to make it work.
FreshRealm Declares Bankruptcy, Impacting Many Meal Kit Companies
In 2023, Blue Apron, the meal kit service, was struggling and was looking for a way forward. The ultimate outcome was that Blue Apron sold its fulfillment operations to a company, Fresh Realm, so it could be an asset-light model. FreshRealm took over Blue Apron’s operations infrastructure, so Blue Apron could focus on marketing and strategy. Freshrealm was just executing the operations plans. Around the same time, Blue Apron was sold to food holding company Wonder, and was integrated into its platform. Ultimately, it seems that the operations woes of the past have followed FreshRealm, since it has voluntarily filed for relief under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of New Jersey last week. In the filing, FreshRealm blames the issues on “a significant ingredient supply disruption in 2025 that materially impacted the company's operations and financial performance.“ For Blue Apron customers, luckily, there is already a path forward. According to Bloomberg, Blue Apron's fulfillment operations will be sold to Misfits Market, with plans to continue operating during the procedure. However, for other clients, like Walmart, Wonder, and Marley Spoon, it is unclear what is going to happen. It will be interesting to follow along, as this is in some ways the final frontier for the meal kit boom of the early to mid-2010s.
Starbucks Sees Same Store Growth On Backs Of Renovations
In the recent quarterly earnings for Starbucks, a rare bright spot emerged. On the back of a $1B restructuring plan for existing stores, same-store sales grew 7%. It has been a while since Starbucks saw that type of growth. When Brian Niccol took over, he wanted to reinvigorate the in store expirence, and invested capital to back that up. It is definitely early, but in some ways, what he has done is working. Traffic continues to rise despite significant industry-wide QSR headwinds that many other chains are facing. On top of that, the matcha craze continues to skyrocket in popularity, and Starbucks is one of the few national retailers at the forefront of it. Dunkin’ has matcha, but not to the same extent. Additionally, the changes to the loyalty system, new ordering methods, and further renovations to sites are expected to continue to drive growth. Just in time as Luckin heats up (more on that next week!).
Trader Joe’s Forced To Close Busiest Store
Out of all the Trader Joe’s in the United States, the busiest one is located at 72nd & Broadway on the Upper West Side. Spanning three floors, this location most likely sees tens of thousands of customers daily, and that doesn’t even include all the people who walk out or skip it to avoid the lengthy line. Over the past couple of years, it has faced issues with the escalators and elevators, which have caused the store to operate without them, and given customers a sub-optimal experience. Rather than keep applying band-aid solutions, Trader Joe’s has decided to rip the band-aid off and close for at least a couple of months while the renovation occurs. They will also be improving refrigeration while they can. Talk about a strong value proposition/brand equity, that they are able to close for a long time, without any major actions in the interim to appease customers, and it will not impact sales long term.
Additional Links:
Smearcase, the FroCo Company, announced a fundraise and hitting 1,000 retail doors (read more here)
Don’t forget to check out Interview #2 with Joe Rotondo, the CEO and co-founder
Need your pitch deck reviewed? Brian Sugar of Sugar Capital, an early investor in Gruns and others, built an AI tool to review it (read more here)
Ulta and Google announce a partnership to utilize Google’s Gemini to power an AI shopping assistant for Ulta customers (read more here)
Sam’s Club announces delivery in an hour or less (read more here)
Before refreshing your brand, it is super important to think through the impact (read more here)
Sprouts course corrects after a tough 2025 by focusing on value and affordability (read more here)
Amazon is moving Prime Day to June (read more here)
Maryland becomes the first state to ban dynamic pricing (read more here)
Retailers are continually launching AI apps, despite limited indications that this feature is something consumers want (read more here)
Sak’s Global eliminaes 16% of its corporate workforce as part of ongoing bankruptcy proceedings (read more here)
Events:
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