Five Below Performs Well Above Expectations

The Wall Street Journal: Five Below, “which sells everything from Spalding basketballs to Bluetooth headphones and yoga mats for $5 or less, might be the most successful retailer you’ve never heard of. By the end of this year, Five Below’s store count will have nearly quadrupled to 750 locations since its 2012 initial public offering … Five Below uses a formula that has largely insulated it from competition from Amazon.com Inc. The chain keeps prices low by creating products from scratch with hundreds of suppliers around the world and sells them in an environment where children want to hang out. Its own e-commerce sales are so negligible the company doesn’t break them out; shipping often costs more than the entire purchase.”

“At 8,000 square feet, its stores are relatively small, making it easy to wander the mazelike floor plan grouped around eight categories: sports, technology, party, candy, style, create, room and now—the latter filled with seasonal products such as Halloween costumes or Christmas decorations … Shelving is no higher than 5 feet, creating a comfortable space for preteens and teenagers who have outgrown traditional toy stores and are Five Below’s core customers. They are encouraged to bounce the basketballs, test-drive radio-controlled cars and participate in slime-making contests—anything that will help them spend their allowance money.”

“Five Below also has items for grown-ups, including cucumber face-masks, yoga mats, storage bins, greeting cards and vintage candy from Mike and Ike fruit-flavored chews to Goetze’s Caramel Creams. Unlike other bargain stores like Dollar Tree or Family Dollar that focus on necessities such as laundry detergent and toothpaste, Five Below is the place to come to find things you didn’t know you wanted, such as squeezable foam toys called ‘squishies’ that have gone viral on YouTube .. It also is testing ‘Ten Below’ sections in four stores that offer items such as wireless home speakers and skateboards for $10 or less.”

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Wannamaker’s Temple: Retail as Religion

The Wall Street Journal: The John Wanamaker Department Store was one of America’s first great temples of consumption … In “Wanamaker’s Temple,” Nicole C. Kirk argues that Wanamaker’s was more than a successful business enterprise, it was also a successful ministry. She notes that John Wanamaker, a Presbyterian, was as committed to evangelism and the social gospel as he was to selling silks and satins. As she writes: “Wanamaker saw his retail empire not as separate from religion but as an instrument of it, as a means for achieving moral reform in business, in the city, and in individuals’ lives.”

“Born into a working-class South Philadelphia family in 1838, Wanamaker began his career as a clerk in a men’s clothing store owned by a friend of his grandfather’s. By accident, he walked into a prayer meeting and heard a hat maker explaining that religion was part of his trade. Wanamaker was soon swept up in the Businessmen’s Revival, a Protestant prayer movement.”

?The store was filled with innovations: electric arc lamps, elevators, pneumatic tubes to move money and receipts. And it was infused with Wanamaker’s religiosity. In full-age newspaper ads, six days a week, he assured potential customers of his high-quality merchandise, his honest treatment of customers and his fairness to employees. ‘It was more than image making, although it was that as well,’ Ms. Kirk writes. ‘Wanamaker saw it as a part of his business mission—to make business a Christian enterprise and profitable’.”

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Hospitals ‘Tiptoe’ into Grocery Business

The Wall Street Journal: “Invoking the mantra that food is medicine, hospitals across the country are taking measures to prevent and treat illness through diet. To nudge patients into eating well at home, they have opened food pantries that offer nutrition counseling and healthful fare. They are growing their own produce, adding farmers to the payroll and hosting greenmarkets. A few are even tiptoeing into the grocery business.”

“ProMedica, a not-for-profit health system headquartered in Toledo, Ohio … set up two food pantries, where patients can receive nutritional guidance and free groceries. ProMedica opened a grocery store a few miles from one hospital, in an area that had been bereft of healthful food. Called Market on the Green, the store is open to the public, not just ProMedica patients.”

“Most grocery-store checkout counters are a gauntlet of candy. At Market on the Green, cashiers are surrounded by produce, while candy bars are tucked down an aisle. Whole-grain cereal is shelved at eye level, sugar-laden cereal can be found on harder-to-reach shelves … The store is a nonprofit enterprise (and) tries to steer shoppers with prices, putting smaller markups on healthful fare. For instance … whole-grain chips cost less than regular ones. Chocolate milk is ‘priced high’ to encourage children to drink skim milk.”

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Merchants of Honor: Dirty Lemon Trusts its Customers

Anne Kadet: “At the Drug Store, a new shop in Manhattan carrying a single line of soft drinks, the prices are so high—$10 for a 16-ounce bottle—you might be tempted to steal one. And that would be easy enough. At this store, there is no cashier. Not even a payment kiosk. It runs on the honor system. The company behind this store is Dirty Lemon Beverages, a local beverage maker that sells what it markets as health-enhancing drinks directly to customers through text messaging.”

“Chief Executive Officer Zak Normandin says he decided to operate his first store on the honor system because it is the most convenient way to serve customers. ‘No one likes standing in line,’ he said. The Drug Store is a tiny storefront on Church Street in Tribeca, a few blocks south of busy Canal Street. The high-ceilinged space, decorated with old-fashioned black-and-white tile, features a three-door refrigerator case and a 5-foot plant. A digital display mounted on the wall says ‘Grab a bottle and txt us’ followed by the store’s phone number.”

“Mr. Normandin says he isn’t worried about shoplifting at the Drug Store. The shop has cameras and heat sensors to track foot traffic. He said there have been no reports of theft at the store since its opening on Sept. 13.”

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Retailers Aim To ‘Swipe’ Rewards Cards

The Wall Street Journal: “Consumers have become addicted to credit cards with generous rewards programs. Retailers are trying to cut them off. Large merchants including Amazon.com Inc., Target Corp. and Home Depot Inc. are pushing for the right to reject some rewards credit cards, which typically carry higher fees for merchants.”

“The retailers are trying to end the card networks’ ‘honor all cards’ rule, which requires merchants that accept Visa- or Mastercard-branded credit cards to take all of them. If merchants could pick and choose among Visa or Mastercard credit cards, those with the highest merchant fees—and most generous rewards—likely would be on the chopping block.”

“Some 92% of all U.S. credit-card purchase volume is currently charged on rewards credit cards, up from 86% in 2013 and 67% in 2008, according to estimates from Mercator Advisory Group Inc., a payments research and consulting firm. Yet merchants say the most generous rewards credit cards with the highest fees are cutting into their profits … ‘swipe’ fees vary widely, but are higher on rewards credit cards—sometimes around 3% of the cardholder’s purchase price.”

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RH Negative: A Restoration of Excess

The New York Times: “On the second Saturday in September, the new RH Gallery opened its doors to the Meatpacking District, looking just as you’d expect: a glowering, 90,000-square-foot landscape of poured concrete flecked with bronze, stone and glass, through which sails a flotilla of enormous gray velvet and white linen sofas … Welcome to the latest iteration of what began as Restoration Hardware, a chain of home goods that in recent years has become best-known less for dependable fixtures than its cumbersome catalog mailings, once reaching 17 pounds.”

“This is RH’s 85th store, and its biggest. It is architecturally quite lovely, the low-slung, hundred-year-old brick building erupting into a tough, industrial-looking glass and steel three-story structure with a rooftop garden and restaurant … It opened the same week the parent company of Henri Bendel announced the closing of all its stores, marking both another death spasm of a certain kind of retail experience, and the unlikely success of a brand that has placed the same Belgian linen sofas, French caned beds and reproduction African objects in houses across the country.”

“The new RH store was seven years in the making. It opened with a flashy party that had caviar bars and dewy-faced models, Martha Stewart and Ryan Seacrest.”

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Consumers are ‘High’ on Seltzer

The Wall Street Journal: “Sparkling water sales are soaring in the U.S. as consumers … ditch soda for healthier, more natural beverages. And with that explosion has come a wave of variants: caffeinated and alcoholic versions, sparkling coconut water and coffee, even seltzer laced with cannabis. Americans will buy an estimated 821 million gallons of sparkling water this year … That is nearly three times as much as 2008.”

“Jess Faulstich, 36, of Los Angeles is so hooked on flavored sparkling water that she takes one to bed in case she’s thirsty during the night. She loves coffee but drinks caffeinated sparkling water to keep her teeth white. A technology trainer by day and a stand-up comedian by night, she gained several pounds in the past year from drinking alcohol at clubs. Now she drinks hard seltzer, when she can find it, because it’s light on alcohol and on calories. ‘I’m surprised my bloodstream is not carbonated,’ she said.”

“Heineken NV, for its part, has a different type of buzz on tap. The company’s Lagunitas brand in July launched an IPA-inspired sparkling water line infused with cannabinoids. Its name: Hi-Fi Hops.”

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FAO Flagship To Return to NYC

The Wall Street Journal: “A dominant presence in Midtown Manhattan for decades before its closure in 2015, FAO Schwarz is coming to life again with a new, 20,000-square-foot Rockefeller Center location, set to open in November. ThreeSixty Group Inc., a California-based firm, acquired the retail brand from Toys ‘R’ Us in October 2016 for an undisclosed price … But in an era when bricks-and-mortar retailers struggle to stay competitive as consumers increasingly go online for their shopping needs, FAO is making its Rockefeller Center location as much about the experience as the buying.”

“That means the store won’t just be staffed with traditional sales clerks, but also product demonstrators, magicians and men and women playing various costumed roles, including toy soldiers … the company is going so far as to hold auditions, rather than just the standard interviews, for retail staff.”

“Ultimately, ThreeSixty Brands may not be looking to make a profit on the Rockefeller Center store so much as use it to promote the FAO name, said Jed Wexler, a retail expert who runs 818 Agency, a New York firm. ‘It feels like an advertising play,’ he said. In any case, the New York store, which will be considered the FAO flagship, is part of a larger push. ThreeSixty Brands is also launching a smaller store at LaGuardia Airport this fall and one in China in 2019.”

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Applestone ‘Butchers’ The Vending Machine

Quartz: “It’s midnight and you need a steak. What do you do? If you live near Stone Ridge or Accord, New York, you just head to the nearest Applestone Meat Co. 24-hour butcher shop. You won’t find a bleary-eyed staff of overnight shifters working though. A row of vending machines, organized by type of meat—beef, pork, lamb, sausages, and ground meat—stand ready, stocked with steaks, chops, and burgers-to-be.”

“Applestone … envisioned the system as way to reach more customers, and make the shopping process more seamless. It’s more for busy families, less about the ability to get grass-fed burgers in the middle of the night—though that would be an excellent use of them, as well … That said, anyone who wants a smile with their ribeye can purchase meat from a customer service window at the Stone Ridge store from 11am to 6pm daily. Customer service, it turns out, isn’t totally dead.”

“Vending machines are a national obsession in Japan, where they sell pretty much everything imaginable, and ramen dispensers popped up in San Francisco earlier this year. And the French have oyster vending machines.”

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Online Feels ‘Off’ to Most Shoppers

Supermarket News: “Going by the trends in retail grocery, online ordering of groceries and meal kits likely stand near the top. But by the numbers, the vast majority of Americans are doing neither, a new Gallup poll finds. Of 1,033 U.S. adults surveyed, 84% said they never order groceries online and 89% never order meal kits, according to Gallup, which released the study results this week.”

“The small percentage of consumers that do order groceries or meal kits online don’t do it very often. Just 11% reported they order groceries online for pickup or delivery twice a month or less, and 4% said they do so once a week or more. Meanwhile, 9% of respondents order meal kits for home delivery two times monthly or less, and only 1% do so once weekly or more.”

Lydia Saad of Gallup comments: “Services like PeaPod, Instacart, Shipt and Amazon Fresh that cut out the trip to the grocery store appeal mainly to those short on time: parents with children younger than age 18 and employed adults. Higher-income Americans are also bigger adopters of grocery delivery, either because higher income means they can afford more groceries or they have greater access to mobile technology like smartphones and tablets that make ordering online easier.”

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