STORE SPACES

Deloitte: The top destination for back-to-school shopping is…

BY Marianne Wilson

Consumers prefer to shop in brick-and-mortar when it comes to the second-biggest shopping season of the year.

Mass merchant stores remain the No. 1 back-to-school shopping destination, drawing 83% of respondents in Deloitte’s annual “Back-to-School” survey, followed by dollar stores (38%), online-only retailers (36%) and off-price stores (32%). (See end of article for the top 10 shopping destinations.)

The ascent of price-based retailers continues to squeeze more traditional retailers out of the higher ranks, Deloitte noted. For example, off-price stores jumped from No. 14 in 2016 to No. 4 this year. Department stores fell from the No. 2 position in 2016 to No. 6 in the last two years of the survey.

While people plan to visit price-based retailers more frequently, those who shop at traditional retailers like department stores, home electronics and office supply stores make larger purchases at these locations compared with other venues like mass merchants.

Household spending on clothing, supplies, computers and electronics for children in grades K- 12 is expected to reach $27.6 billion this year, according to the report. Parents plan to spend an average of $510 between July and September, with most of that occurring in stores ($292) – more than double the amount they plan to spend online ($115). However, respondents remain undecided where they’ll put the remaining 20% of their budget – leaving $5.5 billion up for grabs between online and store retailers.

Additionally, the amount parents say their children influence accounts for $21 billion, or 75% of back-to-school dollars.

“Back-to-school shopping tends to be price-focused as parents look for promotions and mass merchants for the best deals,” said Rod Sides, vice chairman, Deloitte LLP, and U.S. retail, wholesale and distribution leader. “But when we look below the surface, we notice several distinctions between high and low-income households and the way people shop for specific items like clothing, technology, and supplies. The potential lesson for retailers is that back-to-school may require them to do more than compete on price alone or try to sell across all categories. Survey results show it may be about delivering the best product or experience to customers in specific categories.”

In other survey findings:

• Back-to-school shopping is expected to peak during late July and early August, and those who begin their shopping before August are expected to spend 20% more than late starters. Nearly seven in 10 (68% ) of shoppers tend to finish their back-to-school shopping within a four-week period, but those who extend their shopping timeframe (sometimes in search of deals) spend more overall.

• The Northeast accounts for the biggest back-to-school spend, at $568 per household. The South has the lowest, at $488.

• Parents’ reliance on tools like laptops and social media may have hit a digital saturation point. Among respondents, 49% plan to use their desktop or laptop to shop, down from 57% last year. Mobile use increased to 53% after trailing desktop/laptop use in 2017.

Parents’ social media use also appears to be decreasing, with 23% saying they plan to use these tools to find promotions, receive coupons and browse products, down from 27% in 2017.

The top 10 destinations for back-to-school shopping are:

1. Mass merchants (83%)
2. Dollar stores (38%
3. Online-only retailers (36%)
4. Off-price stores (32%0
5. Office supply/technology stores (31%)
6. Department stores (27%)
7. Fast-fashion apparel retailers: (26%)
8. Warehouse clubs (20%)
9. Retailer websites (17%)
10. Drug Stores (15%)

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Tax law glitch puts crimp on store renovation plans

BY Marianne Wilson

A drafting error in the new tax law is causing some retailers and restaurant owners to delay their renovation and improvement plans.

As written, the law allows companies to write off renovation costs (made to non-residential real estate) over 39 years. The authors of the tax law had intended for the businesses to be able to write off the full costs of the improvements in one year.

A group of more than 100 retailers, restaurants and trade groups, including the National Retail Federation and Retail Industry Leaders Association, have urged Congress to take “quick action” to make two technical corrections to law.

“The delay in correcting these provisions has caused economic hardship for some retailers and restaurants and is also delaying investments across the economy that impact the communities in which these companies are doing business,” the businesses and groups said in a letter sent in June to the top Republicans and Democrats on the congressional tax-writing committees.

One of the technical corrections sought by the group has to do with the renovation write- off.

“This very large difference in the after-tax cost of making improvements is causing a delay in some store and restaurant remodeling projects, as well as causing some retailers to decline opportunities to purchase or lease new store locations that would require substantial improvements,” the retailers and restaurants stated in the letter.

The second correction is related to the effective date of a provision that generally bans businesses from carrying back net operating losses to prior years. Lawmakers had intended for the ban to take effect for taxable years starting after Dec. 31, 2017. But the law instead says it applies for taxable years ending after Dec. 31, 2017.

Republican leaders have acknowledged the mistakes, but there is no quick fix in sight at this point as the corrections would require consensus across the aisles.

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Fabletics sets aggressive store expansion

BY Marianne Wilson

The activewear brand co-founded by celebrity Kate Hudson is celebrating its five-year anniversary by setting a course for aggressive growth.

Fabletics, which currently has 24 stores across the United States, announced it will expand its retail presence by adding more than 75 new doors, giving it a total of 100 locations. The privately held company, owned by TechStyle Fashion Group, will also unveil a new store concept this September, in Bellevue, Washington, which will reportedly include a high-tech payment processing system and a leggings bar among other features.

Fabletics, a winner of Chain Store Age’s Breakout Retailers Awards in 2016, was launched online in 2013. It made the leap to brick-and-mortar in 2015 with a sleek store model that combines online and physical retail, with a membership model feature. The brand boasts 1.4 million VIP members, who enjoy in-store perks among other benefits. The company said it continues to see over 20% increase in same-store sales year-over-year, and has surpassed $300 million in revenue.

In other initiatives, Fabletics plans to debut a “brand evolution” that will result in increased merchandise frequency, with new capsules dropping as often as once a week, as well as enhanced products across all categories. The new collections, available starting in July, utilize advanced performance technologies optimized for different activities, in addition to fashion-forward designs that expand on Fabletics’ signature bright colors and fun patterns.

The company is also focused on aggressive global expansion. In the fall, Fabletics will enter its first international distribution partnership, which will introduce the brand to the Philippines through free-standing stores, shop-in-shop concepts and an online shopping site. The agreement is the first of other international partnerships as well as company-owned expansion plans that will result in launching new territories throughout 2018 and 2019.

In line with its next phase of growth, the company is also adding to its leadership team, including the appointment of industry veteran Karen Pornillos as VP of design and fashion director. She served as VP of women’s design for Lululemon Athletica, before joining Free People to lead design for the brand’s activewear line.

In addition, the company named Nancy Arnold as VP, creative director. She has worked across a mix of emerging disruptors and admired brands such as Chloe + Isabel, Victoria’s Secret and Ann Taylor.

“Driven by innovation, inspired by community and grounded in authenticity, Fabletics embodies what today’s consumers value most in brands,” said Adam Goldenberg, co-CEO and co-founder TechStyle Fashion Group, which also owns ShoeDazzle and JustFab. “Fabletics has succeeded beyond our expectations under Kate’s vision and our new team members, and I’m confident Fabletics will continue on its incredible growth trajectory.”

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