Hello BoF Professionals, welcome to our latest members-only briefing: The Week Ahead. Think of it as your 'cheat sheet' to what everyone will be talking about on Monday.
THE CHEAT SHEET
China's Tech Sector Stumbles, and Luxury Shudders
JD.com's automated logistics and warehouse complex in Gu'an, China | Source: Getty
Tencent and JD.com reported disappointing results, sending tech stocks lower
Alibaba and JD dominate Chinese e-commerce; Tencent's WeChat is becoming popular with brands
Tiffany is the latest luxury brand to sell through Alibaba's TMall
In China, luxury brands channel much of their online sales through a handful of internet gatekeepers that compete fiercely for consumers' hearts and wallets. Lately, that competition appears to be taking a toll. Tencent's problems have more to do with online gaming regulations than fashion, and the company continues to push Western apparel brands to advertise and sell through the WeChat ecosystem. Meanwhile, JD.com's logistics and technology spending have left the company overstretched. The tumult, while not a direct threat to luxury sales, comes after a couple years of largely trouble-free growth. This week offers more potential minefields: US-China trade talks resume Wednesday and Alibaba, operator of popular luxury marketplace TMall, reports earnings Thursday.
The Bottom Line: China has been luxury's rock for the last couple years, but between trade wars and the turbulent e-commerce sector, the market is showing some cracks.
Retail's Quarterly Health Check
Victoria's Secret | Source: Shutterstock
Major apparel retailers report financial results over the next two weeks
Retail stocks had a roller-coaster ride last week, sinking on Macy's results and rising on Nordstrom's
Strong US retail sales aren't benefitting some struggling chains
The retail sector is having its best run in years, but there’s a growing fear, at least on Wall Street, that store facelifts, loyalty programs and millennial-targeting collections may be too little, too late to protect mall brands from digital competition. Macy's reported stronger-than-expected sales last week, and its stock plunged anyway as investors appeared to grow frustrated by the slow pace of progress at the department store chain (Nordstrom's 4 percent same-store sales growth was more their speed). Among the more intriguing companies reporting this week: Discounters T.J. Maxx and Ross looks to extend their hot streak on Tuesday, and beleaguered Victoria’s Secret-owner L Brands reports on Wednesday. Kohl’s (reports Tuesday) has aggressively embraced e-commerce, even installing Amazon return stations in dozens of stores. Also helping: the slow collapse of its rivals, including J.C. Penney and Sears.
Large beauty companies are introducing new products and freshening their brands
The Indie Beauty Expo comes to New York this week, and my, how it’s grown. The trade show started in 2015 and has since branched out to three more cities, with hundreds of brands and buyers from major retailers expected to attend. Niche brands are wielding more power than ever, catering to consumers’ increasingly baroque cosmetics tastes with novel ingredients and treatments. Promising newcomers are quickly picked up by international chains and department stores desperate to provide the novelty factor that gets customers in stores. However, old-guard cosmetics companies are getting better at quickly jumping on the latest trends and courting new customers online. Estee Lauder's betting on luxury and China, and Coty is making over dated drugstore brands like CoverGirl. Both companies report results just as the indie brands’ annual soiree kicks into high gear.
The Bottom Line: Big beauty companies still need to prove they can create innovative products and play on Instagram, or they will continue to lose sales to a swarm of independent upstarts.
COMMENT OF THE WEEK: CONTINUING THE DISCUSSION
Last week's comment of the week, from a designer who was leaving fashion after a decade because he felt the industry had lost its creative energy, sparked much discussion on BoF's Instagram account. Here are some highlights:
"When I’m going to multi brand store, sometimes I can’t define one designer from another. Most designers now create not to inspire but to make money." -@miagchilo
"The blending of styles and experimentation of interpolated movements helps to progress fashion. Meaning is what we make of it, I’m grateful there’s more fluidity." -@gauramoodley
"Things can't stay the same forever but we have to make sure that the artistic direction of fashion will move forward in a way that can still be be marketable and maintain its integrity and historic value. Fashion should definitely be inclusive but not at the price of the great legacies that have been left behind." -@thequeenjamesversion
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Editor's Note: This article was revised on 19 August, 2018. A previous version of this article misstated that 600 brands will exhibit at Indie Beauty Expo. This is incorrect. The event will feature 250 brands.