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Shop-From-Home Winners: How Pandemic Crisis Breeds Adaptation

·8 min read
  • (1:45) - Digital Acceleration: Forever Impacts on Retail

  • (5:05) - Tapestry, Capri, StichFix: Learning from Tony Hsieh

  • (12:40) - ULTA and RH: Adapting to Their Customers

  • (17:50) - Shopify and BIGC Guide Brands to E-Comm Nirvana

  • (28:10) - Great Winter Coats... for Everybody This Season?

  • (32:15) - Episode Roundup: Podcast@Zacks.com


Welcome back to Mind Over Money. I'm Kevin Cook, your field guide and story teller for the fascinating arena of behavioral economics.

Most of us are still adjusting to work-from-home life -- if we are so fortunate -- as both workers and investors. If software was beginning to "eat the world" before the pandemic, as Marc Andreesen famously quipped years ago, it has by now swallowed half of it in just a few months.

In July, I put together a presentation about the acceleration in digital demands caused by the remote work imperative. The 2-minute article and 10-minute video are titled Software Goes Stratosphere on Planet COVID.

As always, you'll be able to find all the links and other archived content I mention in the article version of this podcast on Zacks.com.

But for some areas of the economy, there is no software vaccine. I'm thinking mostly of restaurants, where thousands of small businesses have had to close and millions of workers had their livelihoods taken away.

I worked in restaurants for 15 years in my teens and 20s so I can imagine with a heavy heart the multitude of struggling families without work, or much hope.

And then there are brick-and-mortar retail stores with varying degrees of closure and layoffs. In the past month, I've still been able to go to a Kohl's and a Menards in southeast Wisconsin and it seems like those stores should have no trouble surviving, even if traffic is lighter.

Going Online: Making the Leap is Easier Than Ever

But we know that many smaller stores and specialty shops won't make it. For some, making the adaptation to selling mostly online is not so challenging. For others in industries I haven't even imagined, maybe going online is not an easy option.

And yet crisis breeds adaptation and, potentially, new-found success. I recently invested in two companies who help small businesses build their online stores: Shopify SHOP and BigCommerce BIGC.

And it's not just about a web store with a payments system. These e-commerce platforms are offering more services like sophisticated marketing, inventory management, and accounting. I hope they are integrating with tools that many already use like Square.

As I learn more about the customers of these e-comm mega-platforms, I expect to be amazed by the different types of businesses that can sell online, from specialty foods to hair-care at home. I was already surprised that Ben&Jerry's has a store on BigCommerce.

Curious about the logistics of shipping ice cream, I explored the food and beverage options of BigCommerce and found that this is an area they are eager to serve small and medium-sized business with customized shipping, packaging, marketing, and inventory solutions.

The E.T. Economy: Experience and Transformation Go Home

All this investigation led me to conclude that while the WFH transformation is obvious, with dramatic and permanent changes, I'm not sure what the major and lasting impacts have been on shop-from-home (SFH).

Since my podcast is about economic behavior, I am deeply interested in how shopping and e-commerce will evolve with technology. Years ago I learned that Apple and Facebook would eventually change shopping with augmented reality (AR) and virtual reality (VR).

That is still slow to happen, even as NVIDIA advances the power and speed of the hardware and software to make it possible. Here were two episodes I did in 2017 on these emerging trends...

The E.T. Economy: Disruptive Technology and the Behavior of Shopping

Why the Apple Ecosphere Could Own Augmented Reality

If we look to China, we may see first when AR and VR will become mainstream platform technologies for shopping, as they tend to lead in these evolutions. Right now in China, "livestreaming" shopping events are all the rage with JOYY, sort of like QVC with influencers and an app.

But what I'm really curious about right now is which stores, big and small, are adapting and thriving in the SFH environment. Since this is not an area of expertise for me, I thought I'd bring in someone for whom it is.

Today my guest is Madeline Johnson, the Zacks Income Investor Strategist, editor of the Money Sense personal finance newsletter and our resident Millennial Guru of Retail.

We're going to find out who's winning in clothing, furniture, cosmetics and why. In November, she wrote a special report for Zacks Confidential about shopping for retail stocks for the holidays, with a focus on the luxury market -- because even if we don't "shop at the top" of the retail pyramid, there's no reason we can't make money on investing in those who do.

Two of her top picks were Tapestry and Capri CPRI, stocks that have literally doubled since mid-September! Be sure to listen to my 30-minute discussion with Maddy where I try to find out the answer to burning questions like "Where did Tapestry and Capri come from?"

Countless Big Shouts to Tony Hsieh

The world lost a visionary entrepreneur last week and I wanted to include some of his legacy in this episode for many reasons. Tony Hsieh (pronounced like "shay") was a founder and leader of Zappos, the iconic online shoe company that offered customers mail-order footwear that could be returned a year later with no questions asked.

Obsessed with finding passion in one's work, Tony made Zappos a meaningful place for its employees as well as a radical consumer experience. I never read his 2010 book Delivering Happiness: A Path to Profits, Passion, and Purpose, but now I want to, especially after I came across Tony's wonderful and rich definition of happiness.

After his tragic death, Silicon Valley VC Garry Tan posted this on Twitter from a 2009 Startup School talk by Tony...

“Happiness is really just about four things: perceived control, perceived progress, connectedness (number and depth of your relationships), and vision/meaning (being part of something bigger than yourself).”

As I learn more about Tony and his legacy, I was also warmed to discover his humble roots in my home state (from Wikipedia)...

Hsieh was born in Urbana, Illinois, to Richard and Judy Hsieh, immigrants from Taiwan who met in graduate school at the University of Illinois. Hsieh's family moved to Lucas Valley area of Marin County, California when he was five. His mother was a social worker, and his father a chemical engineer at Chevron Corp.

Speaking of Tony's legacy, what online retailer cannot learn something from him even now? On the podcast with Maddy, I was curious about a company like StitchFix SFIX who specializes in picking out clothing for you and shipping you a box full of hand-picked (with some AI help) items that you can return any of which you don't like.

Those shares soared higher the day of our chat after reporting a surprising growth trend and outlook. So I asked Maddy, "Is SFIX considered a luxury? Do they help Tapestry and Capri reach more, and more loyal, customers?"

Tune in for those answers and more as I also ask Maddy about the surprising monster success of Restoration Hardware RH in a pandemic-driven SFH environment where their unique selling proposition since inception was always the gallery atmosphere of seeing, touching and experiencing their high-end, custom décor.

Maddy also opines on the future of big-box stores like Kohls and Macys.

Finally, as millions are still out of work, and many businesses like restaurants and smaller shops have been devastated, I didn't want to focus entirely on aspirational shopping.

Since Canada Goose is also one of Maddy's top picks in high-end fashion, it got me curious which retailers encourage and promote the donation of old coats to those families in need -- before it gets really cold this winter.

We were both surprised at what we found. Join us for the episode and in exploring more ideas to give what we can this season.

Disclosure: I own shares of SHOP and BIGC for the Zacks TAZR Trader portfolio.

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RH (RH) : Free Stock Analysis Report
Shopify Inc. (SHOP) : Free Stock Analysis Report
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Capri Holdings Limited (CPRI) : Free Stock Analysis Report
BigCommerce Holdings, Inc. (BIGC) : Free Stock Analysis Report
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