Brands Start to Think Outside Traditional Retail Box

Amid retail industry shakeup, suppliers diversify their bets

Author: Andria Cheng

October 23, 2017

As the traditional retail industry deals with its multiple challenges, brands that supply to them are fast becoming retailers themselves and diversifying to sell in what once would have been considered unlikely places.

Hasbro is a good example. The toymaker on Monday gave a disappointing sales growth outlook for the upcoming critical holiday quarter because of the uncertainty regarding the US and Canada bankruptcy impact of Toys “R” Us, one of its top customers. Hasbro said it paused shipments to Toys “R” Us for a short period and is working out how much to ship to the retailer over the next few months. 

The announcement sent a ripple of fear through the toy industry because it traditionally has relied on a very small set of retailers. Walmart, Amazon, Target and Toys “R’ Us together represent about 75% to 80% of US toy industry sales, Jefferies analyst Stephanie Wissink told eMarketer Retail.

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Hasbro has worked to diversify its retail base, moving into channels like drug stores, grocery stores, and discount chains like Dollar General and Dollar Tree. It has also been aggressive about its own ecommerce options, becoming the first major toy company to introduce its own subscription box service.

"Our products sell quite well at a number of different new channels that we've expanded into," Hasbro CEO Brian Goldner said in a conference call Monday. “It's really heartening to see how online sell-through is even stronger than brick-and-mortar sell-through when there's no friction in the finding of our products…. Our global commercial teams have invested in an omnichannel retail strategy which puts Hasbro where consumers are shopping.”

Hasbro and the toy industry aren’t alone in expanding beyond the traditional retail boundaries. Lands’ End, having been previously spun off from Sears, had seen sales hurt by Sears store closings. The company, for instance, is opening several of its own stand-alone stores in fiscal 2018 to prepare “alternative strategies” to “serve” its physical-store shoppers in addition to expanding its own online sales. “We’re committed to putting our retail destiny firmly in our own control over the long term,” said CEO Jerome Griffith in a conference call in August.

For Levi’s, ecommerce and other direct-to-consumer channels are an increased focus. “We are challenged in US because of wholesale,” said Chip Bergh, president and CEO of Levi Strauss & Co., in a presentation at WWD's Apparel & Retail CEO Summit in New York on Tuesday. “Our retail is doing great. [With ecommerce,] we are in control of our destiny. It makes a big difference.”

Levi's direct-to-consumer revenues jumped 16% in the fiscal third quarter. Wholesale revenues, by comparison, rose just 4%, and those were boosted by growth in Europe.

Across the board, traditional wholesale giants including Procter & Gamble, Nike and Under Armour are fast expanding their own online and other direct-to-consumer sales options and adding new retail partners to adapt to changing consumer shopping behavior and sell where consumers are shopping, and just importantly, to have a more direct relationship with, and better insight into, their customers.

P&G said earlier this month that fiscal Q1 ecommerce sales rose 40%. Nike, meanwhile, not only is expanding its own online sales, it also has decided to go where the consumers are by agreeing to sell some products on Amazon. Nike rival Under Armour, for its part, has launched its own subscription box service.

“A developed market like North America must embrace change to its legacy retail infrastructure,” Nike President and CEO Mark Parker said in an earnings call in September.