However, Costco net sales for the quarter increased to $52.60 billion. That’s up 1.9% from $51.61 billion in the prior year’s fiscal third quarter. And net sales for the first 36 weeks increased to $160.28 billion. That’s up 5.5% from $151.97 billion in the same period last year.

Chief financial officer Richard Galanti said big ticket discretionary departments decreased ecommerce sales 20%. Those included home furnishings, small electronics, jewelry and hardware, he said. Those accounted for 55% of Costco ecommerce sales.

“These same departments were down about 17% in warehouse, but they only make up 8% of in warehouse sales,” Galanti said.

Costco ranks No. 6 in the Top 1000. The database is Digital Commerce 360’s ranking of the largest North American online retailers by web sales.

Costco ecommerce sales

Galanti said Costco hired a vice president of digital transformation in the past year to improve ecommerce, including both mobile sites and applications.

“That complemented three other outside VPs we hired, one of which was in the data analytics area,” Galanti said. “And we’ve really, over the last six to nine months, began a two-year roadmap to improve and re-platform our primary ecommerce website, and the same goes for our mobile apps and mobile site.”

Omnichannel fulfillment at Costco

“In terms of the benefit of buying online and picking up in store and things like that, we frankly view that as more costly than it is beneficial,” Galanti said. “In fairness to the different retailers that feel they have to do it, many of them want to do it. But there’s a cost of doing that.”

Costco can “certainly do more online,” Galanti said.

“We don’t have some strategic goal to go from 8% — which is still a $20 billion business — but to go from 8% of sales to 16%,” Galanti said. “But let’s go from 8% to 9%, 9% to 10%, 10% to 11% over a certain period of time. And we think that with some of the things we’re doing on that side, we can.”

One such thing Costco is working to implement, according to Galanti: showing in-stock warehouse inventory online.

Costco membership growth in fiscal Q3

Galanti said Costco increased new memberships 7% year over year.

“Membership growth continues,” Galanti said.

The wholesale retailer ended its fiscal third quarter with 69.1 million paid household members and 124.7 million cardholders, both up approximately 7% versus a year ago. Also at the end of the third quarter, Costco had 31.3 million paid executive members. That’s up 681,000 — or an average of 57,000 per week — during the 12-week fiscal third quarter.

“Executive members now represent a little over 45% of our paid members and approximately 73% of worldwide sales,” Galanti said.

Meanwhile, the retailer increased its number of warehouses “just under” 3%.

For the quarter, Costco reported $1.44 billion of membership fee income. That’s 1.98% of sales compared to $984 million, or 1.91% a year ago in the third quarter, Galanti said. That represents a $60 million (6.1%) increase in membership fees, he said.

In terms of membership renewals, the United States and Canada membership renewal rate was 92.6%. Globally, that rate is 90.5%.

Costco earnings

For the fiscal third quarter ended May 7, 2023, Costco reported:

• Net sales increased to $52.60 billion. That’s up 1.9% from $51.61 billion in the prior year’s fiscal third quarter.
• Costco ecommerce sales declined 10%.
• $1.44 billion in membership fee income, comprising 1.98% of sales compared to $984 million, or 1.91% a year ago in the third quarter.

For the 36-week period ended May 7, 2023, Costco reported:

• Net sales for the first 36 weeks increased to $160.28 billion. That’s up 5.5% from $151.97 billion in the same period last year.
• Costco ecommerce sales fell 7.8%.

Check back for more earnings reports.

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Namely, small businesses. More than 60% of the businesses that sell on Amazon are small and independent, Amazon says in a new report. Collectively, those businesses in 2022 sold more than 4.1 billion products — or an average of 7,800 products every minute — Amazon says.

Sales per small business store on Amazon averaged about $230,000 per store, according to Amazon’s new report, 2022 Small Business Empowerment.

Dharmesh Mehta, vice president, worldwide selling partner services, Amazon.com Inc.

“Selling in Amazon’s store has enabled independent sellers to employ an estimated 1.5 million people in the U.S.,” says Dharmesh Mehta, vice president of Amazon’s worldwide selling partner services. “And during the 2022 holiday season alone, Amazon customers purchased nearly half a billion products from small businesses in the U.S., leveraging Amazon’s significant investments in customer traffic, a trusted shopping experience and fulfillment and logistics capabilities that enable fast and convenient delivery.”

Amazon small business metrics

• In 2022, Amazon and its third-party lending partners lent $2.1 billion to independent sellers.
• The top small business categories include health and personal care, home, beauty, grocery, and apparel,
• The states with the most independent sellers are California, Florida, New York, Texas, and New Jersey.
• The fastest growing are Alaska, Washington, D.C., Mississippi, Maine, and Wyoming.

“While small businesses continue to thrive by selling in Amazon’s store, running a small business has never been straightforward,” Amazon says. “And this past year brought new challenges that businesses of all sizes had to navigate. The economy saw rising interest rates and inflation not seen in nearly 40 years. And many businesses continued to face supply chain issues because of the global pandemic and its aftereffects.”

Amazon.com Inc. is No. 1 in the Top 1000. The database is Digital Commerce 360’s ranking of North American web merchants by sales. It is No. 3 in the Online Marketplaces database, which ranks the 100 largest global marketplaces.

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Target sales

Q1 comparable digital sales dropped 3.4%, versus a 3.2% rise in the year-earlier period.

Target said its digitally originated sales — transactions that can be attributed to its website and apps, including online purchases and buy online, pick up in store — fell to 17.5% of total sales from 18.2% in the comparable period of 2022.

Same-day services (Order Pickup, Drive Up and Shipt) saw mid-single digit growth in the first quarter, led by high-single digit growth in Drive Up.

Net income dropped 5.8% to $950 million from $1.01 billion in Q1 2022.

Organized retail crime

In a written statement, CEO Brian Cornell said the retailer expects that shrink will slash some $500 million from Target’s profitability in 2023.

“While there are many potential sources of inventory shrink, theft and organized retail crime are increasingly important drivers of the issue,” Cornell said. “We are making significant investments in strategies to prevent this from happening in our stores and protect our guests and our team. We’re also focused on managing the financial impact on our business so we can continue to keep our stores open, knowing they create local jobs and offer convenient access to essentials.”

Target ranks No. 5 in the Top 1000. The database is Digital Commerce 360’s ranking of the largest North American online retailers by web sales.

Margins and inventory

First quarter operating income margin rate was 5.2% in 2023, compared with 5.3% in Q1 2022.

A decline in an operating income margin rate is generally seen as evidence of inventory discounting. Target announced in June that it would dramatically reduce inventory by slashing prices after supply-chain woes across the retail industry led to a surge in unsold goods.

Inventory at the end of Q1 was 16% lower than the year-earlier quarter. That reflects a more than 25% reduction in discretionary categories.

Outlook

Target maintained its previous sales and profit outlook for the year.

For comparable sales in the second quarter, Minneapolis-based Target said it’s planning for a wide range of outcomes “centered around a low-single-digit decline,” according to a written statement accompanying the earnings report.

Target’s sober outlook for its fiscal second quarter, which began in late April, will do little to assuage worries about weakening U.S. consumer spending, said Adam Crisafulli, an analyst at Vital Knowledge.

“Target could have been worse, but it’s still not good,” Crisafulli said in a note to clients.

Q1 2023 Target earnings

For the three months ending April 29, 2023, Target reported:

• Revenue from sales of $24.95 billion, a 0.5% rise from the $24.83 billion in sales a year earlier.
• A 0.4% rise in the cost of sales to $18.39 billion from $18.46 billion in the comparable quarter of 2022.
• Net earnings of $950 million, a 5.8% drop from the $1.01 billion reported in Q1 2022.

Bloomberg News contributed to this report.

Percentage changes may not align exactly with dollar figures due to rounding. Check back for more earnings reports.

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The firm is in the early stages of consideration. The IPO’s size has also yet to be determined, according to people familiar with the matter. The business group is in talks with banks that could potentially help prepare for the IPO next year, said one of the people. The person asked not to be named as the matter is private.

The unit, which competes with rivals such as Amazon.com Inc. in markets outside China, is one of six parts that Alibaba is splitting into. Valuations for the international business units vary: Morgan Stanley in March priced “international retail” units including Lazada and Trendyol at roughly $29 billion. Meanwhile, a CICC analyst report from the same month valued the firm’s international division at about $39 billion. In recent quarters, however, growth has been volatile in the face of global recessionary fears.

If it goes ahead, the Alibaba unit would join a number of high-profile Chinese firms including fast-fashion leader Shein seeking to tap American capital even as tensions rise between the world’s two largest economies. A listing in the U.S. could help the business — formally Alibaba International Digital Commerce Group, or IDCG — attract global investors wary of putting money directly into China.

Alibaba owns Taobao, No. 1 in the Digital Commerce 360 database of Global Online Marketplaces. The database ranks marketplaces by total value, or gross merchandise value of sales. Alibaba also owns Tmall (No. 2).

Amazon is No. 3 in the Global Online Marketplace Database. It’s also No. 1 in the 2022 Digital Commerce 360 Top 1000 database. The Top 1000 ranks North American web merchants by sales.

Shein is No. 36 in the Digital Commerce 360 2022 Asia Database, which ranks Asia-based retailers by their online sales.

Alibaba empire considers IPOs

Alibaba in March unveiled plans to break up its empire into units such as ecommerce, logistics and the cloud, with each business potentially exploring fundraising and an IPO at an appropriate time. The company will consider gradually giving up control of some of the businesses, CEO Daniel Zhang said at the time, but declined to specify a timeline for any Alibaba IPOs.

IDCG includes:

• Southeast Asian online mall Lazada
• AliExpress, popular in Russia, Latin America and parts of Europe
• Trendyol in Turkey
• Daraz in South Asia
• Business-to-business marketplace Alibaba.com

In the final three months of 2022, the combined orders of Lazada, AliExpress, Trendyol and Daraz grew 3% from a year earlier, led by Trendyol. The international unit accounted for roughly $9.5 billion or 7% of Alibaba’s revenue in the last fiscal year and is headed by Jiang Fan, the former president of Alibaba’s domestic online retail businesses Taobao and Tmall.

Other parts of Alibaba’s empire have already begun moving ahead with spinoffs. Cainiao Network Technology Co., the logistics arm of Alibaba, as well as Freshippo, its grocery chain, have started preparations with banks for IPOs in Hong Kong.

Deliberations around an IPO are very preliminary and the situation may change, the people said. IDCG said in response to queries from Bloomberg that currently, there is no IPO plan.

Alibaba has in the past explored splitting off Lazada. The unit, bought in stages from Rocket Internet SE, is considered one of the Chinese firm’s most high-profile international brands. It competes with Amazon and Sea Ltd.’s Shopee in Southeast Asian markets such as Thailand, Malaysia and Singapore.

In 2022, Alibaba discussed raising at least $1 billion for Lazada before calling off negotiations with potential investors when talks bogged down over its valuation. It had aimed to secure the funding as a precursor to a spinoff. Alibaba has since mothballed the fundraising and injected additional funds into the company instead.

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Amazon ranks No. 1 in the Top 1000. The database is Digital Commerce 360’s ranking of the largest online retailers in North America by web sales. It also ranks No. 3 in the ranking of top online marketplaces.

Fraud remains a major problem

Amazon acknowledges the serious nature of the counterfeit problem on the platform. It spent $1.2 billion and employed 15,000 people to fight fraud on the marketplace in 2022, per the report. Counterfeit products are a “huge problem,” according to Robert Freund, a lawyer who works on ecommerce and social media marketing cases.

Counterfeiters aren’t new to Amazon. In 2016, Birkenstock USA CEO David Kahan said in a letter the footwear company would no longer list its products on Amazon because it was an “environment where we experience unacceptable business practices, which we believe jeopardize our brand.”

In 2019, Nike also stopped listing products directly on Amazon, a decision in part reportedly due to struggles with fake products. Even Amazon’s own products are at risk of fakes.

For brands that rely on Amazon sales, it can be difficult and expensive to “play whack-a-mole in the courts against counterfeits,” Freund said. Some companies, like Disney and Nintendo, have a “war chest” for these legal battles, but many don’t. 

The swaths of knockoffs are making shopping unpleasant for some consumers, some of whom note a decline in quality. In 2020, The New York Times’ Wirecutter dubbed our time “the era of fake products.” A 2022 study from consulting firm Brooks Bell of more than 1,000 Amazon shoppers found that about one-third reported receiving items late or receiving a low-quality product at least monthly. Some consumers may be worried about counterfeit goods on other platforms, too. A March 2023 survey of 1,053 consumers from Digital Commerce 360 and Bizrate found that 12% of beauty buyers don’t shop online because of worries that they might receive counterfeit products.

Reasons to be optimistic

The state of counterfeit products on Amazon seems to be improving, Freund says. It’s encouraging that Amazon has a clear investment in making the marketplace usable for consumers.

“I think that part of the reason they’re [Amazon] so interested in addressing the issue and at least appearing like they’re doing everything they can do, in addition to restoring goodwill with sellers, is good publicity.” They also face potential liability themselves for allowing counterfeits on their platform, Freund says.

The report from Amazon also shows a decline in counterfeit attempts in 2022 compared to the previous year. According to Amazon, there were 800,000 attempts by bad actors to create seller accounts in 2022. That’s down from 2.5 million in 2021, and 6 million in 2020, an 87% decrease over the two year period.

Counterfeit products will probably always be an issue

Despite Amazon’s reports of fewer counterfeit reports, the problem is definitely not going away. 

“It’s hard to imagine setting up some kind of framework where you just completely eliminate the business of counterfeiting,” Freund said, pointing to the massive scope of Amazon.

In 2022, Amazon said its Counterfeit Crimes Unit pursued more than 1,300 counterfeiting criminals in the U.S., U.K., EU, and China, and disposed of more than 6 million counterfeit products. While that’s progress, Freund says it also shows the difficulty of wiping out counterfeits completely.

Selling counterfeit products is “so easy to do, especially if you’re located in a country like China,” Freund said, which is hard to prosecute from the U.S. 

China is responsible for 75% of pirated and counterfeit goods seized by the U.S., according to the Office of the U.S. Trade Representative 2022 Review of Notorious Markets for Counterfeiting and Piracy. Counterfeits from the Chenghai district of Shantou are particularly hard to stop, according to the report, because of “close relations businesses have with local administrative and criminal law enforcement authorities.”

“Right holders describe local officials as unhelpful or unwilling to pursue investigations recommended by either firms or enforcement officials from other cities,” limiting what U.S.-based retailers and marketplaces can do.

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That growth, however, was not evenly distributed, according to research from Commerce Signals, which tracks the spending of 40 million U.S. households through Visa and Mastercard credit cards and debit cards.

For example:

• The biggest gains in early 2023 were in the travel industry, where dollar spending rose 34.5% year over year in January and February.

• Dollar spending climbed 6.3% at apparel retailers in the first two months of this year and rose 6.0% at department stores.

• Electronics stores saw consumer purchases decline 2.6% in dollars in January and February, despite a 10.4% increase in the number of transactions. Commerce Signals attributed the decline in dollars spent to a drop in big-ticket purchases such as computers and a rise in less-expensive areas such as gaming.

• Best Buy, the largest pure retailer in the electronics category, saw purchase dollars fall 19%, while transactions were down only 5.3%. Its online sales fared worse than in-store sales, Commerce Signals said. Best Buy Co. Inc. ranks No. 7 in the Top 1000.

“People are really spending a lot in travel, all aspects of travel — airlines, hotels, rental cars. You see it in the travel agent and online travel agencies. And so we do expect that to continue,” Nick Mangiapane, chief marketing officer and head of partnerships at Commerce Signals, told Digital Commerce 360. “Whereas categories that are specifically home-based are doing less well. Home stores, furniture stores, electronics are all down, and we are expecting that to continue, too.”

Commerce Signals’ data shows overall growth in retail spending at 5.5%-5.6% so far in 2023. That is in line with the National Retail Federation’s predictions of overall retail growth between 4% and 6% this year. Commerce Signals was purchased by TransUnion in April 2022.

Discretionary spending online vs. brick and mortar

Commerce Signals’ data shows a substantial gap between spending levels online and at stores.

Looking at year-to-date figures, Mangiapane said “there’s some variability by category. But we’ve actually got brick and mortar up 6.4% so far and online sales only up 4.4%.”

Dollar spending at department stores year-to-date is up 7.2% versus a year earlier. Meanwhile, dollar spending online at department stores is up just 4.1%.

Among electronics stores, the gap is also substantial. “In-store purchases are up almost 1%, while online purchases are down almost 4%,” Mangiapane said.

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That’s $235 million less than what the retail giant paid for the business in 2017. WHP, owner of such brands as Anne Klein and Joseph Abboud, will pay $50 million for the Bonobos brand, according to an April 13 statement. Express, which is partly owned by WHP, will acquire the Bonobos operating assets and related liabilities for $25 million.

The deal adds to a list of fashion flops for Walmart, which has a record of acquiring apparel businesses only to offload or shutter them later. In 2020, the company announced the sale of its footwear website, Shoes.com, and its lingerie brand, Bare Necessities. The previous year, it announced the sale of ModCloth, a women’s fashion apparel business.

“Bonobos joined the Walmart family to expand our assortment and expertise in menswear,” Walmart said in an email. “Since acquiring Bonobos, Walmart.com has grown from 70 million to hundreds of millions of items. After nearly six years, we’ve decided it’s the right time to sell Bonobos.”

Andy Dunn, who founded Bonobos in 2007 as a website, initially oversaw the brand following Walmart’s purchase of it, but left the retail giant in 2019.

Moosejaw sale

Walmart has pruned away other businesses with online origins like Bonobos. In February, the Bentonville, Arkansas-based company agreed to sell Moosejaw, a retailer of outdoor gear and apparel, to Dick’s Sporting Goods Inc. Walmart had purchased Moosejaw in 2017 for about $51 million. Terms of the sale weren’t disclosed.

Walmart is No. 2 in the Digital Commerce 360 Top 1000 database, which ranks online retailers by web sales. The mass merchant acquired Moosejaw in 2017 for $51 million. At the time, Moosejaw was No. 261 in the Top 1000. Dick’s is No. 36 in the Top 1000. Express is No. 114.

The Walmart-Bonobos deal is expected to close this summer. John Hutchison, the head of Bonobos, will stay on as brand president and report to Tim Baxter, chief executive officer of Express.

“Bonobos is delivering double-digit sales growth and we plan to continue that momentum,” Baxter said in the statement, adding he expects the transaction to contribute to operating income and generate cash in fiscal 2023.

Back to basics

Over the years, Walmart has frequently stumbled in its efforts to sell apparel beyond essential items such as socks and underwear. In 2010, the company vowed it was “going back to basics” by focusing on customers’ “everyday needs” after a push to go more upscale failed to gain traction.

A year later, Walmart closed its New York apparel office as part of its retrenching.

“We don’t need to be on Broadway to sell socks and underwear and T-shirts,” a spokesman said at the time.

The pendulum swung back as ecommerce boomed. Walmart purchased Jet.com for $3.3 billion and brought in its founder, Marc Lore, to take on Amazon.com Inc. Lore pledged “to elevate the Walmart.com brand” and oversaw the purchase of Bonobos and other businesses.

Lore has since departed the company, but he helped to build out Walmart’s web operations. Recent data shows that Walmart+, an online subscription service that competes with Amazon’s Prime service, is helping the retailer chip away at the Seattle-based ecommerce giant’s lead among wealthier shoppers. Walmart has also started a third-party marketplace on its website, dramatically expanding its selection of available goods.

In spite of missteps in fashion, Walmart hasn’t abandoned its apparel aspirations, and the category remains an important part of the business. The retailer hired fashion designer Brandon Maxwell two years ago in a bid to entice shoppers with more stylish clothes.

Last year, Walmart unveiled a new sleepwear and underwear line called Joyspun. Some brands it has acquired, such as plus-size label Eloquii, remain available on the company’s website.

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“We would never do that,” he says.

Instead, the online merchant of cleaning and household products has about four box sizes and two envelope sizes to appropriately fit each size order into the correct box. And for orders with a few products — the average order size on Grove.co is eight to 10 products — its warehouse workers “Tetris” or puzzle together the fulfillment box so all the products fit inside, Landesberg says.

Packing in the Grove warehouse

Stuart Landesberg, CEO and co-founder, Grove Collaborative

This packer position at the Grove warehouse is not entry level. It requires more training and comes with a promotion. Packers receive a week of hands-on training, then a month of guided supervision as they learn how to pack the boxes and their expected goals.

“The training process at Grove is longer than most ecommerce packer training programs because the nature of our product and packaging expectations requires a level of detail that isn’t always necessary in a traditional packing role,” Landesberg says. “Our team members understand the importance of optimizing products and packaging materials in such a way that does not contribute to a higher carbon footprint.”

2022 Ecommerce Fulfillment Report

Analysis of the latest trends in ecommerce fulfillment. Includes over 30 charts, shipping policies of Top 1000 retailers, Amazon’s fulfillment practices, the state of the worldwide supply chain, and updates on in-warehouse automation and delivery robotics. 

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Landesberg describes the role as a “pressure seat.” The employee receives the touts with the products picked for the order and the appropriately sized box. Then, they have to quickly fit it all in, as employees have a units per hour goal.

“In addition to specific quality and safety goals, packers at Grove have an incremental units per hour goal to meet based on how long they’ve been in the job function,” a Grove spokesperson says. “The quality goals focus on ensuring that packed items arrive to our customers safely and in good condition.”

Other warehouses might use a robot to perform this task. Grove is willing to pay a bit more to have this step of the fulfillment process done right to be a more sustainable merchant. Landesberg declined to share its warehouse employee wages.

“I haven’t seen anything robots can do as good as a human,” Landesberg says about this box packing step. Grove weekly tracks customer satisfaction and feedback as the primary success metrics for Grove packers.

A sustainable Grove

Grove launched in 2012 as ePantry, and in 2016 rebranded to Grove Collaborative, an online-only brand with sustainability as its core mission. About 13% of the products sold on Grove.co are its own brand. The remaining 87% are from other brands it sells, such as Mrs. Meyer’s, Method and Rooted Beauty. Today, Grove is publicly traded, a certified B. Corp., and sells a selection of its branded products at Walmart, Target and Amazon. Grove Collaborative generated $321.5 million in net revenue in 2022. This was down 16% year over year, the merchant reported, and it is operating at a loss.

Grove is plastic-neutral, meaning for every pound of plastic sold, it collects and recycles that same amount in nature through rePurpose Global. Its goal is to be plastic-free by 2025. And that means Grove Collaborative has routinely iterated on its product and fulfillment packaging.

Packaging: lighter, smaller and less

To achieve the lowest carbon footprint on a fulfillment box, it’s all about lower weight, smaller size and less package, Landesberg says.

Grove focuses on only selling products that are smaller in size — or changing them to fit this mission. For example, instead of selling a full-size mop, which is bulky to ship, it made its broom stick collapsible to fit into a much smaller box. That brings Landesberg to a tip for merchants striving to be more sustainable: Invest in multiple box sizes.

“The best solution is well-trained labor and enough box sizes that you can match products to appropriately,” he says.

At one point, Grove had 30 box sizes. Now, it has settled on its four boxes and two mailers, which can appropriately fit its all of its orders.

Fewer boxes per order

Another shipping practice that Landesberg claims Grove “would never do” is splitting up an order of eight to 10 products into eight to 10 shipments. The carbon footprint is much larger for multiple boxes instead of a slightly larger box that can hold a few more objects, he says.

While orders arriving in multiple boxes sometimes happens, especially for larger orders, Landesberg says split shipments are less than 5% of all of its orders. This is below the industry standard, in which 21% of orders from an online retailer arrived in more than one shipment, according to data from fulfillment vendor Narvar Inc. collected October-December 2021.

Because Grove launched as a vertically integrated online brand, it purposely designed its products to ship directly to consumers, not for a store shelf, Landesberg says. For example, it’s laundry detergent is sold in a 1-ounce concentrated glass bottle that shoppers can mix with water at home, unlike the large bottles sold in stores. Its candles are packaged in a box with a thinner glass, unlike the freestanding, thick-glass candles at stores.

These modifications to the product package allow Grove to ship orders to consumers in a way that weighs less, takes up less space and uses less interior packaging in the box.

And after the packages are snuggly fit in the box, Grove uses a recycled paper to pad the products during the shipping journey. In May 2019, Grove went through its supply chain and eliminated single-use plastic and switched to paper materials.

Grove.co’s paid members are its more frequent purchasers

These initiatives resonate with a certain cohort of shoppers who strive to live a sustainable lifestyle. Grove is No. 301 in the 2022 Digital Commerce 360 Top 1000.

About half of Grove.co’s sales are from shoppers making one-time purchases priced 5-20% above the discount it gives consumers who sign up for a subscription to products.

The other half of Grove.co’s sales are from consumers who signed up to receive auto-replenishments of  products or paid $19.99 for an annual VIP program membership. Members receive seven free gifts a year, exclusive sales, early access to new products and free samples. Landesberg says “hundreds of thousands” of customers are paid members, but declined to share the exact number.

Nearly 50% of paying members renew memberships annually, Landesberg says.

Landesberg says he is pleased with this membership retention rate. He points to the value of the program, the strong brand and engaged community as reasons for this retention rate. For example, members can join its private Facebook group, which is “incredibly engaged,” Landesberg says.

The average order value for traditional shoppers compared with members or subscribers is about the same, Landesberg says. He did not reveal that figure. The frequency of purchasing, however, is much higher for members and subscribers, from six to 12 times per year. That compares with traditional shoppers, which is about four times per year.

Grove expands its retail presence

But even with such high engagement rates on its own site, Grove Collaborative knows many shoppers still do not recognize its brand.

To that end, since 2021, Grove has sold a selection of its products with national mass merchants including Target Corp. and Amazon.com Inc. In 2022, Grove expanded to sell its products in CVS Caremark Corp., Harris Teeter Supermarkets LLC, H-E-B Grocery Company, Meijer Inc. and Giant Eagle Inc. Today, Grove products are sold at thousands of retail locations, including at mass merchant Walmart Inc.

“To change the category, we need to play in the channels where the majority of people are buying these products,” Landesberg says.

But the goal, Landesberg says, is not to introduce them to Grove on Target and then get them to buy that product on Grove Collaborative.

“It’s my goal to get them to come back and get them to buy that product again,” Landesberg says.

“Economically, yes, we make more money when they buy their entire regimen from Grove,” he adds.

He knows the majority of shoppers don’t buy their household cleaning and personal care products directly from a brand’s website. They buy these products from a mass merchant. Grove declined to share what percent of its sales are from its direct-to-consumer site or from other merchants.

Kathy Kimple, executive director, digital strategy, at ecommerce consulting firm OSF Digital, says it’s interesting to see subscription-based companies expand into retail. Shoppers save on shipping and get the product immediately. Meanwhile, the brand gets more exposure.

“As access to their products grows, there will be less need for subscription,” Kimple says. “Depending on the company’s goal, lower subscriptions may be offset by brand awareness if retailers start to carry more Grove products.”

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The report examined more than 40,000 SKUs between July 2022 and January 2023 to see these trends. Retailers include Dillard’s Inc., No. 103 in Digital Commerce 360’s ranking of the Top 1000 ecommerce retailers in North America, Macy’s Inc. (No. 17), Zappos and Nordstrom Inc. (No. 20). Amazon.com Inc. is No. 1 and owns Zappos.

Retailers and brands adjusted prices

Pricing competitively is especially important in times of high inflation, according to the ecommerce analytics software vendor. Many of the retailers examined in the report reduced prices between June 2022 and January 2023 to attract customers and drive sales.

Per the report, Nordstrom cut prices the most of the brands examined, by 19% in the period. Net-a-Porter, Saks Fifth Avenue, Neiman Marcus (No. 73), and Dillard’s also consistently reduced prices in that timeline by 14%, 8%, 6%, and 6%, respectively.

Lowering prices didn’t drive sales, according to Nordstrom’s annual report for 2022.

“During economic downturns or inflationary periods, including those resulting from the impacts of COVID-19, fewer customers may shop as these purchases may be seen as discretionary, and those who do shop may limit the amount of their purchases. Any reduced demand or changes in customer purchasing behavior may lead to lower sales, higher markdowns and an overly promotional environment or increased marketing and promotional spending,” the retailer said.

Individual brands also offered discounts during the period, according to DataWeave. The majority of brands examined had discounts of more than 15% across retailers that sold them. Joe’s Jeans had an average discount of 25%, Silver Jeans Co. offered 22%, and Mango came in at 19%. Nike (No. 9) came in a bit lower at an average discount of 11%.

Some retailers bucked the trend of reducing prices, per the report. Macy’s increased prices an average of 18% over the seven-month period, and Zappos increased by 6%.

Retailers focused on lower-cost products

An examination of merchandise in stock for different apparel retailers showed that supply chain pressures like delayed shipments could still be impacting businesses. However, some are faring better than others. Nordstrom maintained nearly 100% of merchandise in stock during the entire time frame. Macy’s, Dillards, and Zappos saw stock decline from 98%, 96%, and 85% in July, respectively, to 87%, 93%, and 80% seven months later.

Saks Fifth Avenue and Neiman Marcus seem to be far more impacted by supply chain issues, according to the report, with in-stock levels of 45%-55% and 35%-45%, respectively. Neiman Marcus also said in February 2023 that it would focus on the top 2% of customers that drove 40% of sales, which could impact inventory.

The report also shows retailers are differentiating which products they prioritize keeping in stock. DataWeave broke down the stock availability of premium products at retailers compared to availability of other products. Premium products are defined as in the top 20 percentile by price. In each month examined within the report, retailers had higher stock availability for non-premium products, with a breakdown of 72% of premium items in stock and 78% of other products in stock in January.

“It is clear that there is a greater focus by all retailers on the more affordable range of their assortment,” DataWeave wrote in the report.

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The post Retailers are lowering prices and reducing premium products to fight inflation, according to a report from DataWeave appeared first on Digital Commerce 360.

Cleancult sells nontoxic cleaning products, such as soap and laundry detergent, in a cardboard carton. Shoppers then transfer the product into a glass bottle, which the brand also sells. Cleancult’s mission is to reduce plastic consumption, and it has 15 patents on the machines it uses to create its cartons.

Cleancult is not the first brand to tackle reducing plastic packaging in the cleaning industry, as other brand manufacturers sell cleaning products in 1-ounce concentrated glass bottles or sell products in powder form. This appeals to eco-conscience shoppers, but many consumers are not ready for this step, Lupberger says. While concentrated products are lighter, require less packaging and are more sustainable to ship than traditional products, it requires effort for customers at home to create the final product, which is a barrier, Lupberger says. Although Cleancult customers need to purchase a glass bottle in addition to its cleaning products, Lupberger says this is not a barrier to purchase.

Cleancult’s products are packaged and shipped without plastic.

“We want to go after the 99%,” Lupberger says. “We have to meet them where they are with ready-to-use formulas and ready-to-use bottles.”

“How do we change the category, but not change consumer behavior?” he adds about its goal to make choosing its plastic-free products easy for shoppers.

Cleancult.com launches and then pivots to physical retail

Cleancult launched in 2019 with its direct-to-consumer website Cleancult.com.

“I really hoped D2C would work long term,” Lupberger says.

But things quickly changed. As online sales skyrocketed during the pandemic — especially for cleaning products — so did costs. Digital marketing costs to acquire customers and shipping carriers raising their rates were the largest increases, he says. Digital marketing costs increased roughly 50% from 2019 to 2021, Cleancut says. Plus, what once cost the brand $6-$7 to ship now costs it $17-$18.

Plus, post-pandemic, many consumers resumed their normal shopping habits, including buying their cleaning products in stores. And so, Cleancult shifted priorities to get its products in more physical stores instead of working to acquire digital customers. In 2021, Cleancult debuted in a handful of regional grocers. In 2022, it expanded to Walgreens, CVS, and Bed Bath & Beyond, and this year is Cleancult’s Walmart debut. Cleancult also sells on the Walmart and Amazon.com Inc. marketplaces.

Amazon is No. 1 in the 2022 Digital Commerce 360 Top 1000 database. The Top 1000 ranks North American web merchants by sales. Walmart is No. 2. Amazon is No. 3 in the Digital Commerce 360 Online Marketplaces database, which ranks the 100 largest global marketplaces. Walmart is No. 9.

Ryan Lupberger, co-founder and CEO of Cleancult.

“A lot of categories shouldn’t live online,” Lupberger says. “Fundamentally, the cost of shipping big, bulky, low-price items, doesn’t work very well.”

Subsequently, its sales shifted from 100% via its direct-to-consumer website, to 90% its own website in 2020, 70% in 2021, 65% in 2022 to likely 20% in 2023, Lupberger says. Cleancult includes sales made on the Amazon marketplaces in its direct-to-consumer sales figures.

Even though sales are growing 50% year over year for its total business, sales are flat on Cleancut.com.

This shift in sales is fine with Lupberger, as its ecommerce site and Amazon business do not make money.

“It’s break even at best,” he says.

But its ecommerce site still serves a purpose, including building a community and testing new products and scents, he says.

“If they find us in store and believe in the Cleancult brand, join the website. But if they need a quick shipment, buy on Amazon. And if they are grocery shopping, they can pause their subscription and buy from the grocer,” Lupberger says.

Plastic-free shipping packaging

For shoppers who do buy direct from Cleancult.com, the brand works to ensure the products are shipped in the most sustainable way, such as by offsetting the carbon from the freight and by using paper instead of plastic.

“We can’t use plastic. It can’t ruin our value proposition,” Lupberger says.

Cleancult uses corrugated paper to pad its products, which is typically two to three times more expensive than a plastic polybag filler. It also pads its glass bottles with carboard beds to ensure the products are not touching anything and there is space for crushing.

The brand uses Forest Stewardship Council certified paper for its product cartons and shipping boxes. FSC is a nonprofit organization that ensures the paper is from a forest that is responsibly managed for environmental, economic and social benefits. 

Cleancult has four box sizes, and 99% of its orders arrive in one box. This means an order with multiple products is not split up into multiple shipments.

The last person who packs the box is the last quality control to ensure it is packed correctly, with none of its products touching. While this is important to its plastic-free ethos, it’s often thankless.

“[Shoppers] don’t notice it when it arrives,” Lupberger says.

But shoppers do notice when there is plastic in the shipping box by mistake. This can happen for some of its Amazon.com orders, which is shipped via Fulfilled By Amazon. Cleancult provides Amazon with its own carboard boxes to use to ship directly to shoppers. Sometimes, however, a warehouse employee may put that box inside another box with a polybag in it, or its box is added to another part of a larger order and plastic is added. Then, shoppers contact Cleancult with negative comments, even though this is outside of its control, Lupberger says. 

Cleancult is No. 1963 in the 2022 Digital Commerce 360 Next 1000.

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