The Goods (U.S. Edition) – The Diner Things in Life
With 2025 in our sights, we asked our experts from around the world to share their top insights and perspectives on what will impact retail & consumer goods companies next year.
As a companion to our weekly newsletter, The Goods, and our weekly video series, The Goodies, we have rolled these global insights into our 2024 wrap-up video called the Global Goody Bag. Watch for everything you need to know about how consumer behavior, social activists, M&A, regulation and more may impact your business in the coming year.
Sit back and dig into our Global Goody Bag for hot takes from around the globe and subscribe to The Goods to get these insights direct to your inbox all year round!
Welcome back to The Goods! This week we’re discussing Taylor Swift’s contribution to the U.S. economy, people moving into malls, and a $50 billion confectionary combination.
A new designer outfit, Christmas gifts for the family, a trip to the strip club…believe it or not, all of these have been expensed on a corporate card. As overwhelmed accounting departments race to close the books at year-end, finance teams are more likely to miss questionable business expenses submitted by employees. According to the Association of Certified Fraud Examiners, expense fraud costs businesses an estimated 5% of revenue on average.
What’s In: This Week’s Trends
- Eranomics: Taylor Swift’s Eras Tour was more than just a concert… it was a boon for local economies. Over the last two years, the singer-songwriter sold 10 million tickets that generated $2 billion in revenue, and her U.S. leg of the five-continent tour generated an estimated $5 billion in additional consumer spending. Local businesses saw massive spikes in revenue when the Eras Tour came to town. One group of Swifties spent nearly $6,800 on outfits, food, and hotel stays for a weekend trip, showcasing the “Taylor effect” that has economists marveling.
- Welcome to JCPenthouse: Between 2001 and 2020, retail sales at U.S. department stores were in steady decline, leaving nearly 34 million square feet of empty mall space up for grabs. As a result, property developers have started to rebuild former department store spaces into high rise apartments where residents can literally live right inside a mall. Amazon distribution centers, pickleball courts, and even an NHL training facility have all replaced big box stores at American malls in recent years, but as the U.S. faces a housing crisis, apartment complexes are the fastest growing use of these spaces.
- The Clock’s Tikking: Since launching in the U.S. in 2023, TikTok Shop has rapidly gained market share, with the company reporting that it had reached $100 million in sales on Black Friday. Through ads as well as sponsored content from influencers, merchants market products to TikTok’s 170 million U.S. users, fulfilling orders directly or from third-party and TikTok fulfillment services. However, the future of the e-commerce platform is uncertain after a U.S. court upheld a law this week requiring Chinese-based ByteDance to divest TikTok in the U.S. by early next year, or else, face a ban.
Cash or Card: Consumer Behavior
What’s going on with the consumer these days? This week we talk about retailers feeling the burn of returns, Gen Z breathing life back into malls, and signs of inflation heating up.
- Sticky Inflation: Consumer prices were up 2.7% for the 12 months ended in November, up from 2.6% in October and marking the highest annual rate since July, according to the latest Consumer Price Index (CPI) from the Bureau of Labor Statistics. Grocery store food prices surged 0.5%, with the cost of eggs soaring 8.2%, as well as increases for the price of beef and nonalcoholic beverages. There were some silver linings in the services sector. Rents, one of the stickier components of inflation, rose at the slowest pace in nearly 3.5 years, and the rise in motor vehicle insurance also moderated.
- Diminishing Returns: Consumers are expected to return an estimated $890 billion in goods this year, according to a new report by the NRF and Happy Returns. It’s currently peak return season – retailers expect their return rate for the holidays to be 17% higher than the annual rate. In addition to a general increase in consumer comfort with making returns, nearly two-thirds of consumers now buy products multiple sizes or colors with the intention of sending some back, a practice known as “bracketing.” These returns don’t come cheap, as processing them costs retailers an average of 30% of an item’s original price.
- No Mall Feat: Despite growing up as digital natives, Gen Z is shopping in stores about as much as their baby boomer grandparents, breathing new life into malls. Nearly 63% of Gen Z respondents said they plan to make holiday purchases at physical stores this holiday season vs. 50% making purchases online, according to a survey by EY. To catch Gen Z’s eye, mall owners have stepped up their game. Simon Property Group launched a marketing campaign tapping into the nostalgia of ‘80s mall culture, while Brookfield Properties has turned to mini golfing, fresh food court offerings and hot fashion brands to attract younger shoppers.
Making Moves: Industry Transformations & Innovation
ICYMI, even industry icons need to reinvigorate their brand presence through unique and creative ways. Here are some new brand moves that you should know about:
- The Diner Things in Life: Casual dining and fast food chains are turning to streamlined operations, value promotions and TikTok campaigns to combat rising prices and declining consumer demand. Bloomin’ Brands chain Bonefish Grill is trying to capitalize on the blockbuster musical Wicked, offering $7 martinis inspired by the movie, and McDonald’s is planning to release a new value menu in January. Despite a recent wave of more than a dozen restaurant chain bankruptcies, these strategies show promising results – November was the third consecutive month of same-store sales growth for the industry.
- Lord for Less: Lord & Taylor is back in the fashion game, but don’t expect any new department stores. Regal Brands Global, the new owner of the 198-year-old retailer, aims to reposition the brand as a discount luxury e-commerce brand by offering primarily licensed products. In addition, the company will be adding Lord & Taylor branded items to luxury retailers such as Saks Fifth Avenue and Nordstrom. As Regal Brands’ Chief Brand and Strategy Officer Sina Yenel put it, “We’re leaving the brick-and-mortar game to those big players who are already on the market.”
- Guac is (Not) Cheap: For the first time in over a year, Chipotle has raised its menu prices by 2% nationally to combat inflation. This decision coincides with company efforts to improve portion size consistency, which had previously garnered customer complaints and social media backlash. Despite some challenges, Chipotle’s pricing strategy, operational stability and new CEO have contributed to a recovery in stock performance – the fast-casual favorite is up 47% year-over-year.
Capital Markets Corner
What consumer news is moving the market this week? Our investor relations experts break down this week’s trends and headlines.
- Deal with a Kiss: Chicago-based snacks and sweets company Mondelez International is exploring an acquisition of U.S. chocolate-maker Hershey Co. in a deal that would create a company with sales of roughly $50 billion. Hershey is a challenging takeover target, as Hershey Trust Co. holds roughly 80% of the voting power at the company. Over the years, the Trust has thwarted several attempts to acquire Hershey, including bids from Wrigley, Cadbury and Nestle in 2002, and one from Mondelez in 2016. After the news broke on Monday, shares of Hershey Co. closed up 11%.
- Changes in Store: Activist investors Barington Capital and Thor Equities have built a position in Macy’s and are urging the department store-owner to cut capital expenditures, aggressively repurchase shares, create a real-estate segment within the company, and consider strategic alternatives for Bloomingdale’s and Bluemercury. While Macy’s stock rose 3% in premarket trading upon news of the activists’ stake, it is down 18% this year. This latest campaign represents the fourth activist push at Macy’s in the last decade. Earlier this year, the company successfully fended off a take-private bid from an investor group comprising Arkhouse Management and Brigade Capital Management.
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