Nearly 1,800 retail employees lost their jobs at 4 major companies this week — and it shows the great retail shakeout is far from over
Nearly 1,800 retail employees were laid off at four major companies this week, signaling ongoing strife for the industry even as the US unemployment rate reached a 50-year low in 2019. While layoffs at Barneys and Kohl's reflect ongoing challenges for the traditional retail market, woes at Wayfair and Jet Black point to the dangers of e-commerce brands that grow too much, too fast. We took a closer look at this week's rash of layoffs as the retail apocalypse continues. Visit Business Insider's homepage for more stories.
Since Monday, nearly 1,800 total positions were eliminated across four major companies — Jetblack, Wayfair, Kohl's, and Barneys — in retail. These workers join a growing legion of retail employees who continue to be axed en masse from major companies, despite the US unemployment rate reaching a 50-year low in 2019. While the challenges plaguing these companies are nuanced, the cuts represent a wide cross section of the issues affecting both traditional retailers and e-commerce companies alike, as they struggle to keep up with the fickle whims of consumers. "The struggles of Kohl's, Walmart, and Barneys are exemplary of what many retailers are facing today," Katrin Zimmermann, managing director of TLGG Consulting, told Business Insider. "There's a tendency to point towards rising rents and competition from e-commerce players as the source of these struggles, yet there are things all retailers can do to remain competitive in the new decade." Though Barneys and Kohl's represent opposite sides of the traditional retail spectrum — Barneys an iconic luxury department store beloved among celebrities, and Kohl's the big-box store that became emblematic of the suburban US shopping center — both have failed to adapt to a quickly changing retail landscape. "Department stores have been struggling for a long time, but they still generate billions of dollars," Sucharita Kodali, vice president and principal analyst at Forrester, told Business Insider last year. "That's not going to evaporate overnight, but we're still seeing this slow chipping away. Sometimes a well-executed program can help stave off the decline. Every quarter they have to pull a rabbit out of a hat." Meanwhile, on the e-commerce side, Jet Black and Wayfair represent the dangers of the plucky digital startup that grew too much, too fast. In both cases, these companies made lofty promises that left them incapable of handling high operating costs. Zimmermann said that for Kohl's and Wayfair — the two companies in the group still standing — survival will be dependent on refocusing on new target audiences and being smarter about how to integrate tech. "Technology has been a buzzword in retail for almost a decade now, yet there are still few companies that get it right," she told Business Insider. "It's not enough to simply hand out iPads to your employees. Technology is always a means to an end, never an end in itself. The end should always be a more seamless customer experience." Here's a recap of layoffs from this week to bring you up to speed.SEE ALSO: Wayfair is laying off more than 500 workers Kohl's: 250 employees
After several quarters of underperforming sales, Kohl's announced on Wednesday it would slash 250 jobs, including several regional managers, as part of a larger companywide restructuring plan. Though Kohl's will not close any stores at the time being, the Midwest retailer has significant work to do in order to improve efficiencies and bolster sales, even after testing innovative partnerships like its return program with Amazon. "I was convinced that [the Amazon] partnership would have brought new potential customers through their doors to return Amazon products, with some portion of those customers spending money in the store on their way out," Jonathan Treiber, CEO of offer-management platform RevTrax, told Business Insider last year. "However, even if this were true, the rest of the Kohl's value proposition and store experience needs a face lift." Wayfair: 550 employees
Wayfair employees on Thursday received an email from CEO Niraj Shah detailing mass layoffs, part of what staffers have dubbed the "Valentine's Day massacre." The cuts will affect 550 employees as part of the company's focus on "organizational changes" intended to "increase efficiencies," a Wayfair spokesperson told Business Insider's Mary Hanbury earlier this week. In recent years, the company has hemorrhaged money into advertising and improving its inventory selection, investments that have failed to improve the company's "already wafer-thin margins," Neil Saunders, the managing director of GlobalData Retail, said previously. Adding to its woes, in June Wayfair found itself at the center of controversy when customers and employees alike protested the brand for its role in furnishing migrant detention centers. Jet Black: 293 employees
On Thursday, Walmart announced that it would shutter its exclusive, members-only concierge service Jetblack, coming off a 2019 Wall Street Journal report that found the company was losing a staggering $15,000 per member. The brand was ambitious from the onset, but it garnered significant buzz as the brainchild of former CEO Jenny Fleiss, who also cofounded Rent the Runway. However, the departure of Fleiss in 2019 signaled that strife was afoot, and it didn't take long for the company to be crushed by its own zeal. Jet Black will close for good on February 21, at which point Walmart will "focus on how to leverage [its] infrastructure to make conversational commerce scalable," a spokesperson told Business Insider's Áine Cain. Barneys: 719 employees
After months of hanging by a thread, Barneys announced it would officially close its doors on February 23, marking the end of an era for the iconic luxury department store. The shuttering will effectively entail laying off more than 700 employees, many of whom had already experienced a barrage of difficulties during the liquidation period, including rampant theft and paycheck delays. Since Barneys first filed for bankruptcy in August 2019, its most loyal fans held on hope for a possible restructuring deal that would save the company. However, its acquisition by Authentic Brands Group in November marked the beginning of the end for Barneys. ABG subsequently called for the closure of all remaining Barneys stores and moved licensing of the Barneys name under Saks Fifth Avenue.
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$1 billion startup Rent the Runway has furloughed 35% of its employees. Its future is now in question as coronavirus ravages retail.
Rent the Runway has furloughed roughly 35% of its corporate employees and cut overall headcount as...Rent the Runway has furloughed roughly 35% of its corporate employees and cut overall headcount as a result of the fallout from the coronavirus, the company confirmed to Business Insider. A slew of startups, from scooter company Bird to luggage-maker Away, have been grappling with the effects of the pandemic. As a flag-bearer for the new breed of direct-to-consumer brands, Rent the Runway's ability to withstand the crisis could serve as an important test case for startups facing the biggest business threat in a generation. Click here for more BI Prime stories. It was mid March and businesses were just starting to feel the impact of coronavirus — even highflying startups weren't immune. During a virtual company-wide meeting, Rent the Runway co-founder and CEO Jenn Hyman told staff that the clothing rental company would freeze hiring for the rest of 2020, cut its marketing budget, and that the leadership team would all take pay cuts. Some staffers were also told to negotiate better terms with vendors, like extended payment terms, by their managers. "We were all beginning to get worried, and knew that layoffs were a possibility," said a former employee who attended the meeting and was ultimately laid off. "But you always just hope it's not going to be you." Just a few days later on March 27, employees received an emotional video message from Hyman in their inboxes and were instructed to join Zoom calls where various department leads told members of their teams that they would either be laid off, furloughed, or receive a pay cut, according to three former employees with direct knowledge of the event. Former employees told Business Insider that their email accounts were disabled within 30 minutes of the calls. Rent the Runway has furloughed corporate employees — roughly 35%, according to the company. It also laid off "less than 10%" of its overall headcount, but wouldn't be more specific. The cuts are a result of the fallout of the coronavirus, the company confirmed to Business Insider. "We built Rent the Runway so our customers could 'show up' feeling powerful and confident every single day, whether they're at work or in a Zoom meeting," Hyman told Business Insider. "No amount of scenario planning could have prepared any business for the fallout of coronavirus, but our path forward remains unchanged, and even in a new normal, our mission is more relevant than ever. We will continue to be here for our customers so they can access the closet in the cloud with total flexibility." These cuts coincided with the startup laying off its entire retail staff late last month, on the heels of its retail stores in Chicago, New York, Los Angeles, and Washington, DC, being forced to shut in the wake of the pandemic. A slew of startups, from lingerie startup ThirdLove to luggage unicorn Away, have been grappling with the effects of the pandemic with states mandating the closure of non-essential stores and customers curtailing their spending. But as a flag-bearer for the new breed of direct-to-consumer brands, Rent the Runway's ability to withstand the crisis and avoid a repeat of past missteps could serve as an important test case for startups facing the biggest business threat in a generation. Particularly for those in the sharing economy, as consumers rethink borrowing rather than buying cars, apartments and clothes for safety reasons even once the pandemic passes. Business Insider spoke with 10 former Rent the Runway employees. Some were directly impacted by the layoffs and worked at the company as recently as last month, while others left the company over the course of the last 15 months. They said that they thought the company was on solid ground before the pandemic hit. These sources' identities have been confirmed by Business Insider but they requested anonymity because they are not authorized to speak publicly about the company. Unexpected roadblocks for the unicorn Rent the Runway pioneered the concept of women borrowing high-end designer clothes without shouldering the financial burden of purchasing them and has long been heralded as one of the hottest tech startups. Started by Harvard Business School classmates Hyman and Jenny Fleiss, it's raised $337 million and notched a valuation of $1 billion. But the company's ability to expand its retail footprint, grow its business, and go public is now in question. US retail sales, including clothes and accessories bought in stores and online, fell 8.7% in March, according to the Commerce Department — the largest decline in the nearly three decades that the government has tracked the data. Rent The Runway's business is no exception as consumer behavior has shifted in the wake of social distancing and mandatory work-from-home policies. With many customers working remotely, spending $159 a month for an unlimited office wardrobe may no longer make sense. And with few weddings or special events, there's little need for designer dresses. "There's a confluence of factors that, unfortunately, is all running counter to their business," said Sucharita Kodali, VP and principal e-commerce analyst at Forrester. "They're in apparel, where everybody's gasping for air right now; their core customers are not going out anymore; and they may have reservations about renting clothes and receiving packages in the middle of a contagious pandemic." The layoffs at Rent the Runway impacted employees across teams including operations, customer experience, talent, product and business development in offices across the country, a company spokeswoman confirmed to Business Insider. Temporary workers at the company's two distribution centers in Secaucus, New Jersey; and Arlington, Texas, did not have their contracts extended. Rent the Runway has also shelved plans to open an office focused on customer experience in Denver. The company has had growing pains In its first few years, Rent the Runway's business was focused on one-time designer wear rentals. But since then, it's added subscriptions tiers, retail locations, new sustainable brands and categories like home furnishings, and distribution and collection partnerships with companies including WeWork and West Elm. The idea was for the company to ultimately help people rent anything, from dresses to home furnishings, Hyman told CNBC last summer. "Our goal is to be the Amazon Prime of rentals and reach every single person in the US and the world," she said. But that expansion has come with growing pains. The company's culture was the subject of a 2015 Fortune Magazine report that described a "stressful and occasionally hostile" workplace at the startup and documented a high rate of executive churn at the company. In October 2019, a weeklong shutdown affected roughly 14% of subscribers and halted new membership. A recent Medium post by a former employee criticized its handling of COVID-19. While Rent the Runway has bounced back from these stumbles, according to the former employees, some said that they feared that it may not be able to shrug off the impact of the pandemic as easily. The company has said that more than 75% of its revenue is from subscriptions, while the rest comes from one-off rentals and sales of items. A reliance on subscriptions represents a challenge to Rent the Runway's ability to maintain profitability, the former employees said, because subscriptions — particularly the popular unlimited tier — have low margins. Rent the Runway has been creating new subscription tiers (it just launched a new plan between its single swap and unlimited tier that lets members exchange eight items a month), and entering into profit-sharing agreements with new brands and designers. These moves were a bid to improve margins, these former employees said. But the coronavirus coming out of the left field will likely make things harder, they said. "Rent the Runway was headed in the right direction," a former employee told Business Insider. "But it's a tough spot to be in right now, because rental fashion isn't the highest margin business to begin with, and combining that with a recession only makes things worse." Business Insider was unable to pinpoint the precise financial impact of the coronavirus on Rent the Runway's business, but some former employees said that the company is trying to weather the downturn by extending the duration of its sample sale, which is typically done to swap out clothes that can't withstand the dry-cleaning cycle. It is also giving subscription members two bonus spots for swapping clothes to get them to stick to their memberships versus canceling them, according to the former employees. As the coronavirus's spread threatens thousands of businesses and retailers, Rent the Runway's future remains uncertain. "There's not a lot that you can do except ride it out, preserve as much cash as possible, and cut costs with layoffs, salary cuts, and variable expenses with as much of your core assets intact as possible," said Forrester's Kodali. Got a tip about direct-to-consumer startups? Contact this reporter via encrypted messaging app Signal at +1-646-702-2530, email at email@example.com, or Twitter DM at @tanyadua. Join the conversation about this story » NOW WATCH: Why thoroughbred horse semen is the world's most expensive liquid
Retailers now know more about us than ever before thanks to AI, but experts insist it 'can improve lives'
Artificial intelligence is becoming more advanced than ever, and retail experts say it will become increasingly...Artificial intelligence is becoming more advanced than ever, and retail experts say it will become increasingly essential in making stores more efficient and convenient for shoppers. The artificial intelligence market in retail is expected to surpass $8 billion by 2024, according to the business management company Global Market Insights. "The speed at which AI can work through issues and create solutions — and just the sheer volume of data that it can collect, but more importantly, analyze in a really intelligent way — can improve lives," Chelsea Grayson, former CEO of American Apparel and True Religion, told Business Insider. Visit Business Insider's homepage for more stories. While the term "artificial intelligence" may summon futuristic images of robots and machines, in the retail industry it has become a catchall term for everything from customer service chatbots to virtual reality apps. Artificial intelligence services have become big business in retail: The sector is expected to surpass $8 billion by 2024, according to business management company Global Market Insights. As e-commerce continues to reign supreme, AI continues to flourish out of business necessity, according to Emil Alon, CEO and founder of augmented reality company Resonai. "Retailers can finally map and understand the full shopper journey across both digital and physical sales channels to achieve an omnichannel picture," Alon said. "It allows retailers to gather a more detailed understanding of their customer segments to refine their product portfolios and better connect brands with target customers." Today, nearly everything a shopper does is being mined and tracked for data. While this may sound scary on its face, retail experts say AI will become essential in making stores more efficient and convenient for shoppers. "Everything that a consumer does online, and an increasing fraction of what they do offline, generates data which is associated with them," Andrew Konya, CEO and cofounder of the AI startup Remesh, told Business Insider. "This data is sewn together across devices, people, companies, and transactions. It is leveraged by increasingly advanced algorithms which are continually getting better. How AI is improving inventory management According to Chelsea Grayson, former CEO of American Apparel and True Religion, AI has been most beneficial to retail by improving the way companies track and manage inventory. "No retailer I have ever worked with has this down to a perfect science," she told Business Insider. "In fact, the predominant majority of retailers I work with are terrible at inventory management and demand forecasting." Inventory challenges have been a major thorn in the side of retailers struggling against the retail apocalypse, specifically those that continue to over-index on apparel that goes unsold before being pushed to clearance racks at significant discounts. Such sales are dangerous because they can weaken the brand by establishing a "promotional culture," she said. However, growing AI technologies like RFID tracking are helping brands streamline the inventory process by tracking it online. Today everyone from Nike to Outdoor Voices uses this system, which Grayson said is especially helpful in tailoring product based on geographic region. "[Retailers struggle with] having a particular item or set of SKUs in the right place at the right time," she said. "They often have the same item in every single one of their locations, for example, without figuring out that in a particular geography, a floral skirt might work, while elsewhere they're going to need a big puffer because it's cold." On the consumer side, Grayson said augmented reality technology like Sephora's Color IQ program has already proven beneficial to helping shoppers pick out products. In addition to allowing shoppers to "virtually" try on makeup, it saves information on favorite hues, a move that can help drive consumer loyalty and prevent "the graveyard of makeup." How AI can improve shopping With so much data at their disposal, retailers are still identifying the best ways to use this information to bolster sales and engage with consumers in a way that doesn't feel invasive. This is easier said than done — while brands like Gucci have implemented intelligent customer service chatbots, a New York Times report found that the company powering the bot could see what shoppers were typing before they sent it, and used this intel for future targeting. "It is one thing to think, 'O.K., somehow my clicks are being recorded somewhere,'" Christine Bannan, a consumer protection lawyer at the Electronic Privacy Information Center, told the Times. "But to think of an individual sales rep watching all of your clicks, I think it will resonate with people that this sort of tracking is so prevalent and what it really means." Grayson said that despite concerns over the technology, the pros of retailers tracking consumer habits through artificial intelligence ultimately outweigh the cons. "The speed at which AI can work through issues and create solutions — and just the sheer volume of data that it can collect, but more importantly, analyze in a really intelligent way — can improve lives," she said. "AI is going benefit humanity far more than it hurts any individual." Read more in our Revolutionizing Retail series: The retail apocalypse has forced stores to abandon the mall and transform into a destination where shoppers can take a 'vacation from reality' These 17 companies are revolutionizing the retail industry This startup wants to help retailers like Toys R Us, Macy's, and Lowe's revamp their store experience — and it's raised $88.5 million to do it From robotic shop assistants to AR, these 10 pieces of tech could change shopping forever SEE ALSO: How AI is changing everything Join the conversation about this story » NOW WATCH: Gold can cost $1,500 per ounce — here's why it's so expensive
This is a preview of a research report from Business Insider Intelligence,Business Insider's premium research service. To...This is a preview of a research report from Business Insider Intelligence,Business Insider's premium research service. To learn more about Business Insider Intelligence, click here. Current subscribers can read the report here. Third-party logistics (3PL) providers have been the cornerstone of retail supply chains for decades. 3PL providers are defined by the Council of Supply Chain Management Professionals (CSCMP) as "a specialized company that handles the outsourcing of much or all of a company's logistics operations." Today, the term has become nearly synonymous with any company in the logistics industry that operates planes, trucks, or warehouses. But the rapid growth of e-commerce has given rise to new services and business models, challenging the 3PL model. Traditional 3PL relationships are well suited to route orders from a factory to a distribution center to a brick-and-mortar store, but they're typically ill-equipped to bring parcels to customers' homes. Historically, retail supply chains had a single destination: stores. And even the largest retailers only had a few thousand of them — Walmart operates 5,000 stores in the US and Puerto Rico, for instance — allowing retailers to rely on a handful of 3PL providers that had warehouses near their brick-and-mortar locations. But the rise of online shopping has turned that model upside down. Now, retailers must deliver their products directly to the homes of the more than 300 million consumers in the US — and increasingly within only a few days — a far greater challenge than delivering directly to stores. Meeting this challenge requires a higher number of supply chain partners than before, meaning products often change hands several times before they arrive at a consumer's door. To effectively manage this complex new environment, some retailers are opting for one of two approaches to supply chain management: fourth-party logistics (4PL) providers or in-house supply chain management. In Future Business Models in Logistics, Business Insider Intelligence details how the rise of e-commerce as a core consumer shopping channel has fundamentally transformed retail supply chains. We examine the primary two business models — 4PL and in-house supply chain management — and what's driving retailers to adopt these new models. Lastly, we offer recommendations for how legacy 3PL providers can adapt to meet the changing demands of retailers in the age of e-commerce. The companies mentioned in this report are: Accenture, Deloitte, McKinsey, CH Robinson, Penske Logistics, UPS, DHL, XPO Logistics, JB Hunt, Kuehne and Nagel, Amazon, Alibaba, and JD.com. Here are some of the key takeaways from the report: Retailers' supply chains are being crunched: They must deliver a higher volume of goods to more locations than ever before, and must do so faster — a significantly greater challenge than delivering to brick-and-mortar stores. Such complexities require more 3PL partners than ever, requiring a separate entity to coordinate and manage the relationship between all these partners. Two popular models have emerged: 4PL providers and in-house supply chain managers. 4PL providers typically fall into one of two buckets: legacy 3PL providers that have transitioned into the 4PL space, and management consultancies that have long had supply chain management practices. Both 4PL providers and in-house supply chain management teams need to get comfortable collaborating with longtime competitors if they are to thrive in the managed supply chain environment. Legacy 3PL providers that transition into the 4PL space must carve out a separate business unit to house their 4PL business segments. In full, the report: Outlines several factors that legacy 3PL providers need to consider when deciding whether to transition into the 4PL space. Details why not all 3PL providers need to reinvent the wheel and carve out their own 4PL arms to thrive in the age of managed retail supply chains. Explains why legacy 3PL providers will be left behind if they don't learn to cooperate well with both 4PL providers and other 3PL providers. Interested in getting the full report? Here are two ways to access it: Purchase & download the full report from our research store. >>Purchase & Download Now Subscribe to a Premium pass to Business Insider Intelligence and gain immediate access to this report and over 100 other expertly researched reports. As an added bonus, you'll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. >> Learn More Now The choice is yours. But however you decide to acquire this report, you've given yourself a powerful advantage in your understanding of the fast-moving world of Transportation & Logistics.Join the conversation about this story »