Retail Spending Retreats, Sephora Gets A New Partner And Dollar General Expands Beauty: A Look At March 2023’s Big Retail News

Heightened interest rates weren’t alone in roiling financial markets in March. The collapse of Silicon Valley Bank caused many e-commerce companies’ access to funds to be shut off, and they struggled to pay employees and cover other business costs. Etsy sent an email to sellers warning that payments could be delayed. Shopify swiftly rebuilt its payroll system to avoid disruptions in worker compensation. 

SVB’s failure was the second-biggest bank failure in United States history, and it was followed by the third-biggest bank failure in U.S. history with Signature Bank’s collapse. Today, the effects of the bank failures on consumer behavior are unclear, but some economists predict they could be a drag on the country’s gross domestic product (GDP) growth this year. As we try to get a handle on their impacts, we take stock of recent retail news below. 

Consumer Spending Slows Again

After a strong gain in January that saw spending jump to the highest it’s been in two years, retail sales retreated by a seasonally adjusted .4% in February. Prior to January’s gain, spending declined for two consecutive months during the holiday season last year.

Retail sales calculated by the U.S. Census Bureau are unadjusted for inflation and capture spending at stores, e-tailers, restaurants, car dealerships and gas stations. Spending on transportation and travel, housing or utilities isn’t factored in.

Discretionary categories that accelerated at the start of the year underperformed in February. Spending at bars and restaurants decreased 2.2% after rising 7.2% in January. Furniture stores and department stores registered dips as did car dealerships. A 1.8% decline in auto sales weighed down the month’s total more than any other category. Sales of essential items at grocery stores and pharmacies were up for the month.

The labor market continued to grow at a healthy clip in February. Over 300,000 new jobs in leisure and hospitality, retail, government, professional and business services and healthcare were added during the month. Employers have added more than 800,000 new jobs in 2023. 

Inflation declined to 6% in February, following seven months of decelerating consumer prices. To curb spending further, the U.S. Federal Reserve announced its ninth interest rate hike in March of 25 basis points. Hikes in 2022 increased the rate by a larger 75 basis points. The federal funds rate now sits at 4.75% to 5%. 

The NRF Issues Annual REtail Sales Forecast

The National Retail Federation (NRF) recently issued its forecast that retail sales will increase between 4% and 6% this year to land at $5.13 trillion to $5.23 trillion. Online sales are included in the forecast. They’re expected to advance between 10% and 12% to hit $1.41 trillion to $1.43 trillion this year. Last year, overall retail sales climbed 7% to $4.9 trillion.

Though retail sales growth is forecast to slow this year, if the NRF is correct, it will still beat the average pre-pandemic growth rate of 3.6%. The retail industry trade organization’s forecast doesn’t include spending at automobile dealers, gasoline stations or restaurants.

In conjunction with slower retail sales growth, the NRF is forecasting that GDP growth will halve in 2023 to 1%. It believes that economic growth will ebb as interest rate hikes persist and the labor market cools as a result. The unemployment rate, which was 3.6% in February, is projected to surpass 4% before the end of the year.

Sephora Strikes A Deal With Zappos

In a bid to widen its e-commerce reach and draw new customers, Sephora has secured a partnership with the Amazon-owned footwear and apparel e-tailer Zappos, according to the publication The Business Of Fashion. While all Sephora brands will be eligible to be listed on Zappos, Sephora will handle distribution and fulfillment. The retailer’s loyalty program will be linked to Zappos. 

Sephora is intent on doubling its business within the next five to 10 years, and its deal with Zappos is part of the effort to accomplish that goal. On top of the Zappos deal, Sephora’s shop-in-shop partnership with Kohl’s is set to expand across the department store retailer’s 1,000-plus stores as millions of Kohl’s shoppers snap up prestige cosmetics.

Sephora’s new 6,000-square-foot flagship store in London opened last month. In 2021, the retailer acquired British e-commerce platform Feelunique, which has been transformed into Sephora’s website in the United Kingdom.

Zappos is the second Amazon-owned company to make inroads into beauty recently. In October, the online fashion e-tailer Shopbop launched a new beauty vertical.

Dollar General Expands Beauty Offering

Dollar General is testing a new store layout that will amplify space for beauty and personal care in 300 of the discount retailer’s 19,000-plus stores this year. Dubbed Beauty Reinvention, the initiative launched in stores in February and injects over 1,000 beauty products to Dollar General’s assortment. 

In the new layout, customers can peruse so-called beauty bars for items like face masks, nail polish, bath bombs and lip gloss. The skincare section is 50% larger in the new store layout, while the soap and shower section is 30% larger.

The haircare and hair color selection has been enlarged as well, thanks in part to the debut of the in-house brands Curl Rhythm and Yes! Honey. The haircare brands are rolling out across Dollar General stores nationwide, including at the Beauty Reinvention stores. A new in-house skincare line called Joy Works is involved in the rollout, too.

Co-created with beauty brand incubators like Hatch Collective and Maesa, Dollar General’s portfolio of exclusive beauty brands features Believe Beauty, Root To End, Goodbaths, Scent Happy and Five Deep Breaths.

Beauty Reinvention isn’t Dollar General’s first attempt to reinvent its beauty presentation. Launched in the fall 2020, its Popshelf store concept has 2,000 beauty stockkeeping units. Aimed at higher income consumers, roughly 1,000 Popshelf stores are planned to open in the U.S. by 2025. Under the Dollar General banner, 800 of the 1,100 stores that opened last year had expanded health and beauty assortments. 

Birchbox’s Owner Is Up For Sale

Femtec Health, the female-focused health and technology startup better known as FemTec Health that bought the beauty subscription box company Birchbox in 2021, is looking to be acquired. A sale memo soliciting potential buyers was obtained by Beauty Independent. 

Along with Birchbox, Femtec listed three other portfolio companies it plans to offload in the sale: membership-based direct-to-consumer wellness platform Awesome Woman, digital beauty shopping tool Mira Beauty and healthcare-focused social marketing platform Liquid Grids. 

Femtec’s two most recent acquisitions—digital diagnostics and therapeutics company Ava AG and nutrition platform Nutrimedy—aren’t mentioned among the assets available for purchase. Potential buyers were asked to submit letters of intent by Friday, Jan. 27.

Birchbox stopped shipping its monthly beauty boxes in October. By the next month, the publication Women’s Wear Daily reported that Femtec was considering filing for bankruptcy as Birchbox’s revenue projections plummeted from $74 million to $47 million despite a $30 million infusion.

Birchbox’s subscriber numbers have dwindled to 78,000 active users from over 1 million in 2016. Femtech is currently facing legal action from vendors over unpaid invoices.

Additional Retail News

Kinder Beauty Moves To Future-proof Its Business As Subscription Boxes Struggle [Beauty Independent]

Several Brands Allege Retailer Standard Dose Owes Them Thousands Of Dollars [Beauty Independent]

Manhattan’s Contact Sports Reimagines The Sex Shop [Beauty Independent]

Retailer Field Botanicals Doubles Down On Clean Beauty And Shelf Space [Beauty Independent]

Aire Health To Transform How Dermatologists Recommend And Sell Products [Beauty Independent]