What's shaping the e-commerce landscape?

Just over a year ago, it appeared Bed Bath & Beyond was done.

After years of floundering, failed attempts to raise cash and mass layoffs, the retailer filed for Chapter 11 bankruptcy after over five decades in business in April 2023. At the time, Bed Bath & Beyond had $1.8 billion in debt and 360 stores in the U.S.

In the long lead-up to that move, some of the company’s decisions, like pursuing a private label strategy that made popular name brands hard to find in stores, alienated consumers. The retailer also experienced pandemic-related supply chain challenges.

After 52 years in business — and two months after seeking Chapter 11 protection and announcing plans to shut down, online retailer Overstock.com last June won a bankruptcy auction with a $21.5 million stalking horse bid to buy elements of Bed Bath & Beyond’s intellectual property. 

Later that month, Overstock said it planned to rebrand itself to Bed Bath & Beyond. Despite the bankruptcy, “the brand remains strong with consumers,” Overstock’s then-CEO Jonathan Johnson said. Under Johnson’s leadership, the company made several big moves. It relaunched Bed Bath & Beyond’s e-commerce site and changed its corporate name to “Beyond”.

Around the same time, the company decided to discontinue — but then later relaunched — the Overstock brand. However, after several quarters of lackluster performance as a combined company, activist investors called for Johnson’s ouster. He left the company in November.

In his place, those investors, led by John Thaler, founder of investment firm JAT Capital, advocated for and ultimately succeeded in getting businessperson and former TV personality Marcus Lemonis appointed executive chairman of Beyond’s board of directors. Lemonis acknowledged his leadership ascension was unusual. 

“So in December of 2023 … I kicked down the door,” Lemonis said in March during a keynote speech at The Inspired Home Show in Chicago. “And for those of you that are in the industry, my arrival to the company was less than conventional. I came through an activist investor and pushed all the idiots out of the room. And I have no problem saying that.”

Lemonis said during a February earnings call that shutting Overstock down “was a fatal mistake.” In addition, Lemonis said past leadership made an error by allowing or pushing Overstock to morph from an off-price retailer to an entity without a distinctive, strong brand identity. Instead, “what they did is they took the [Overstock] website and they literally painted it blue and changed the logo. … And when the company did that, the Overstock customer arrived at the party that they normally went to every single day and they knocked on the door and the people that answered the door were different and they didn’t tell anybody why,” Lemonis said in his Chicago speech.

Today, about a year after declaring bankruptcy, Bed Bath & Beyond is back, but as an online only store. Overstock is back too. And late last month, Beyond said it plans to relaunch online retailer Zulily in early to mid-September. At the same time, the company reported a net loss of $73 million for the second quarter. Net revenue fell 5.7% from $422 million a year ago to $398 million for the quarter ended June 30.

Developing ‘a gallery of brands’

The value in Bed Bath & Beyond and Overstock likely lies in the high brand awareness the two retail banners hold with U.S. shoppers, David Mayer, senior partner for marketing and customer strategy at Lippincott, a brand consultancy, told Retail Dive.

“They also have sizable active annual customer bases, plus large customer lists,” Mayer said in emailed comments. “Bed Bath & Beyond also performs strongly in SEO, being ranked in the top three for over 22,000 unbranded search terms, e.g. second-ranked in Google for the term ‘bed’ and third for ‘dining room sets.’” 

Mayer said that means the two brands can potentially reach a large audience searching for relevant products. “Replicating this from scratch would be far more expensive than the investment to acquire the two brands,” Mayer said. 

Lemonis, during his Chicago event remarks, said he wants to use Bed Bath & Beyond and Overstock as the foundational elements of a gallery of brands. 

Beyond has continued to tweak its brand portfolio. It acquired defunct e-commerce retailer Zulily for $4.5 million in March. That same month, it announced plans to sell Wamsutta, a bed linen brand, to Indo Count Global for $10.2 million. The company acquired Wamsutta intellectual property in June 2023 as part its purchase of the Bed Bath & Beyond brand and associated intellectual property, according to an SEC filing.

“With the sale of the Wamsutta IP, the company has successfully recovered approximately 48% of its $21.5 million purchase,” Beyond said in a regulatory filing with the U.S. Securities and Exchange Commission.

Lemonis said in March he envisions Beyond’s brand portfolio that would eventually capture “every homeowner or renter in America” regardless of their demographic, gender or income. Over time, he said, the company wants to build its gallery of brands ranging from luxury to off-price flash sales that would allow Beyond to connect with everyone. “And over time, if you give the customer and the vendor a great experience, you’re going to build trust. And if you build trust, then the portfolio companies do fine,” Lemonis said.

As of early August, Beyond’s brand portfolio included Bed Bath & Beyond, Overstock, Baby & Beyond, Backyard.com and College Living. Zulily, Kids & Beyond and Studio4 Beyond were listed as brands that are coming soon on the company’s website. 

“Home furnishing and accessories is a category where there are thousands if not millions of products that reflect the unique tastes that we each have,” Mayer said. “That means people are willing to spend hours browsing to discover the product that’s right for them; it also makes price comparisons across retailers challenging.”

Mayer described Bed Bath & Beyond as “a storied brand” with high search rankings. Mayer said the company’s key challenges going forward will be increasing engagement, maximizing opportunities for shoppers to find unique products, facilitating great shipping experiences and finding opportunities to increase basket sizes.

“Content strategy — meaning what ensures Google continues to rank Bed Bath & Beyond highly — will be where the brand needs to win,” Mayer said. In contrast, Overstock is in a weaker position, Mayer said, and will need to focus on a target audience or purchase occasions while seeking to build organic ranking performance.

Beyond plans to use Salesforce Data Cloud to unify customer data. “Our work with Salesforce signifies a new era for Beyond, with digital at the forefront of our growth initiatives,” Carlisha Robinson, Beyond’s chief customer officer, said in a May 1 announcement. 

“Through our expanded collaboration, we will harness the capabilities of the Einstein 1 Platform, including Data Cloud, to tap the power of AI and data to reach our customers in a more personalized way and drive loyalty providing the same unique and tailored experience shopping online as they get when they walk into a retail store,” Robinson said.

 

Under new management

Soon after Lemonis took charge, Beyond selected new leadership to steward Bed Bath & Beyond and Overstock. Chandra Holt who is new to the company, was named Bed Bath’s CEO. Holt has held leadership roles at Walmart, Target and Conn’s HomePlus. Dave Nielsen, who first joined Overstock a decade ago, was named CEO of that banner.

However, Holt left the company in June after less than five months in the role as part of a C-suite reset. At the same time, Nielsen, who was CEO of the Overstock banner, was named president and oversees marketing, merchandising and supply chain.

“The leadership team will need to redefine each brand’s DNA, and clearly and strategically communicate the companies’ value proposition to win the hearts and minds of consumers, particularly those who may have walked away given the many changes,” Tricia Logan, managing partner of the global consumer and retail practice at DHR Global told Retail Dive in an email

Logan said the brands must work to rebuild trust and ignite consumers’ passion. “Both Overstock.com and Bed Bath & Beyond inspire a level of sentimentality on a general level; the challenge is figuring out how to tap into that to achieve Beyond.com’s aggressive financial plan over the coming years,” Logan said.

Beyond’s goals include reaching $2 billion in revenue this year. The company also wants to reach 10 million active customers over the next five years. Beyond expects them to spend $250 on an average order value and buy from the company at least twice a year. 

During her stint at Beyond, Holt said at the Chicago trade show that Bed Bath & Beyond is trying to own the home retail sector by providing a great value proposition across every customer segment. She described the revamped brand as “a more mainstream tier” offering a high-quality, broad assortment with curated depth. Holt also said part of the company’s strategy included offering specialized experiences to customers.

With so many e-commerce experiences available, Holt said some customers may cross their fingers and hope they get something that meets their needs and expectations. She said that’s not the experience Bed Bath wants to offer customers. That’s why the company is working to offer a wide palette of specialized retail banners. “We know our customers have other needs and those needs, we feel, will be better met with specialized experiences,” Holt said.

The company is positioning Overstock, which officially relaunched in March, as an off-price brand, to meet some of those needs. The new Overstock will offer merchandise at 30% to 70% off MSRP. 

“There’s a big segment of customers out there who love this space,” said Holt, who pointed to the success of retailers like TJX and Ross that are “doing an incredible job” based on their financial performance. Zulily, in contrast, will focus on appealing to customers who like flash sales. 

In comments shared before Holt’s departure, Logan said Lemonis, Holt and Nielsen comprised a good leadership team, Logan said. All three are known for their customer-first mentality. Additionally, Logan said Nielsen and Holt’s early retail experiences are rooted in merchandising and that perspective will be critical to creating points of differentiation from their competitors, Logan added.

“Dave brings the institutional knowledge of Overstock.com, and his familiarity with the teams and processes will give him the ability to move the needle far more quickly than an external hire, This is a great advantage when rebuilding, as there will be an innate level of confidence from the employees and board,” Logan said.

Conversely, Logan said Holt brought a fresh perspective, which is critical to building the business. For Beyond to achieve its goals, Logan said, the new leadership will need the ability to rally the teams, build collaboration, drive innovative thinking and provide ongoing, transparent communication.

Brick and mortar won’t be back

One part of the Bed Bath & Beyond experience that is unlikely to return anytime soon are bringing back brick-and-mortar stores. “There is no plan for our company to spend our dollars bringing Bed Bath and Beyond back in brick-and-mortar where we sign leases and open locations,” Lemonis said. In the U.S., “that model, financially, just doesn’t work,” he said. Mayer also acknowledged Beyond’s reticence and concerns about resurrecting physical stores are appropriate.

“Physical store networks represent a high fixed cost to maintain and, with the continued rise of internet shopping, are challenging to keep profitable,” Mayer said. However, he added, physical stores do offer benefits. They can serve as venues for hands-on discovery and as marketing vehicles. They also keep the brand top of mind for consumers. 

“In the short term, Bed Bath & Beyond is benefiting from the memory of its stores,” Mayer said. “Over time, that benefit will fade and we will see whether organic search is sufficient to keep up customer numbers or whether marketing budgets will need to increase.”

Last year saw a number of DTC players file for Chapter 11 or shut down entirely. 

From Forma Brands — the parent company of Morphe, Jaclyn Cosmetics and Bad Habit — to SmileDirectClub, a wave of digitally native companies found themselves in bankruptcy court. And department store Showfields, which once dubbed itself as “the most interesting store in the world” and housed several DTC brands as part of its rotating assortment, filed for bankruptcy in October last year and has since shuttered all of its stores.

While 2024 so far has seen a slower start to bankruptcies, filings will likely pick up in the industry, particularly among digitally native retailers.

“This is going to be a year of resettling for a lot of companies that have been disrupted over the last few years,” RapidRatings Executive Chairman James Gellert said. “So many companies have emerged and/or grown over the last three or four years — really boosted by the pandemic — but have faced a much harder time since the pandemic.”

Wayfair, for example, saw sales skyrocket and even reached profitability for the first time during the early days of the pandemic as consumers actively sought out products for their homes. But more recently, the retailer faced falling sales — only ticking up 3.7% in Q3 after experiencing nine consecutive quarters of declines — and continues to report losses. The retailer has also initiated several rounds of layoffs impacting thousands of employees.

Companies now are also facing challenges like inflation and higher cost of goods as a result, Gellert added.

In 2024 “hopefully, we have a more calm or declining inflationary environment and we will have a stable-to-lower interest rate environment, which hopefully helps many of these companies focus on operations and business improvement,” Gellert said.

And while retailers across the industry feel the effects of rising costs, smaller players are disproportionately impacted compared to their bigger or more established competitors. In addition to having greater access to resources, larger companies are more competitive than their smaller peers, which means, in many cases, they can put pressure on their suppliers, whereas smaller companies don’t have the same pricing power, access to capital and wherewithal to weather economic pressures.

Another challenge facing retailers now is being able to create strong brand propositions to customers. While a brand like Hoka has been able to resonate with customers, others, like Wayfair, have struggled with differentiating themselves from competitors, making repeat purchases more difficult, Gellert said. “It’s hard for a Wayfair to have a loyal customer base when a customer may buy from them and then be perfectly happy to buy from Overstock or to buy from Target or to buy from any one of a number of other competitors. So they have to keep spending to be in the face of their customers.”

Over the next two years, the sector will continue to see consolidation, whether that’s through mergers and acquisitions, private equity buyouts or bankruptcies, Gellert said. And in order to avoid bankruptcy, companies need to both be profitable, or on a path to profitability, and have limited debt.

“If you're unprofitable and continue to be unprofitable, and you have a high debt load that needs to be paid for and/or refinanced, you're headed for bankruptcy,” Gellert said.

Looking ahead to 2024, two themes on retailers’ minds will be whether they have improved enough operationally to turn themselves around, and whether companies that need capital or have high debt loads are able to raise capital or refinance in a responsible way, according to Gellert. “Not all companies are going to make it through ’24. The financial health of a lot of these companies continues to be low or have deteriorated.”

According to data from CreditRiskMonitor, 11 digitally native retailers have an increased risk of filing for bankruptcy in the next year. Four of those companies have a FRISK score of 1, the highest risk, representing a 10% to 50% chance of filing for bankruptcy. The other seven retailers have a FRISK score of 2, which indicates a 4% to 10% chance of filing for bankruptcy in the next 12 months.

Several of the brands at risk of bankruptcy also have a high or very high probability of default of the next year, according to RapidRatings analysis. RapidRatings assesses a company’s near- and medium-term financial health.

The firm’s Financial Health Rating is the primary risk measurement that identifies the risk of default in the next 12 months, while its Core Health Score measures the core financial health of a company and shows its long-term sustainability and operational efficiency. Both the FHR and CHS are measured on a scale of 100, with 0 being the worst and 100 being the best.

Here's a look at some of the companies at risk.

Peloton

Peloton experienced a boost during the early days of the pandemic as gyms were forced to temporarily close and consumers spent more time at home.

But as businesses began to reopen and consumers started to return to their old habits, Peloton struggled to maintain its momentum and attract new customers.

The at-home fitness company in February 2022 announced a plan to lay off 20% of its corporate workforce, or about 2,800 jobs, as well as pull back on capital expenditures. At the same time, Peloton co-founder and CEO John Foley announced he would step down, with Spotify and Netflix veteran Barry McCarthy replacing him. Foley became the company’s executive chair.

A few months later, Peloton was prepping another round of layoffs, this time impacting about 800 employees, as it shuttered stores, according to a Bloomberg report. The company announced price hikes on some models at that time that would impact customers in the U.S. Canada, the U.K., Germany and Australia. Peloton previously raised prices on its subscription.

In September 2022, Foley and co-founder Hisao Kushi stepped down from their positions as executive chair and chief legal officer, respectively. Foley, Kushi and Yony Feng, another Peloton co-founder, went on to start rug company Ernesta.

More recently, Peloton has faced a number of other challenges, including a product recall that impacted its financial results. 

The company also continues to see its sales decline. In its most recent quarter, Peloton reported revenue fell 6% year over year to $743.6 million, with connected fitness products revenue declining 16% and subscription revenue increasing 3%.

But Peloton has also introduced a number of initiatives intended to grow the business. The company last May announced a brand relaunch in an attempt to position itself as “more than a bike company.”

The company also formed a five-year strategic partnership in which Peloton would be Lululemon’s exclusive digital fitness content provider and Lululemon would be the primary athletic apparel partner for Peloton. That followed previous legal action taken by the two companies against each other over apparel designs. And at the start of 2024, Peloton announced it partnered with TikTok to create custom content for the social media platform, including live and pre-recorded class clips.

Beyond Meat

Beyond Meat was a pioneer in paving the way for the plant-based meat industry, which has exploded in popularity, and competition, over the past several years.

But more recently the company has faced a number of challenges. In November, a TD Cowen report said Beyond Meat was in “survival mode” and risked issuing a “going concern” warning as a result of deteriorating trends in the U.S. meat alternatives business and negative cash flow.

That same month the company said it planned to lay off about 19% of its workforce, or about 65 employees, and would review its global operations as part of a cost-reduction initiative.

In its most recent quarter, Beyond Meat reported Q3 net revenues were down 8.7% year over year to $75.3 million. However, the company was able to narrow its losses during the period.

After cutting its annual revenue twice, the retailer now expects 2023 revenue to be between $330 million and $340 million.

Other companies within the plant-based sector have struggled in recent years. JBS USA in September announced it would shut down its Planterra plant-based business. And Impossible Foods and Maple Leaf Foods’ Greenleaf Foods initiated layoffs.

Digital Brands Group

Digital Brands Group has landed itself on several of Retail Dive’s past bankruptcy watchlists.

At the start of 2023, the company finally completed its acquisition of clothing brand Sundry, about a year after the deal was initially announced. Digital Brands in June said the company was in the final stages of closing the deal after modifying it significantly: Initially, it had a purchase price of $34 million in cash and $7.5 million in stock; the revised deal had a cash price of $5 million, plus $7 million in cash or equity at Sundry’s option, and another $20 million in equity.

Digital Brands in March took steps to go private — just about two years after making its public debut — after being approached by an unnamed private equity firm. CEO Hil Davis said at the time “if the price were to come in lower than we expected and our valuation doesn’t change, we will hire bankers to go private.”

Then in November, Digital Brands announced that its board of directors decided to initiate a formal review to explore strategic alternatives.

“Given the continued dislocation between Digital Brand Group’s public market value and the intrinsic value of Digital Brands Group’s underlying assets, we believe an evaluation of strategic alternatives is a prudent approach to ensure we are maximizing value for our shareholders,” Davis said in a statement at the time.

In its most recent quarter, the company reported third-quarter net revenue increased 22.5% year over year to around $3.3 million, while operating loss grew 40% to $3.4 million. The company in January said it projects revenue between $27 million and $30 million in 2024, and said Q1 revenue is expected to reach $6 million, with $4.5 million in confirmed wholesale bookings.

And now Digital Brands is plotting a store expansion. The company last month announced plans to open 50 stores, with the first location opening by March. Digital Brands said it will use that first store to clear excess inventory at a higher margin than if it were to sell via an off-price channel. The company said it had “a significant amount of excess inventory with its Sundry acquisition” for the store.

Rent the Runway

Rent the Runway kicked off 2024 by launching a restructuring plan, which included plans to cut 10% of its corporate workforce, impacting 37 roles. 

The company’s Chief Operating Officer Anushka Salinas also stepped down at the end of January “in light of the Restructuring Plan.” Salinas remains with the company through Feb. 29 in an advisory role.

The plan, including workforce reductions and open role closures, is expected to deliver $11 million to $13 million in annualized run rate cash savings. The company anticipates to incur up to $4 million in charges during Q4 as a result of the plan. About $2 million to $3 million of those charges will come from employee severance and related costs, while $1 million will include a non-cash impairment charge of company assets.

In December, the company reported third-quarter revenue fell 6.3% year over year to $72.5 million. Rent the Runway’s active subscribers fell 2% from the year-ago period to 131,725.

Gross profit fell 20.8% to $25.2 million, but net loss narrowed to $31.5 million from $36.1 million last year.

Express

While on its own Express is not a retailer typically thought of as digitally native, the retailer has been moving deeper into the DTC space in recent years.

The company in 2019 debuted UpWest, a direct-to-consumer brand focusing on casual apparel, loungewear and sleepwear for men and women, as well as home goods and wellness products. And Express Inc. and WHP Global last year acquired Bonobos from Walmart for $75 million.

The company has experienced a number of recent challenges. In April 2023, Express Inc. received a letter from the New York Stock Exchange notifying it that it fell out of compliance with the continued listing requirements and faced delisting. Then in August, the company said it planned to cut 150 jobs by the end of the third quarter and initiated a reverse stock split, which it said would allow it to regain compliance with the NYSE.

By November, the retailer had lost its CFO a little over a year and a half after he joined the company. That happened just before Express Inc. reported Q3 earnings results. 

While overall Express sales were up 5% year over year in the third quarter — helped by the Bonobos acquisition — sales at the Express and UpWest brands fell 7%. Comps for Express stores and e-commerce fell 4%, with retail store comps falling 16%. E-commerce comps rose 10%.

CEO Stewart Glendinning — who was appointed in September after Tim Baxter abruptly resigned — in November acknowledged the retailer’s missteps, especially related to its merchandise strategy where its women’s assortment was “out of balance across categories, price points and wearing occasions.”

A bankruptcy filing could be coming sooner rather than later for Express. The retailer reportedly hired restructuring adviser M3 and law firm Kirkland & Ellis to explore options related to its $275 million debt load, according to a report this week from The Wall Street Journal citing unnamed sources. The report said Express could file bankruptcy within weeks.

Marley Spoon

Marley Spoon entered the increasingly crowded meal kit space in 2014.

In recent months, the company has seen sales fall. In the fourth quarter, Marley Spoon reported revenue fell 18% year over year to 73.5 million euros (about $78.7 million at press time), while marketing expenses grew 6% to 9.3 million euros. The company’s gross profit fell 19% year over year to 35 million euros. Within its U.S. segment, active customers fell 20% year over year, while active subscribers fell 21% and the number of orders declined 20%.

Last month Marley Spoon announced it was selling its U.S.-based operations assets to fresh meals producer FreshRealm in a $24 million deal, which is expected to close this month.

The deal includes three fulfillment and production facilities in Texas, California and New Jersey. The company hopes to reduce its costs and increase margins by selling off some of its assets.

The deal mirrors a similar one with Blue Apron, which likewise has faced challenges as of late, including layoffs and warnings of a NYSE delisting. Blue Apron last May announced plans to shift to an asset-light model and sold its production and fulfillment facilities to FreshRealm. By late last year, Blue Apron had sold itself to Wonder Group, ​​a food tech company started by ex-Walmart e-commerce executive Marc Lore.

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Building on its previous e-commerce efforts, mall owner Simon has expanded and rebranded its online outlet marketplace as ShopSimon, according to a Thursday press release. 

ShopSimon’s website and app features sale and discounted merchandise from over 360 retailers including Adidas, American Eagle, Cole Haan, Puma and Hugo Boss. The marketplace will also continue to offer outlet products. Participating retailers have control over the product assortment, pricing and marketing of their products, and will have custom virtual storefronts within the platform. 

ShopSimon users can search for items based on image or color and find product recommendations. The company plans to integrate its network of shopping centers to help customers obtain their desired items for same-day pickup, per the press release.

ShopSimon is the evolution of Shop Premium Outlets, which launched in 2019. Now the marketplace has expanded to be a “comprehensive source” for sale and outlet merchandise. The goal is to provide an integrated omnichannel experience for shoppers, according to CEO and President of Simon, David Simon.

“ShopSimon is yet another example of how we are bringing the retail ecosystem together to deliver more of what today’s discerning shopper wants,” David Simon said in a statement. 

The decision to launch ShopSimon comes as the company attracts a large volume of online visits — 153 million annually to its core consumer-facing websites, according to the company. Additionally, Simon said it garners more than 2 billion annual visits to its retail properties. With its new e-commerce hub, the company aims to adapt to “changing consumer preferences to drive loyalty and sales for retailers,” Lee Sterling, chief marketing officer at Simon, said in a statement. 

The ShopSimon debut follows Simon’s other digital offerings. In 2022, the company began testing a search tool to help shoppers find available items at participating retailers before visiting their brick-and-mortar shopping destinations. It expanded the tool to more properties the following year. 

Digitally native retailers, including DTC brands, sell goods in just about every category, from exercise bikes to lingerie, razors to luggage. But through the years, as they’ve pitched venture capitalists, wooed shoppers, stolen market share and disrupted retail, their basic business models have had much in common.

They operate online, without stores or retail partners. Thanks to that, they easily vacuum up shopper data and keep customer relationships all to themselves. With no rent to pay or physical locations to run, their margins, theoretically, are fatter. And without wholesale, their customers pay full price, directly to them.

But of course, the devil’s in the details. Many digital natives have strayed from their original visions, often in the very ways that purported to make them disruptive in the first place, in an attempt to achieve scale and/or profitability.

“Probably the first domino to fall was ‘you don't have to run stores,’” Rick Watson, founder and CEO of RMW Commerce Consulting, said by phone. “Then the second thing that happens is, a lot of these DTC brands, like Harry’s, have been acquired by bigger consumer product companies. And now folks like Allbirds and others are prioritizing wholesale. Wholesale is cool again.”

Several DTC brands and marketplaces, including Glossier, The RealReal, Casper, Warby Parker, ThirdLove, Peloton, Allbirds, Away, Lively and Wayfair, have opened brick-and-mortar stores. Increasingly, more are also turning to wholesale, which turns out to be an effective channel for boosting sales and margins.

Some continue to change up other aspects of their sales approach. In recent years, for example, Rent the Runway has: introduced various new subscription tiers; dropped unlimited rental; added kids and (with a retail partner) home decor; offered sales of previously rented clothing; opened those sales to non-subscribers; partnered with a retailer to sell those garments; partnered with retailers and hotels for pickup and dropoff; opened then closed its own physical locations; and developed exclusive designs.

Stitch Fix has similarly shifted its approach numerous times. The box e-retailer expanded to the U.K., announced its exit from the U.K., added men’s and kids’ clothes to its offer, allowed box subscribers to buy garments a la carte, provided previews of curated boxes so customers could reject or accept certain items, opened its a la carte website to all consumers, added a search function to that site, then restricted it once again to only those who have ordered a box.

Exercise bike company Peloton has scrambled to adjust prices and make other changes after its pandemic-era boom fizzled. Those that are dependent on clients signing up for a membership are grappling with the decline of that model, according to Watson. ThredUp and Nordstrom appear to have taken that note, as both shut down their curated box services in the last couple of years.

“I think people are subscriptioned out,” Watson said. “So I think they're grasping at straws a little bit. They need to find a next act. That's definitely Stitch Fix. RealReal just has pretty major profitability issues. If they sold higher-margin goods, maybe they can charge more and turn a profit on those things. The challenge is, the site then becomes so exclusive that how many items are those in the world?”

Expanding what turns out to be, for many digital natives, a niche customer base is getting harder as venture capital money has dried up and customer acquisition costs have soared, Watson also said. Fundamentally, more of these companies, including of late Thirteen Lune, Our Place and Vuori, realize the tweak they need most is selling through brick and mortar.

"Regardless of the model that a DTC adopts, the math simply doesn’t support an online pure-play retail model of any kind that can be sustained against those that have a physical presence and can copy whatever someone else does online,” Forrester Principal Analyst Brendan Witcher said by email. "Not enough consumers have shown the propensity to remain long-term, loyal customers of a pure-play, online-only retailer. If they did, these companies would not have to spend the millions of dollars in advertising and marketing that wipe out their profitability.”

While the pandemic super-charged e-commerce, that acceleration will serve to slow its growth somewhat over the next year or two, especially as consumers return to stores, according to Euromonitor Senior Consultant Rabia Yasmeen. The first wave of e-commerce’s disruption is giving way to a new era, she said by email.

“As current trends clear the path ahead for physical retail – we can see the next development of retail would see integration of physical and digital, with one supporting the other,” she said. “Hence, years of dynamic, double digit e-commerce growth are likely to be only seen in the case of unusual circumstances.”

Identity theft is the top concern of consumers who are shopping online. The credit monitoring company Experian polled 2,000 consumers and found that 84% said they worry about identity theft, a 20 percentage point increase from a 2023 survey, according to an Aug. 21 report on the results.

The number of consumers who worry their credit card information will be stolen also spiked between 2024 and 2023. The poll showed that 80% of consumers said they worry about bad actors acquiring their card information, a jump of 19 percentage points compared to the survey conducted in 2023.

An emerging technology, generative AI, was a top concern among the 700 businesses Experian polled, with 71% saying they are worried about criminals using artificial intelligence to commit fraud.

 

The shift mirrors a surge in losses to fraudulent credit card transactions. Consumers lost $10 billion to fraud in 2023, a 14% increase from the previous year and the highest dollar amount the agency ever recorded.

Older respondents worried more about losing their credit card information to thieves and hackers, Experian’s survey found. Of respondents aged 55 to 69, 86% of them said they were concerned about someone stealing their credit card information, compared with 71% of respondents between the ages of 25 and 39.

Experian did not ask why consumers were afraid of bad actors stealing their credit card information, making the underlying reasons behind the increase difficult to ascertain.

However, high-profile data breaches involving credit card numbers have become a distressingly common headline in recent years. On Aug. 20, the Oregon Zoo said someone hacked its online ticketing system and compromised the credit card accounts of 100,000 visitors and American Express acknowledged that credit card information was stolen in a data breach in March.

Meanwhile, an emerging technology, generative AI — which can write short prompts and mimic human speech — is keeping business owners up at night.

The rise in worry over AI fraud shows that bad actors are evolving in their tactics, even as more time and effort is dedicated to stopping them, Peters said.

“The fraud landscape is swiftly changing,” Kathleen Peters, Experian’s chief innovation officer for North America, said in an email. “The emergence of generative AI alone has created new opportunities for fraudsters to create sophisticated schemes at scale. With technologies, and fraud schemes, developing rapidly all the time, it can be difficult for businesses to home in on what they should be focusing on when it comes to their fraud prevention strategies.”

Experian did not ask about artificial intelligence in 2023.

The survey showed that business owners who want to retain customers must show their patrons they take the problem seriously, Peters said.

“Businesses should remain close to consumer preferences and continue to innovate in order to implement the latest technologies,” she said.

With the start of 2024, the COVID-19 pandemic seems that much farther away. “Post-pandemic” stories were already being written in 2021, after vaccines that were swiftly developed for the devastating COVID-19 disease outbreak eased the threat to human health and allowed a return to some semblance of normalcy to daily life. 

As a global health crisis, the pandemic is ongoing, though the World Health Organization, the U.S. government and others no longer consider it an emergency. That also means that many of the adaptations and innovations that retailers had scrambled to develop amid 2020’s lockdowns are less necessary. 

Still, while many aspects of the retail business have steadily begun to resemble pre-pandemic 2019, there are a few important ways the pandemic continues to affect the industry.

“Rarely in recent history has there been a tsunami-like event that has altered norms to the degree that the pandemic has,” Retail Speak founder Sanford Stein said by email. “The shadow it cast over retail will not likely be lifted soon, if ever.”

1. The hybrid workplace is changing the retail landscape.

Even as offices reopened and companies became stricter about showing up for in-person work, research shows that a hybrid workplace is now the norm for many people in the U.S.

“The biggest change from the pandemic is work from home, inspiring more local shopping or online shopping from home,” Lee Peterson, executive vice president of thought leadership and marketing at WD Partners, said by email.

In a survey of 2,500 consumers by WD Partners, zero respondents said they would ever again work at their office five days a week. That is directly affecting where they go to shop at stores, as nearly 40% said they now frequent retail businesses within three miles of their home, with 10% saying they go to malls. 

Similarly, a Pew Research Center survey found that 35% of those with jobs that can be done remotely now always work from home, with 41% on a hybrid schedule. Consultancy Kearney finds that work-from-home has leveled off at about 30%, depending on the type of job. 

This is ushering in what Stein calls a 21st century version of the post-World War ll flight to the suburbs, this time featuring millennials and their young families.

“Their urban-to-suburban push has only been invigorated by home working dads and moms,” he said. “With it came the flexibility to sneak out between zoom meetings to shop close to home, rather than during office lunch breaks in urban centers.”

In December 2023, visits to buildings in Placer.ai’s nationwide office index were down 36.5% compared to December 2019; foot traffic has fluctuated somewhat but has hovered around 40% of pre-COVID levels, according to the analytics firm’s report. Retailers near corporate centers should expect a gradual decline in foot traffic to continue, as more companies evaluate their downtown office leases, according to Kearney Partner Brian Ehrig.

“Sophisticated retailers are already tracking this with analytics, but smaller retailers, especially mom-and-pop shops, will be at a significant disadvantage due to lack of capabilities to sense the shifts in demand,” he said by email. “I would predict more retail will end up nearby ‘bedroom communities’ as a result of these changes, compared with what we’ve seen in the past.”

2. E-commerce got a lift

The vast majority of retail sales continue to be conducted in stores, and many physical locations like restaurants and stores have recovered nicely in the past company of years as people ventured out again. But while e-commerce sales have dipped from the peaks during the height of the disease outbreak, many consumers have stuck with the ease of shopping online.

E-commerce sales growth is expected to be 10% or less in the coming years, but its growth through 2025 will nevertheless be more than double the rate of store-based sales growth, according to FTI Consulting’s 2023 U.S. Online Retail Report.

“The pandemic actually forced people to shop online, and, like single-malt scotch, once you try it, you ain’t going back to that crap you drank before!” WD’s Peterson said. “Online is just too easy, and getting easier every day, while stores do nothing in terms of attracting new customers.”

David Gottlieb, chief revenue officer at Trax Retail, agrees that an “entirely new cohort of consumers” tried out ordering online from grocers and mass merchants in particular, and that many stores have struggled to meet shoppers’ elevated expectations of offline retail.

“The shift that we are seeing is that the way people shop in physical stores has changed; they now expect more from their in-store experiences, as they've gotten used to the convenient and flexible options offered by digital platforms,” he said by email. “Consumers want to be able to interact with stores in new ways, including the ability to search, filter and find products in the store the same way they do online.”

Generally, websites have long been considered less enjoyable to shop than brick-and-mortar stores. But many retailers during the pandemic made an extra effort to engage people online, which has also made a difference, according to Gottlieb. 

“Retailers and brands made smart moves during the pandemic — especially those who focused on creating engaging shopper experiences,” he said, noting that, for example, beauty retail giant Sephora has used customer data to personalize products and also offers interactive tools for customers to engage and share on social media. “The adoption of digital technology and AI was incredibly helpful for brands throughout the pandemic and will continue to shape the retail industry for years to come.”

3. Inventory remains a problem

There has been significant recovery from the havoc that the pandemic wreaked on supply chains, though retailers have moved from crisis management to a focus on optimization, according to Kearney’s Ehrig.

“Of particular interest at the moment is how to optimize supply chain networks and reduce transportation costs,” he said.

While global supply bottlenecks have eased since the peak of the pandemic, out-of-stock issues persist, according to Trax Retail’s Gottlieb.

“In 2024, AI will play a significant role in creating a leaner supply chain that doesn’t fail consumers,” he said. “Brands and retailers will be able to make more-exact estimates of how many products to order — which will ultimately reduce costs and ease supply chain issues.”

Out-of-stocks aren’t the only challenge, however. Many retailers pulled various levers to ensure they had stock on the shelves, resulting in overabundance in 2023. In 2024, many will continue to be saddled with excess supply, Ehrig also said. 

“There is still too much inventory, and we have a good couple of quarters to get through pushing through this stock before we are back to normal levels,” he said. “This means we should expect continued discounting, especially in apparel.”

4. BOPIS endures

Omnichannel fulfillment like curbside or in-store pickup of online orders were crucial for retailers during the peak of the pandemic, and those services are here to stay, experts said. The service has become handy at the holidays as a way for shoppers to get packages without worrying about shipping delays. Buy online, pick up in store accounted for a quarter online orders in the three weeks after Cyber Monday, according to Salesforce.

“Initially this may have been thought to be a necessary offshoot of the touchless times but has become a time-saving convenience that is not likely to go away,” Stein said.

Target is rolling out a new, larger store format that includes more backroom space for fulfillment. Now, though, many retailers are moving to trim the extra expense of store-based fulfillment, according to Kearney’s Ehrig.

“Generally, retailers can make a profit when consumers walk in the door to pick up, and foot traffic in your store is always beneficial to your brand,” he said. “But curbside and ship from store makes less sense financially unless it’s an unwieldy object or a large basket size. A big reason is that store labor is generally inefficient at picking orders when compared to distribution center labor.”

5. Self-checkout may not

Self-checkout stations proliferated during the height of the pandemic, as retailers sought to address workforce shortages and maximize social distancing. But, as with omnichannel services, retailers are now grappling with the downsides.

The machines became the dominant checkout method at grocery stores in 2023. But they are turning out to be less than ideal as retailers have grown increasingly vocal about shrink and theft; several grocers have been forced to devise ways to deter shoplifting at checkout kiosks.

“Retailers are recognizing that the costs of shrink associated with fewer associates outweighs the value of reducing labor costs,” Gottlieb said. “In 2024, retailers will begin to move away from self-checkout and shift their focus towards loss prevention.”

Will 2024 be the year that Stitch Fix proves that the online, tech-led, stylist-enabled apparel-box sales model — abandoned by Nordstrom and others a while ago — can succeed long term?

Much of 2023, the company scrambled to arrest declines in its sales, customer base and profits; unwind major initiatives undertaken by a previous chief executive; pull back on some of its ambitions; tighten its belt; and seek out new leadership. C-suite doors revolved every few weeks, as founder Katrina Lake temporarily replaced Elizabeth Spaulding as chief executive a few days into 2023, and David Aufderhaar replaced Dan Jedda as chief financial officer a couple of months later. Matt Baer arrived from Macy’s in June to take over as CEO.

Many changes have been painful. The company laid off 20% of its workforce in early 2023, closed its four-year-old U.K. operation and closed two distribution centers. More recently, the company eliminated full-time work for stylists and laid off some leads.

Now, the company has “set up a Transformation Office focused on identifying foundational and long-term growth opportunities. Fundamental to this is ensuring we have the right team in place to take our business forward,” a spokesperson said by email.

That includes former Amazon Fashion executive Tony Bacos, who joined in November as chief product and technology officer. The question remains whether Stitch Fix can be transformed.

“To be sure, this is a company in transition with a new management slate that is less than a year in,” William Blair analysts Dylan Carden and Alexander Vasti said in a client note in January, based on a meeting with Aufderhaar. “While this creates some uncertainty, alongside limited visibility from the company as to when it expects revenue to stabilize, Stitch Fix has a story to tell that we believe is not widely appreciated.”

In some ways, Stitch Fix is going backward, undoing what William Blair called “the failed pivot directed by prior leadership.” Even before Spaulding left, the company realized that its much-touted and highly marketed move toward more conventional e-commerce in 2021 had confused customers and failed to drive sales. The introduction of its Freestyle website, which was opened to all consumers and not just its box customers, “pitted it against a broader apparel industry set, where it had less advantage and required heightened spending on less efficient marketing,” the analysts said. The Freestyle option is once again only open to those who have signed up for Stitch Fix and received at least one box.

The company realizes that it also at times neglected its apparel merchandising and over-emphasized its tech, according to William Blair’s note. 

Correcting that could set Stitch Fix up for success, because its algorithm is an advantage over more traditional apparel retailers, according to Liza Amlani, principal and co-founder of Retail Strategy Group. Moreover, many of the legacy retailers chasing the same audience not only don’t have such sophisticated tech, but also have failed to offer enticing assortments.

“If you see what the ultra-fast fashion brands are doing, like Shein and Temu, and Amazon Fashion, and anyone who's creating content on TikTok Shop — that is where you're going to find more of the interesting, fun fashion pieces,” she said. “People are moving away from Loft, Banana Republic and all of these brands because they've become boring.”

That includes Stitch Fix, too, which must correct its own inventory issues, something that Bacos in particular may be very good at, according to Amlani. Executives in recent months said the company would expand its private labels, and William Blair analysts said the goal is to have private labels top 50% of its offer.

“If they're looking to build out more relevant product mixes across their private label program, it would make sense to bring in a chief merchandising officer that would have not only insight into merchandising strategies and how to build out a product mix, but how to use that technology in the insights, and close the feedback loop,” Amlani said. “To actually sort product that people want, that they know they’re looking for because they have a ton of data.”

Stitch Fix shouldn’t lose sight of its ultimate differentiation, though, which is the humans who work as stylists, curating the boxes sent to subscribers, who receive as often or as seldom as they wish, paying a $20 “styling fee” each time, Amlani said.

“The whole point of Stitch Fix is to help customers figure out what to wear because they can't do it themselves,” she said. “The stylists should be used for clienteling — to get to know the customer, to drive customer loyalty, to improve the customer journey and the customer experience by providing that one-on-one help. And of course for styling questions, absolutely.”

Stitch Fix has “some positive attributes in the model that are overlooked or misunderstood,” according to William Blair. When it reduced its marketing by 40%, for example, it lost just 13% of its active customers. Its average customer buys four times per year, per William Blair’s note. And even its returns are more valuable than most because the data gleaned from them is richer, according to both William Blair analysts and Amlani.

“For now, we believe we are still a couple quarters out from stability in the model,” William Blair said. “We are more encouraged that the company is returning to its origins, recognizing and reinforcing very real advantages in the model, and adapting for a new marketing climate as opposed to a more dramatic shift in the business, which occurred under prior management.”

Building on a plan introduced at the beginning of the year, Warby Parker on Thursday announced its e-commerce business has returned to growth. Revenue from that segment of its business grew 4.4% year over year in the second quarter, while revenue from its stores grew 17.8%.

Overall, the company’s net revenue increased 13.3% year over year to $188.2 million and its gross margin improved 140 basis points to 56%.

Warby Parker also narrowed its losses during the period, with operating loss improving 50.9% from the year-ago quarter to about $9 million and net loss decreasing 57.5% to $6.8 million.

Warby Parker said Q2 marked its highest e-commerce growth since the first quarter of fiscal year 2021.

The company in February outlined a number of key focus areas for the year, which in addition to returning to e-commerce growth, included increasing marketing spend to drive brand awareness, expanding its core glasses business and leaning into its health care offerings.

In Q2, Warby Parker notched its fourth consecutive quarter of active customer growth, with active customers reaching 2.39 million, up 1.3% from the prior quarter and up 4.5% year over year, co-founder and co-CEO Dave Gilboa said on a call with analysts. Average revenue per customer during the second quarter grew 8.8% to $302.

“We anticipate seeing active customer growth continue to inflect upwards throughout the year. We know once we acquire a customer and deliver an exceptional Warby Parker experience, we see consistent retention metrics and repeat purchasing patterns across cohorts,” Gilboa said. The executive noted that within its most recent cohort, the company saw a revenue retention rate of about 50% over the past two years and about 100% over the past four years.

Warby Parker also continues to promote the value of its stores, reiterating its view of opening up to 900 stores eventually. The company has added 39 net new stores over the past 12 months, with 11 net new stores opening in Q2 alone, which brought the retailer to 256 total locations. The company remains on track to open 40 stores this year.

For the remainder of the year, the retailer has raised its financial guidance, now expecting full-year net revenue to be between $757 million and $762 million, representing an increase of 13% to 14% from last year. That's compared to previous guidance of revenue between $753 million and $761 million, representing year-over-year growth of 12.5% to 13.5%.

Spring cleaning has a different meaning for Grove Collaborative. The company is embarking on several changes to boost both its bottom line and planet-friendly reputation.

Earlier this month, the company rebranded its core private label, Grove Co., to improve visibility on retail shelves. Grove also consolidated all of its own brands under the Grove Co. label.

The sustainability-driven home products company also launched a new e-commerce model in late February to encourage noncore customers to browse freely on the company’s website and incentivize them to order more products.

“We will move from the gated first order experience to one that is shopping focused and provides incentives for customers to subscribe to items and build the most planet-friendly and wallet-friendly order as possible," CEO Jeff Yurcisin said, according to a transcript of the company’s fourth-quarter earnings call on March 6. “We expect this to reactivate and reenergize our 5 million customer base, further increase our total addressable market and appeal to all conscientious customers."

Change is necessary to stay afloat financially, Yurcisin said. Net revenue in the fourth quarter was $59.9 million, down 3.1% from the third quarter of 2023 and 19.2% year over year. For the year ahead, the company expects net revenue between $215 million to $225 million and adjusted EBITDA margin of 0% to 1%.

“This is just the reality of what happens in a subscription model – when you go from unsustainable advertising spend to growing more organically from your core, and then growing out in a more candidly sustainable way,” Yurcisin said in a recent interview with Retail Dive. “These changes will allow us to better match best practices across e-commerce that I've seen throughout my career and drive growth in new acquisition channels.”

Under the former subscription model, customers were onboarded with a default subscription. While they received freebie gifts to entice them to try Grove’s products, they had to subscribe to repeat orders for any product they purchased themselves.

 “We just blew up that model … and [are] enabling a wider set of customers to open up the [total accessible market],” Yurcisin said. “Now you can just purchase [an item] and we can be that trusted brand for you. Secondly, we’ll be able to better find those customers using more traditional channels, like Google.”

The revamped subscription model debuted on Feb. 29, and Yurcisin said the initial response has been positive. Yurcisin said vendors are helping to fund some of the subscribe-and-save benefits through a partnership with Grove. Over half of the products found on the website are available for subscribe-and-save. 

“It’s the inactive customers that I believe we really have a path to really engage because they like us,” Yurcisin said. “When we surveyed them, they still trust us and are still Grove fans. They just haven’t had a need for a box showing up in a particular type of subscription model on a very regular basis. So we’re approaching this a little differently.”

New customers will get 20% off their first order with Grove when they subscribe to an individual product, then 5% off each subscribed item in repeat orders thereafter.

“Now we have an incentive … through subscribe-and-save — by partnering with our vendors to lock in these wonderful dark green customers,” Yurcisin said, referring to environmentally conscious shoppers. “The people who want to change daily life to be a little bit more planet first.”

But Yurcisin acknowledged that attracting this group and staying profitable is a balancing act.

“Each e-commerce retailer needs to find their own unique business model that allows them to serve customers well, but also deliver enough margins to have a sustainable, profitable business," Yurcisin said in an email to Retail Dive. "Grove is the first retailer to be plastic neutral with carbon neutral shipments. Our customer chooses us because we help them find those great products that minimize their impact on the environment.”

But when many items on Grove’s site are under $10, getting to bigger orders requires subscriptions, according to Yurcisin.

“What we have to do is get to a large enough order size with $50, $60, $70, $80 in a box, where we are able to ship to a customer in a planet friendly way,” Yurcisin said. “The customer receives real value, the shipping cost per item decreases, and the impact we have on the planet improves — mainly because our unique offering is the only one that is most focused on reducing, measuring, and reporting one’s plastic pollution impact.”

‘I think we have home position right now’

Last fall, Grove Collaborative announced a leadership shake-up with co-founder Stuart Landesberg stepping down as CEO after a decade. Landesberg became executive chairman on the company’s board, and he continues to oversee strategy, capital markets and corporate development. Yurcisin officially took over the CEO role last August.

Eight months in, Yurcisin wants the company to reach profitability and prioritize innovation, while staying true to its planet-first mission.

“Our vision is to truly transform the consumer products industry into a force of human and environmental good,” Yurcisin said.

The San Francisco-based eco-friendly products company is doubling down on sustainability. Yurcisin refers to this as “Grove’s point of differentiation” and why customers trust the brand.

“There is a wonderful tailwind and all the trends are behind it. It’s mission driven, and if you look at younger customers, they’re the ones who value transparency in the ingredients you’re putting in, and customers who just care about sustainability,” added Yurcisin. “All of these are tailwinds that will intersect.”

Yurcisin, a veteran of Shopbop, Zulily and Amazon, said he chose Grove because he wanted his next opportunity to have a positive impact on the world. He liked Grove Collaborative’s mission-driven mandate of reducing plastic use and waste with more sustainable, lower plastic footprint products.

Grove produces soap pods that can be thrown into a dishwasher and laundry detergent sheets, among its product offerings. Yurcisin said he’s listening to Grove’s core customers as it expands into new categories.

Grove Collaborative has sold health and wellness products on its marketplace since 2020, according to the company. The expanded focus on categories like vitamins, minerals and supplements began in March 2023 with Grove Wellness. The online hub offers customers a curated assortment of health and wellness products.

“Where I want to take us is to be the trusted brand for conscientious customers,” Yurcisin said of the firm’s expansion from the sustainable cleaning space to health and wellness.

According to survey data the company cited last year, 75% of its customers currently buy wellness products, and 89% said they trust Grove more than other brands to provide those products.

“That is truly the tip of the spear when it comes to innovation — having products that are both efficacious [and] high performing, but also planet first,” Yurcisin said. “It can’t just be a planet-first product,” he added. “It has to be high performing and just as good as some of the alternatives.”

Yurcisin is also plastic obsessed. Or, rather, he’s reducing-plastic obsessed.

Since 2020, the company has collected some 15 million pounds of single-use nature and ocean bound plastics through its partnership with plastic recovery platforms. For every ounce of plastic shipped to Grove customers, the company collects the equivalent amount of plastic through its ongoing partnership with rePurpose Global, according to the company.

“I see single-use plastic as the enemy. We put all of this plastic into our recycling bin and only 5% of it gets recycled. Some of it ends up in a landfill, but a lot of it ends up in the ocean, burned or shipped overseas,” Yurcisin said. “We’re the only retailer I know that measures plastic in grams and ounces of our products. We track it, measure it, and report about it in our quarterly earnings, all in an effort to earn customers’ trust.”

Grove translates all of this plastic data into a three-tier badge system, which is part of the company's Beyond Plastic initiative. The tier system helps customers make informed purchasing decisions based on plastic. Customers can look for three badges on products on the website, including 100% plastic-free, 95%-plus plastic free and no single-use plastic.

“There are more customers who care about reducing their plastic waste and plastic footprint than they do [about] global warming,”Yurcisin said. “We are that leader saying, ‘Let’s help you. Where are you on your journey, and how can we help you reduce single-use plastic?’”

There is booming interest among customers in sustainability, according to Yurcisin. But that interest may be waning. Consumers in the U.S. are less sustainably minded compared to a year ago, according to a Global Voices survey from ESW released in April.

“I think there’s going to be a billion-dollar retailer out there one day, a billion-dollar brand, that consistently earns customers’ trust in their transparency and helps consumers find the right type of product,” Yurcisin said.

He added that he wants to lead Grove to become that eco-friendly, billion-dollar retailer.

“I think we have home position right now,” Yurcisin said. “We’re probably the leader there … but we have a lot of work to do.”

Although the company’s revenue is declining, Grove Collaborative reached a new high in DTC net revenue per order of $66.83 in Q4, something Yurcisin is proud of, as he turns his attention to improving DTC. 

Yurcisin said wholesale also performed “incredibly well” in Q4, and that consumers can expect to see new product offerings hitting the shelves at the end of Q1 or early Q2.

“They asked me to come in and lead the company, so let’s make sure we’re profitable and growing and still leaning on sustainability and helping customers make right decisions,” Yurcisin said.

Grove Collaborative on Thursday reported that Q2 net revenue fell 21.2% year over year to $52.1 million. Direct-to-consumer orders fell nearly 25% to 0.7 million; DTC active customers fell 34% to 0.7 million; and DTC net revenue per order rose almost 5% to $67.73.

Gross margin expanded by 200 basis points year over year to 53.9%, and net loss narrowed by 7.4% to $10.1 million, according to a company press release.

The consumer products retailer also announced that it is switching from its custom DTC website to Shopify, part of an effort “to create opportunities for new customer enhancements, drive down costs for ongoing site maintenance, and better leverage industry best practices and innovations for future growth,” per the release.

In the year since CEO Jeff Yurcisin took the helm from co-founder Stuart Landesberg, Grove has chased profitability by shaking up its model, most notably abandoning its subscription requirement. The company also revamped its core Grove Co. private label in order to boost visibility on retail shelves; the brand is found at mass merchants like Walmart, Target and Costco, drugstores like CVS and grocers like Kroger and Hannaford, among others.

Its transition to Shopify reflects a realization that maintaining a custom platform is less efficient, according to Rick Watson, founder and CEO of RMW Commerce Consulting, who noted that Glossier similarly made the switch last year. At Grove, the move will take a while: It started in July and is expected to be complete in Q1 next year, per the company’s release.

“Meanwhile, Overstock switched to Shopify in like an afternoon,” Watson said by phone.

Inching toward profitability isn’t Grove’s only challenge. While its differentiation is the sustainability of its products and packaging, with an emphasis on reducing the use of plastic, it faces a lot of competition in that niche, according to Watson. Moreover, its online DTC operation is likely to remain under pressure, he said.

“I think ecom-only for most players is just not profitable,” he said. “That's just the reality. You can't point to too many who have achieved pure profitability on their own, without stores, without full scale. I don't think that story has changed.”