Target ain’t exactly hurting is our point here — its average customer makes ~23 trips per year, spending ~$50 each time; sales topped $107B last year.

Yet we grimaced when we learned about Target’s growing inventory loss problem.

How much are we talking here?

Last fiscal year, the retailer saw $763m in “shrink”: loss of inventory, whether by accident or a deliberate act like shoplifting, fraud, or cargo theft.

CEO Brian Cornell expects Target’s inventory losses to balloon beyond $1B this year.

• It’s not just Target — Walmart, Walgreens, and Home Depot also recently lamented theft increases.

What’s changed?

Organized retail crime is up. (Or, in Target parlance, up & up.)

“It’s not people shoplifting an individual item for personal use,” National Retail Federation president Matt Shay told CNBC. Stores, he said, are fighting “sophisticated” networks stealing throughout the supply chain — on docks, trucks, and railways, as well as in stores.

Efforts to limit secondary markets for stolen goods are underway; a law goes into effect next month requiring US online marketplaces to verify high-volume sellers.

It’s easy to blame criminals, but…

… retailers must also look inward; investing in loss prevention can, y’know, prevent losses — yet 68.5% of retailers do not have teams fighting against organized retail crime.

Perhaps that’s because external theft only accounted for 37% of lost inventory last year — employee theft (28.5%) and process failures (25.7%) were other major culprits.

Back to Bullseye: Listen, we’re not saying he’s running a crime syndicate, but does anyone else have a presence in all ~2k Target stores? Just saying, it’s a little suspicious.

It was a foolproof, reliable system. It worked. That is until retailers said, “Pay up, losers.”

OK, they might not have used that exact language, but the sentiment stands: Per The Atlantic, an estimated 41% of retailers charged some kind of return shipping fee in 2022, up from 33% in 2021.

• DSW charges $8.50 for returns
• LL Bean takes $6.50 per returned package
• Abercrombie & Fitch deducts $7 for online returns
• Even Amazon started charging customers $1 for dropping packages at select UPS stores

While most retailers won’t charge if you return your rejected items at a brick-and-mortar location, standing in line at a cash register really takes the joy out of online shopping.

(We wanted to order our adult onesies and self-help books in private — that was the whole point!)

Why the change?

The average online purchase return rate is 15%-30%, and Americans returned $800B+ worth of goods in 2022. That’s a lot of boxes.

To make matters worse, a single return can cost a retailer $10-$20, not including transportation back to a warehouse, per The Atlantic.

Makes sense but…

… customers still aren’t pleased. More than half believe retailers should cover the cost of returns, and 62% said they’d shop elsewhere given a poor return experience with a brand.

While returns are more expensive than ever, so is therapy — so we might just stick with online shopping as our coping mechanism for now.

Richard’s Rainwater turned it into a business, selling still and sparkling rainwater in recyclable aluminum cans and glass bottles.

The backstory

Frustrated with well water’s effect on his hair and laundry, founder Richard Heinichen began collecting rainwater for personal use at his Austin, Texas, home in the ‘90s.

He later built a “tank town” to harvest larger volumes of water and, in 2002, received a license to bottle and distribute what he called “cloud juice.” Heinichen has since retired.

Today…

… in addition to Tank Town, Richard’s Rainwater has two brewery partners: Lazy Magnolia in Kiln, Mississippi, and Faubourg Brewing Co. in New Orleans.

CEO Taylor O’Neil told The Hustle that collection systems, located on the breweries’ roofs, connect to existing stormwater management systems.

Sensors note when a rain event begins and, because rain events cleanse the atmosphere, eschew the first 0.2 inches.

The rest goes into collection tanks. A proprietary zero-waste, chlorine-free filtration system removes biological or particulate contaminants before the water is bottled on-site.

• For every 1k square feet of collection area, an inch of rain generates ~550 gallons of clean water.
• The company anticipates harvesting 4m+ gallons in 2023 for an estimated $10m+ in sales.

The goal…

… is to build collection sites nationwide, with immediate sights set on Oregon and North Carolina. Sites that offer ample surface area and precipitation are ideal.

“Every new site will enable us to move water [shorter distances] from where it’s captured to where it’s consumed, create new jobs, and be a better example of renewable water in more communities,” O’Neil said.

BTW: O’Neil said even dry places could collect rain for drinking water or other purposes. Because when it does rain, it can overload ill-equipped  systems, spread contamination, and make my commute very soggy.

Threats are rare, but long negotiations with bargain hunters and bidding wars have become common on reselling platforms in a way they haven’t in traditional stores.

Thrifting has always been a popular hobby…

… but it’s boomed online in the last few years, with people turning to platforms like ThredUp, Depop, and Poshmark to browse beyond their neighborhoods. Other contributing factors:

• The pandemic: Bored at home, people shopped online (and for fashionable Zoom outfits).
• Inflation: They want the deals!
• The environment: Gen Z and millennial shoppers, in particular, are seeking more sustainable options.
• Brands — from fast-fashion giants like H&M to higher-end retailers like Reformation — are partnering with resale platforms to offload extra merchandise.

Forget it, Jake, it’s the internet

Depop — purchased by Etsy for $1.6B in 2021 — recently deleted its comment section, telling CNBC comments didn’t help buyers decide on items.

• On Reddit, some sellers discussed the rude comments they’d received from buyers wanting cheaper prices.
• A 2019 Business of Fashion investigation revealed sellers — many of them teens — received inappropriate messages from creeps

Long-time resale champ eBay has similar issues; heck, people even send spicy messages on LinkedIn.

In many ways, the rise of harassment and bad behavior is simply an unfortunate testament to a platform’s popularity and we wouldn’t be surprised to see more guardrails in the future.

Until then, please enjoy some @depopdrama.

In the US, 7-Eleven had sprung from the 1927 merger of several Texas icehouses, known as the Southland Ice Company. They ultimately became a chain of convenience stores, open from 7am to 11pm daily.

Masatoshi Ito…

… entered retail as the president of his family’s clothing store. In the ‘60s, he launched Ito-Yokado, a Japanese grocery chain inspired by US supermarkets.

In the 1970s, Ito-Yokado exec Toshifumi Suzuki was attempting to secure a Denny’s license, but was wowed by 7-Eleven. Japan didn’t have anything like it, and he persuaded Ito to also become a 7-Eleven licensee.

Ito-Yokado opened its first 7-Eleven in 1974 in Tokyo…

… leading to a massive boom in 24/7 convenience stores, AKA “konbini.” By the ‘80s, Ito-Yokado’s empire — which included 4k+ 7-Elevens across Japan — was generating $12B in annual sales, per The New York Times.

• In 1991, Ito-Yokado purchased a 70% stake in the floundering Southland for $430m.
• In 1992, Ito stepped down amid accusations that the company had paid off Japanese racketeers and was replaced by Suzuki. Ito returned as honorary chairman in the late ‘90s, a position he held until his death.

But why are Japanese 7-Elevens so good?

The konbini has become a place you want to go. They have:

• Huge selections of delicious and fresh prepared foods, snacks, and beverages
• Banking, mail, travel, and other handy services
• Many have communal seating

Today, Ito-Yokado is known as Seven & I Holdings, and operates 80k+ 7-Eleven stores globally, including 21k+ in Japan.

It will connect TikTok creators with 12 brands from Sephora’s Accelerate program, a six-month incubator for beauty founders of color that culminates in a Sephora brand launch.

These are two beauty powerhouses

LVMH-owned Sephora sells products from 360+ brands in-store, online, and via its app, per Retail Dive. It has 2.7k+ locations globally, plus a shop-in-shop partnership with Kohl’s that’s anticipated to generate $2B in annual sales by 2025.

TikTok has 1B+ monthly active users. Beauty brands go viral on the platform, where #beautytok has 35.4B views:

• The Ordinary saw a 426% spike in sales of its peeling solution.
• Glow Recipe saw a 600% spike in sales, with one product selling out 17x in 2021.

Consumers…

… are turning away from celebrity brands, instead seeking authenticity and quality, per Bloomberg.

An outlier is Rihanna’s Fenty Beauty, also part-owned by LVMH and worth an estimated $2.8B. Fenty won consumers over with inclusivity, offering shades for darker skin tones.

Sephora Accelerate is geared toward founders of color, and incubation is key to the company’s growth strategy.

• In 2013, Huda Beauty launched at Sephora Dubai with false lashes. It now sells 140+ products and generates ~$200m in annual sales, per Forbes.

Sylvie Moreau, Sephora president of Europe and the Middle East, told Vogue Business that it’s seeking another “10 or so” brands to follow suit. Should one go viral on TikTok, fans will only be able to get it at, well, Sephora.

Why? The power of influencers. In this case, former boxing rivals Logan Paul and KSI who, combined, have 40m+ YouTube subscribers.

It’s called Prime

It contains 10% coconut water, appeared in a Super Bowl ad, and is the UFC’s official sports drink. It typically retails for ~$2.40 per bottle and, in 2022, generated $250m in retail sales, per The Washington Post.

But Prime has also become a hard-to-get status symbol that resellers are hawking at high markups. Plus:

• Rowdy shoppers led grocery chain Aldi to limit sales to one of each flavor.
• UK schools have banned Prime to curb children-run black markets.

Interestingly, at press time, it was available on Amazon at… a very regular price.

This all sounds silly…

… but it ain’t new.

Shoes, toys, and other products can become hot commodities — including soft drinks. We previously covered Exotic Pop, a Houston-based soda company that got its start reselling brands touted by hip-hop acts.

Mae Karwowski, CEO and founder of influencer marketing firm Obviously, told WaPo that, in the next decade, she expects “all the biggest brands will be made by creators” because they get what their customers want.

Emma Chamberlain has a growing coffee/tea brand. MrBeast started a burger chain. For Paul and KSI, it’s a beverage Gordon Ramsay compared to “swallowing perfume.”

Rolando Rodriguez, chairman of the National Association of Theatre Owners, told CNBC that the 30-screen megaplex is out. Instead, new theaters have 12-16 screens, while old ones are converting space into arcades, bowling alleys, and bars.

Why? We can watch almost anything we want at home in our pajamas now. Consumers need more incentive than mediocre, overpriced popcorn.

Like what?

Better sound and visuals, comfier seating, elevated food menus, and cocktails help. In 2022, 15% of domestic ticket sales were for premium screenings.

A Chicago-area theater is building a “Super EMX” auditorium featuring a 96-foot-wide screen and heated recliners so you can really be blown away by Avatar 3.

But successful programming…

… doesn’t have to include visually spectacular blockbusters — it just needs to be social and fun:

• Warehouse Cinemas sold 1.4k $5 tickets to a “pajamas and popcorn” screening of 1988’s The Land Before Time.
• Alamo Drafthouse’s Cocaine Bear party featured an agility course and themed food. (BTW, Cocaine Bear earned $28.4m opening weekend on a ~$35m budget.)
• An Edinburgh theater held a Magic Mike screening with scantily clad butlers serving prosecco.

Meanwhile, Secret Cinema, known for immersive screenings, was acquired last year for $100m+ by TodayTix Groups to expand its offerings.

It’s like malls…

… elevating food courts and adding experiential “shoptainment” offerings to compete with hassle-free online shopping.

• Placier.ai found visits to a Pennsylvania mall in 2021 increased 31%+ compared to 2018 after it turned a Sears into a casino.

BTW: A recent 25th anniversary screening of Titanic in Rio de Janeiro went viral after the theater flooded. While it may have been immersive, it was not intentional.

A Junk Fee Prevention Act would ban or reduce several of them — but what are they?

Oh, you know ‘em

Ever book a hotel at what seems like a decent price, only to realize there’s also a “resort fee”? That’s a junk fee — an added cost that pops up when it’s time to pay.

Some other examples:

• Service fees when buying event tickets; one review found that sports tickets can rack up service, delivery, and other fees that amount to 50% of their face value.
• Fees airlines charge for families to sit together.
• Early termination fees for TV, internet, and phone services, which can exceed $200.
• Hotel resort fees, which average ~$42 per night, cover amenities like WiFi, gyms, and pools — even if you don’t use them

It’s often hard to avoid these fees because they’re not included in the upfront price, and in some cases — like when buying event tickets — buyers have few alternatives.

What’s the impact?

A 2019 Consumer Reports survey found 85%+ of Americans have experienced junk fees. And while you might not notice them on a daily basis, they do add up.

US hotels raked in an estimated $2.9B in resort fees in 2018. Airlines made $8.6B in seat change and baggage fees in 2019. (Notably, several airlines ditched change fees amid the pandemic; in 2022, US airlines made ~$5B in baggage fees and just $697k in change fees).

As inflation drives the cost of everyday things higher, added fees could be the difference between a family vacation and staying home.

Just Born Quality Confections was founded in 1923 by Born’s father and produces a range of sweet treats, including its bestselling brand Mike and Ike.

The company’s claim to fame, though, is the humble Peep — 5.5m of which are produced daily (that’s ~2B chicks a year).

But it wasn’t always like that

In 1953, Peeps were made mostly by hand, and the process took 27 hours from start to finish.

Born, after earning his engineering degree, spent nine months building a machine that could turn sugar, corn syrup, and gelatin into Peeps in six minutes flat.

Peeps began as yellow chicks — Just Born inherited the candy when it bought a smaller competitor — but have since mutated into a variety of colors and shapes.

Then people got weird:

• There’s a standing world record for eating 255 Peeps in five minutes.
• Many are obsessed with exploding the little guys in microwaves.
• Recipes abound: s’mores or, even worse, vodka.

Stranger still, The St. Paul Pioneer Press started a Peeps diorama contest in 2004, and ~80 newspapers across the country followed suit. (The Washington Post took its 2022 contest to TikTok and the entries are epic.)

If you’re a Peeps fan, be sure to mark your calendars for Pennsylvania’s Peepsfest, where a giant Peep is dropped on New Year’s Eve.