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    As Holiday Shopping Season Begins, Retailers Worry

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    Consumer spending has been strong in 2023 despite higher prices and waning savings. But some retailers have jitters heading into Black Friday.Christina Beck is approaching this holiday season cautiously.Ms. Beck, a 58-year-old administrative director at a school, makes lists of gifts she plans to buy for her family and friends and sticks with it. But her spending this year will be kept in check by the high cost of food in grocery stores and restaurants, and the mortgage for a home in Minneapolis she bought last year with her best friend.That best friend, Kristin Aitchison, cannot wait for the holidays. Ms. Aitchison, 55, who works for a senior living home, advises her family each year that she plans to make the holidays smaller, spending less. And every year, she spends more than she did the year before.“I’m a huge gift giver,” Ms. Aitchison, who started her shopping in early November. “I have so much joy in giving gifts. I’m always running around the last week before Christmas because I have to find just a few more gifts.”There are many reasons for people to be more prudent in their holiday spending this year. While inflation is less rapid than it was a year ago, millions of shoppers still feel sticker shock when buying groceries. Payments on federal student loans, which were on pause during the pandemic, have resumed. And higher interest rates have meant larger credit card bills and, for home buyers, mortgage payments.Yet consumer spending has been surprisingly strong throughout 2023. For retailers, the question is whether people will continue to spend their way through the holiday season or decide this is the time to pull back.Predictions are murky. The National Retail Federation said it expected holiday sales to increase 3 to 4 percent from last year, without adjusting for inflation, on a par with the prepandemic 2019 season. But in a survey by the Conference Board, a nonprofit research group, consumers said they planned to spend an average of $985 on holiday-related items this year, down slightly from the $1,006 they anticipated spending last year.One closely watched early indicator, Amazon’s Prime Day in October, showed consumers were spending more, but only slightly. They spent an average of $144.53 on Prime Day, a 2 percent increase from the average the year before, according to Facteus, which analyzed credit and debit card transaction data.Last week, the Commerce Department reported that retail sales nationwide fell 0.1 percent in October from September, the first drop since March. Executives at Walmart also warned that consumer spending had weakened in the last two weeks in October, noting that people seemed to be waiting for sales.“It makes us more cautious on the consumer as we look into the fourth quarter,” John David Rainey, the chief financial officer of Walmart, said in an interview. “I think there’s likely more variability in the numbers.”Still, the retail sales pullback was smaller than the decline that many economists had expected after a very strong summer of spending, and some analysts saw it as a sign of continued consumer resilience.Holiday sales are likely to be decent by prepandemic standards, though not as strong as the gangbuster seasons in 2020 and 2021, said Tim Quinlan, a senior economist at Wells Fargo.Higher-income shoppers still have plenty of extra savings built up during and after the pandemic, but those with lower incomes have more fully used up their resources, Mr. Quinlan said. Higher interest rates may also deter shoppers from putting holiday shopping on credit cards. The combination of reduced savings and higher rates “makes it tougher to have a big pile of presents under the tree this year,” he said.For much of the year, consumer spending has been underpinned by continued strength in the job market and wage gains. Average hourly earnings in October were up 4.1 percent from a year earlier. That was faster than inflation. As measured by the Consumer Price Index, prices were up 3.2 percent.Those factors have helped to keep retail sales climbing on a yearly basis.It’s the Most Wonderful Time of the Year (for the Economy)Three decades of monthly retail spending show how important the holiday season is to our economy.Still, signs of slowing are beginning to show up. Wage growth is slowing, and the unemployment rate has risen over recent months. Like Mr. Quinlan, many economists think that consumers are getting closer to exhausting their savings, though some studies suggest that many have been drawing down their financial cushions only slowly.For many, the resumption of student-loan payments is putting a crimp in holiday spending plans. In a holiday survey by the consulting firm Deloitte, 17 percent of respondents said they had to resume student loan payments, and almost half of them said they planned to reduce their holiday spending as a result.In past years, Tara Cavanaugh, a 37-year-old marketing manager, spent as much as $1,500 on gifts for her family, friends and various office parties, she said. This year, after a move with her partner to Boulder, Colo., and the resumption of her $400-a-month student-loan payments — her partner also has student-loan debt — she said she was paring down her gift list and expected to spend closer to $200.Tara Cavanaugh outside her home in Boulder, Colo. She plans to pare down her gift list this year.Kevin Mohatt for The New York Times“We both make decent incomes and live simply, sharing an old car and our furniture is still from Ikea, but it still feels like we’re struggling,” Ms. Cavanaugh said of her and her partner. “I know a lot of us are feeling the pinch, so I’m not going to freak out about giving gifts to people who are older than me, are doing fine and don’t need anything.”As always, many people are looking for deals, whether on Black Friday or through other pre-Christmas sales. About 52 percent of consumers plan to watch for deals and special offers online and 39 percent plan to hunt for sales in stores this year, according to a survey by the research firm Forrester.When the Amazon toy catalog landed in Claire Kielich’s mailbox in Austin, Texas, her two daughters, ages 5 and 10, who also have birthdays in December, began circling what they wanted.“I’ll be watching to see if any of those things go on sale for Black Friday,” said Ms. Kielich, 40, who does product development and sourcing in the furniture industry. She said she expected to spend around $1,000 this holiday season and already had a stash of stocking stuffers hidden in one of her closets.Ms. Beck in Minneapolis started buying holiday gifts in July, making lists of what friends and family needed or liked, picking up unique items at local craft stores or from small local businesses and storing them in what she calls her “present drawer.” This approach, she said, helps her put more thought into her gifts and keeps her from spending beyond her budget.Her best friend, Ms. Aitchison, takes the opposite approach. While careful with her finances during the year, come the holidays she has no plan and, basically, no budget. Her oldest child has barred her from ever buying him another pair of corduroy pants. Last year, she bought four nine-foot-tall blow-up dinosaur costumes for her adult children.“Of course, nobody needs a blow-up dinosaur costume,” Ms. Aitchison conceded.This holiday season, she plans to shop until she drops.“I don’t think about what I’m going to spend,” she said. “In January and February, because I spent all my money, I’ll eat beans and rice while I pay the bills off.”Despite their different holiday shopping styles, Ms. Aitchison said she and Ms. Beck always had fun shopping together.“She doesn’t get nearly the amount of things that I do,” Ms. Aitchison said. “She’s always like: ‘Kristin stop. Put that down. You don’t need it.’” More

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    Amazon to Meet Regulators as U.S. Considers Possible Antitrust Suit

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    Amazon’s meetings with the Federal Trade Commission, known as “last rites” meetings, are typically a final step before the agency votes on filing a lawsuit.Amazon is scheduled to meet with members of the Federal Trade Commission next week to discuss an antitrust lawsuit that the agency may be preparing to file to challenge the power of the retailer’s sprawling business, according to a person with knowledge of the plans.The meetings are set to be held with Lina Khan, the F.T.C. chair, and Rebecca Kelly Slaughter and Alvaro Bedoya, who are F.T.C. commissioners, said the person, who spoke on the condition of anonymity because the discussions are confidential.The meetings signal that the F.T.C. is nearing a decision on whether to move forward with a lawsuit alleging that Amazon has violated antimonopoly laws. Such discussions are sometimes known as “last rites” meetings, named after the prayers some Christians receive on their deathbed. The conversations, which are usually one of the final steps before the agency’s commissioners vote on a lawsuit, give the company a chance to make its case.If the F.T.C. files suit, it would be one of the most significant challenges to Amazon’s business in the company’s nearly 30-year history. Amazon, a $1.4 trillion behemoth, has become a major force in the economy. It now owns not just its trademark online store, but the movie studio Metro-Goldwyn-Mayer, the primary care practice One Medical and the high-end grocery chain Whole Foods. It is also one of the world’s largest provider of cloud computing services.The F.T.C. has investigated Amazon’s business for years. The company’s critics and competitors have argued that the once-upstart online bookstore has used its retailing clout to squeeze the merchants that use its platform to sell their wares. U.S. officials have grown increasingly concerned about the influence and reach of giant tech companies like Amazon, Google and Meta, which owns Facebook and Instagram. The Justice Department has filed several antitrust lawsuits against Google, with two scheduled to go to trial next month. The F.T.C. has also sued Meta over accusations that it snuffed out young competitors by buying Instagram and WhatsApp.Some of those efforts have stumbled in the courts. Federal judges declined this year to stop Meta from acquiring a virtual reality start-up and Microsoft from buying the video game powerhouse Activision Blizzard, dooming F.T.C. challenges to both deals. In 2022, the Justice Department also lost its bid to challenge UnitedHealth Group’s plan to buy a health tech company.Stacy Mitchell, a co-executive director of the advocacy organization Institute for Local Self-Reliance and an Amazon critic, said she hoped the F.T.C. would pursue a sweeping case against the tech giant. She said the agency should focus on how Amazon’s control of the retail business — from its store to its logistics network that delivers packages — let it hurt competitors and merchants.“It’s a watershed moment,” she said. “What we need to see from the F.T.C. is a case that targets the core of Amazon’s monopolization strategy.”Amazon has said that it competes aggressively with other retailers and that efforts to regulate its business would only hurt consumers and the businesses that sell products through its site.Under the leadership of Andy Jassy, Amazon’s chief executive, the retailer has recently been in retrenchment mode. The company has cut costs, laying off thousands of workers as growth slumped after a soaring period fueled by the pandemic. Last week, Amazon announced that its revenue in the second quarter of the year had increased 11 percent, to $134.4 billion, beating analysts’ expectations.In June, the F.T.C. sued Amazon in a separate case that accused the company of tricking users into subscribing to its Prime fast-shipping membership program and then making it difficult for them to cancel.Amazon has also faced scrutiny from states and regulators in other countries. The District of Columbia’s attorney general filed a lawsuit against the company in 2021, arguing that it had used unfair pricing policies against merchants on its site. The lawsuit was thrown out by a judge, though the attorney general has tried to revive the case. California filed a similar lawsuit last year that is moving forward. In December, Amazon also reached a deal to end a European Union antitrust investigation by agreeing to change some of its practices.If the F.T.C. sues, it would formally pit Ms. Khan — who has been one of Amazon’s most prominent detractors — against the company.While a law student at Yale, Ms. Khan had argued that Amazon’s growth represented a failure of American antitrust laws, which she said had become myopically focused on consumer prices as a measure of whether businesses were violating the law. Amazon’s prices were often low, she wrote in a widely read 2017 paper, but that failed to account for other ways it could bully players across the economy.The paper’s success supercharged a debate in Washington about the power of the tech giants. In 2019, federal antitrust regulators decided to investigate some of the companies. In keeping with a longstanding practice of dividing responsibilities, the Justice Department agreed to look at Google and Apple while the F.T.C. examined Facebook and Amazon.President Biden named Ms. Khan chair to oversee the F.T.C. — giving her control of the Amazon investigation — roughly two years later. More

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    Biden Administration Unveils Tougher Guidelines on Mergers

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    The proposed road map for regulatory reviews, last updated in 2020, includes a focus on tech platforms for the first time.The Biden administration’s top antitrust officials unveiled tougher guidelines against tech mergers on Wednesday, signaling their deepening scrutiny of the industry despite recent court losses in their attempts to block tech deal-making.Lina Khan, the chair of the Federal Trade Commission, and Jonathan Kanter, the top antitrust official at the Department of Justice, released draft guidelines for merger reviews that for the first time include a focus on digital platforms and how dominant companies can use their scale to harm future rivals.The guidelines — which generally provide a road map for whether regulators block or approve deals — show the Biden administration’s commitment to an aggressive antitrust agenda aimed at curtailing the power of companies like Google, Meta, Apple and Amazon.The guidelines, which aren’t enforced by law, follow a losing streak in the courts. A ruling last week prevented the F.T.C. from delaying the closing of Microsoft’s $69 billion acquisition of the video game maker Activision Blizzard. In January, a court sided against the F.T.C. in its lawsuit to stop Meta’s purchase of Within, a virtual reality app maker.The forceful antitrust posture is a pillar of President Biden’s agenda to stamp out economic inequality and encourage greater competition. “Promoting competition to lower costs and support small businesses and entrepreneurs is a central part of Bidenomics,” a senior administration official said in a call with reporters.The new guidelines would apply to all deals across the economy. But they highlight obstacles to competition among digital platforms, including how an acquisition of a nascent rival may be intended to kill off future competition. Such deals, known as killer acquisitions, are prevalent in the tech industry and at the heart of an F.T.C. antitrust lawsuit against Meta, which owns Facebook, Instagram and WhatsApp. The agency has accused Meta of buying Instagram in 2012 and WhatsApp in 2014 to prevent future competition.The F.T.C. and Justice Department also said they would look at how companies used their scale, including their large number of users, to ward off competition. These so-called network effects have helped companies like Meta and Google maintain their dominance in social media and internet search.The agencies also laid out ways in which mergers involving “platform” businesses, the model used by Amazon’s online store and Apple’s App Store, could harm competition. An acquisition could hurt competition by giving a platform control over a significant stream of data, the draft guidelines said, echoing concerns that tech giants use their vast troves of information to squash rivals.“As markets and commercial realities change, it is vital that we adapt our law enforcement tools to keep pace so that we can protect competition in a manner that reflects the intricacies of our modern economy,” Mr. Kanter said in a statement. “Simply put, competition today looks different than it did 50 — or even 15 — years ago.”While they lack the force of law, the guidelines can influence how judges look at challenges to mergers and acquisitions. The effort to update the guidelines has been closely watched by businesses and corporate lawyers that navigate regulatory scrutiny of megadeals.The guidelines were last updated in 2020. In 2021, Mr. Biden ordered the Justice Department and the F.T.C. to update them again as part of a broader effort to improve competition across the economy. The agencies will take public comment on the proposals and could make amendments before final guidelines are adopted.“These guidelines contain critical updates while ensuring fidelity to the mandate Congress has given us and the legal precedent on the books,” Ms. Khan said in a statement.While the F.T.C. experienced the recent court losses, it has forced some companies, including the chip-maker Nvidia and the aerospace giant Lockheed Martin, to abandon some large deals. The Justice Department blocked the publisher Penguin Random House from buying Simon & Schuster, using an unusual argument that the merger would harm authors who sold the publication rights to their books. More

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    For Many Small-Business Owners, a Necessary Shift to Digital Payments

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    The pandemic accelerated a transition to cashless payments, forcing a reckoning among small-business owners. But there are benefits: One owner said the switch saved her $3,000 a month.“Making It Work” is a series about small-business owners striving to endure hard times.When Egypt Otis opened her business, Comma Bookstore and Social Hub, three years ago in Flint, Mich., the pandemic was full blown. But her neighbors welcomed the literature and art she sold in her store that celebrated people of color, as well as the community programs she hosted.Despite the warm reception, Ms. Otis quickly found that she had a sales problem: Her customers wanted to pay with their cellphones.“I realized that people were hardly keeping a wallet or a physical card, which limited my ability to sell and make money,” Ms. Otis said. So she upgraded her transactions platform to include tap-and-go purchases on mobile devices. “People are not carrying cash,” she said. “It’s becoming obsolete.”The number of Americans who say they are “cashless” has jumped in the last five years. Forty-one percent of Americans said they did not use cash for their purchases in a typical week in 2022, up from 29 percent in 2018, according to a Pew Research Center survey released last October.Small-business owners increasingly are making the switch to cashless payments for several reasons, including rising consumer demand, faster checkout, lower labor costs and increased security. Those who wait risk losing revenue, experts say.But there are drawbacks to going cash-free, including a learning curve for entrepreneurs who may not understand how to set up digital payments, a lack of accessibility to credit cards for low-income consumers, and privacy concerns.Signs at a pizza joint in New York indicating it takes multiple forms of cashless payments, a switch that accelerated in the pandemic.Karsten Moran for The New York TimesJuanny Romero was an early adopter of digital payments for her small business. Fifteen years ago, when she founded Mothership Coffee Roasters, a chain of coffee shops in Las Vegas, she began using Square, a low-cost digital payments system for small businesses.“​​I was a young businesswoman and not astute,” she said. But Square saved her $3,000 a month in merchant fees for credit card processing.As Ms. Romero expanded her businesses (to four locations in Las Vegas, with two more on the way), she added more payment options, including Apple Pay and Google Pay.But she noticed a shift during the pandemic: Her customers no longer wanted to use cash, and her employees did not want to handle it. “We didn’t know where Covid was coming from,” she said. “There were still people bringing in cash, but it was scary and dangerous.”When the coin shortage hit in 2020, she ran out of cash altogether, but Ms. Romero found it saved on labor costs. “My managers were standing in line for two hours to deposit the cash,” she said. “I can’t get an armored car service to pick up $100 in cash.”Even so, customer demand prompted her to return to cash sales, which Ms. Romero said are holding steady at about 11 percent of her overall revenue. She said she would go cashless if the share dipped below 10 percent.A digital transaction at Mothership Coffee Roasters in Las Vegas.Bridget Bennett for The New York TimesThe pressure to adapt is growing. More that 2.8 billion mobile wallets were in use at the end of 2020, and that is projected to increase nearly 74 percent to 4.8 billion — nearly 60 percent of the world’s population — by the end of 2025, according to a study released in 2021 by Boku, a fintech companyThe United States lags other countries in adopting cashless payments. Among the most cashless countries in the world is Britain, where the pound makes up only 1 percent of all transactions, according to a report from Merchant Machine, a payment research firm based in London. But in the United States, some small-business owners do not understand the complexities of digital payments.“Smaller merchants, they don’t always have the knowledge and resources to know what to do,” said Ginger Siegel, who leads the North America small-business segment at Mastercard, which offers training to business owners like Ms. Otis of Comma Bookstore.Ms. Otis said she noticed an increase in sales when she began offering mobile payments, which made the checkout process faster. “As a retailer, you want to make the experience as efficient as possible,” she said. “It is a matter of survival.”A veteran using a tap-and-go device to collect donations for the Royal British Legion in London in 2020.Guy Bell/AlamyBenefits include immediate payment, increased sales and the ability to sell to customers who might use other currencies. “You have to set it up, but it’s worth it,” said Kimberley A. Eddleston, a professor of entrepreneurship at Northeastern University.But some business owners say they are hesitant to move too quickly, worried that today’s technology could become obsolete tomorrow. And there are compatibility and cost issues to consider, said Wayne Read, the chief executive of Forged & Formed, an online jeweler with a physical store, Studio D Jewelers, in Woodstock, Ill. In his jewelry sales, where items can be pricey, he said a speedy transaction might not be suitable. “We don’t want people to feel they have rushed their decision,” he said.Despite advances in technology, many Americans still have little or no access to financial services like credit cards and mobile wallets, although that is slowly improving. An estimated 5.9 million households did not have a bank account in 2021, down from 7.1 million households in 2019, according to a survey by the Federal Reserve.Rewards points displayed on a checkout screen at Mothership. Mobile apps allow for cashless payments and can increase customer loyalty.Bridget Bennett for The New York TimesAnother obstacle to adoption is privacy concerns: Some people prefer the anonymity that cash provides. And cash is perceived as a way for consumers to remain aware of expenditures. Complicating the transition to the digital economy, the recent banking turmoil in the United States has made many depositors question the security of financial institutions.But experts agree that cash is unlikely to go away. Consumers in lower income households continue to rely on cash for payments, according to the Fed survey.And small-business owners say that despite the speed and efficiency that cashless payments offer, cash is still a viable option for their customers.“At the end of the day, I know the people I serve,” Ms. Romero said. “I would feel conflicted if I didn’t do the right thing.” More

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    Overstock Buys Intellectual Property to Rename as Bed Bath & Beyond

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    The online retailer is renaming its website and its mobile app after buying the intellectual property of the bankrupt home-goods store.Soon, Overstock.com will become Bed Bath & Beyond — at least in digital form.Overstock, which last week paid $21.5 million to acquire the bankrupt retailer’s intellectual property, said on Wednesday that it would start operating its website under the Bed Bath & Beyond name.The change will roll out in Canada in early July. Starting in August, about a month after the final Bed Bath & Beyond stores in the United States close, customers in the country who visit overstock.com will be redirected to bedbathandbeyond.com.Overstock’s mobile app and its rewards program will also be rebranded. Company executives plan to eventually bring back Bed Bath & Beyond’s popular wedding registry.As Overstock folds the bankrupt retailers’ assets into its own operations, it is considering renaming its business entirely, said Jonathan Johnson, the company’s chief executive. It might settle on Bed Bath & Beyond, he added, but other names are being considered, too.“I can’t tell you how many times I’ve been asked over the years when we’re going to change the name of Overstock,” said Mr. Johnson, who has been at the helm since 2019.For years, Overstock.com has been trying to find a way to update its image as a liquidator, which was how it started in 1999. The company has since moved away from selling only furniture at basement bargain prices, but ultimately, Mr. Johnson said, its name was holding it back in the eyes of consumers.It’s betting Bed Bath & Beyond’s name can help change that.“We will probably have both logos for a little bit, but the goal is to transition as quickly as possible to Bed Bath & Beyond,” Mr. Johnson said.When the home-goods retailer filed for Chapter 11 bankruptcy in April, Mr. Johnson saw an opportunity for his own company. In 2018, when Patrick Byrne, then Overstock’s chief executive, wanted to sell the retail business to focus on cryptocurrency technology, Bed Bath & Beyond was a potential buyer, Mr. Johnson said. That deal never happened.The tables turned when the pandemic hit and Overstock’s sales surged. Bankers approached the company, suggesting that it should purchase Bed Bath & Beyond.On the other hand, Bed Bath & Beyond was financially battered by the pandemic. Like many retailers, it had to temporarily close its stores, and its supply chain buckled as the company sought to keep up with the demand in online shopping. Sales fell drastically as company executives made several merchandising and marketing missteps.“We’ve been watching and watching, and last year when Bed Bath & Beyond fell on some troubles we started thinking, ‘Gee, if it goes bankrupt, we might have the opportunity to purchase what we like without purchasing what gave us pause before,’” Mr. Johnson said. (Overstock did not purchase Bed Bath & Beyond’s store locations or inventory.)As Overstock folds the bankrupt retailers’ assets into its own operations, it is considering renaming its business entirely, said Jonathan Johnson, Overstock’s chief executive.Alex Wong/Getty ImagesIn the week after its bid for Bed Bath & Beyond’s assets became public, Overstock added more than 100,000 bedding and bath items to its site as vendors raced to do business with the company. This was after months of Overstock’s courting them and making concessions like agreeing to hold inventory in warehouses, a rare move for the online retailer. Now, Mr. Johnson said, he does not think his company will have to do that to win vendors over.The acquisition also gives Overstock a trove of customer data. It has information on what Bed Bath & Beyond shoppers bought online and how frequently they visited the website — a helpful tool as Overstock contends with its own falling sales. On Wednesday, the company said it expected its second-quarter revenue to decline in the low 20 percent range from the year before.Overstock’s sales peaked in 2021, when more people bought furniture during the height of the pandemic. Its active customers have also been declining, and it said in April that it had 4.8 million users. Bed Bath & Beyond’s active customer list for its online shoppers is twice as large.Overstock expects that its customer count will increase in the coming months, while the average amount that shoppers spend may shrink because the small appliances and home goods that Bed Bath & Beyond was known for are less expensive than the couches and patio tables Overstock normally sells. The online retailer will also spend more on marketing to make consumers aware of its branding changes.This deal comes as U.S. consumers are spending less on furniture and more on eating out and traveling. Sales at furniture and home furnishing stores in the first five months of the year fell nearly 3 percent from a year earlier, according to Commerce Department data, which is not adjusted for inflation. “Opportunities like this come up once in a while, and they come up sometimes when times are tough,” Mr. Johnson said. “Will the category still be tough in the short to medium term? I think so, but I think getting all these new customers and rebranding helps us cut through some of that headwind.”During the integration process, Overstock plans to hire workers with marketing, merchandising and technology expertise. The company has been trying to recruit former Bed Bath & Beyond employees.As for the fate of Bed Bath & Beyond’s famed 20 percent coupon?“We’ll always be a couponer; we’ll always do the site sales,” Mr. Johnson said. “Whether we run at 20 percent as frequently as Bed Bath did — probably not. But it’ll be there for the beginning.” More

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    Congress Spotlights Forced Labor Concerns With Chinese Shopping Sites Shein and Temu

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    A congressional investigation into Temu and Shein offered new insight into services that are delivering a deluge of cheap and little-regulated products.Lawmakers are flagging what they say are likely significant violations of U.S. law by Temu, a popular Chinese shopping platform, accusing it of providing an unchecked channel that allows goods made with forced labor to flow into the United States.In a report released Thursday, the House Select Committee on the Chinese Communist Party said Temu, a rapidly growing site that sells electronics, makeup, toys and clothing, had failed “to maintain even the facade of a meaningful compliance program” for its supply chains and was likely shipping products made with forced labor into the United States on a “regular basis.”The report stems from a continuing investigation into forced labor in supply chains that touch on China. Lawmakers said the report was based on responses submitted to the committee by Temu, as well as the fast fashion retailer Shein, Nike and Adidas.The report offered a particularly scathing assessment of Temu, saying there is an “extremely high risk that Temu’s supply chains are contaminated with forced labor.” The site advertises itself under the tagline “Shop like a billionaire” and is now the second most downloaded app in the Apple store.The report also criticized Shein’s use of an importing method that allows companies to bring products into the United States duty-free and with less scrutiny from customs, as long as packages are sent directly to consumers and valued at under $800. Some lawmakers have been pushing to close off this shipping channel, which is called de minimis, for companies sourcing goods from China.Lawmakers said that they were troubled by what the bipartisan committee’s investigation had uncovered so far, and that Congress should review import loopholes and strengthen forced labor laws.“Temu is doing next to nothing to keep its supply chains free from slave labor,” said Representative Mike Gallagher, a Wisconsin Republican who heads the committee. “At the same time, Temu and Shein are building empires around the de minimis loophole in our import rules: dodging import taxes and evading scrutiny on the millions of goods they sell to Americans.”“The initial findings of this report are concerning and reinforce the need for full transparency by companies potentially profiting from C.C.P. forced labor,” said Representative Raja Krishnamoorthi, an Illinois Democrat and a co-author of the report, referring to the Chinese Communist Party.Temu, which began operating in the United States in September, told the committee that it now brought millions of shipments into the United States annually through a network of more than 80,000 suppliers that sell directly from Chinese factories to U.S. consumers. The site sells clothing, temporary tattoos, modeling clay, electronics and other items directly to consumers for low prices, like $3 for a baby romper, $6 for sandals and $8 for a vacuum.The report also contained new data showing that Temu and Shein make heavy use of the de minimis rule, together accounting for almost 600,000 such packages shipped to the United States daily.The shipping method allows retailers to sell their goods to consumers at cheaper prices, since they are not subject to duties, taxes or government fees that apply to traditional retailers that typically ship overseas goods in bulk.A Shein pop-up store last year at the Shops at Willow Bend in Plano, Texas.Cooper Neill for The New York TimesDe minimis shipping also requires far less information to be disclosed about the products and the companies involved in the transaction, making it harder for U.S. customs officials to detect packages with narcotics, counterfeits and goods made with forced labor. The number of de minimis packages entering the United States more than tripled between 2016 and 2021, when it reached 720 million.At an annualized rate, the shipments reported by Shein and Temu would represent more than 30 percent of the de minimis shipments that came into the United States last year, and nearly half of those packages from China, the report said.Both Shein and Temu have steadily taken market share from U.S. brick-and-mortar retailers and won over younger consumers by investing in sophisticated e-commerce technology and offering hundreds more new products than competitors. Among teenagers, Shein was the third most popular e-commerce site behind Amazon and Nike, according to a Piper Sandler report this spring.As their popularity has grown, so has congressional scrutiny of the firms, given their ties to China. Shein was originally based in China but has moved its headquarters to Singapore. Temu, which is based in Boston, is a subsidiary of PDD Holdings, which moved its headquarters to Ireland from China this year.Lawmakers have been questioning their relationship with the Chinese government, as well as the companies’ ability to vet their supply chains to ensure they don’t contain materials or products from Xinjiang. Last year, the U.S. imposed a ban on products from Xinjiang, citing the region’s use of forced labor in factories and mines.The Chinese government has carried out a crackdown in Xinjiang on Uyghurs and other ethnic minorities, including the organized use of forced labor to pick cotton; work in mines; and manufacture electronics, polysilicon and car parts. Because of this, the U.S. government now presumes all materials from the region to be made with forced labor unless proved otherwise.A young Uyghur women working in a garment factory in Xinjiang in 2019.Gilles Sabrié for The New York TimesShein said in a statement that it had zero tolerance for forced labor and had a robust compliance system, including a code of conduct, independent audits, robust tracing technology and third-party testing. It provided detailed information to the House committee and will continue to answer its questions, the company said.“We have no contract manufacturers in the Xinjiang region,” it said. “As a global company, our policy is to comply with the customs and import laws of the countries in which we operate.” Temu did not respond to a request for comment.Laboratory tests commissioned by Bloomberg News in November found that some Shein clothing had been made with cotton from Xinjiang. Shein didn’t dispute those findings, but said in a statement to Bloomberg that it took steps in all global markets to comply with local laws and had engaged another lab, Oritain, to test its materials.The congressional report also criticized Temu’s failure to set up a compliance or auditing system that could independently verify that its sellers were not sourcing products from Xinjiang.Temu told the committee that it had a reporting system that consumers and sellers could use to file complaints, and that it asked its sellers to sign a code of conduct specifying a “zero-tolerance policy” for the use of forced, indentured or penal labor. Temu’s code of conduct also says the company reserves the right to inspect factories and warehouses to ensure compliance.But the code does not mention Xinjiang or the U.S. ban, and Temu told the House committee that it did not prohibit vendors from selling products made in Xinjiang, the report said.Temu also argued that its use of direct shipping meant that the U.S. consumer, not Temu, would bear the ultimate responsibility for adhering to the ban on Xinjiang goods.“Temu is not the importer of record with respect to goods shipped to the United States,” the report quoted it as saying.Customs lawyers said that it was not entirely clear which party would be liable for complying with the U.S. ban, but that any company facilitating the importation of goods from Xinjiang could face civil or criminal penalties.The committee report also pictured a key chain that was listed on Temu’s website this month and labeled “pendant with Xinjiang cotton.” The key chain itself is shaped like a bud of cotton, and the report said that the Xinjiang label “may refer to the materials, the supplier, the pattern or the origin of the product.”Temu’s “policy to not prohibit the sale of products that explicitly advertise their Xinjiang origins, even in the face of mounting congressional and public scrutiny on related topics, raises serious questions,” the report said.The New York Times was not able to verify whether the product is made using Xinjiang cotton, which is barred under U.S. law. The Times found an identical product listed for sale on a Chinese wholesale site that was described as manufactured in Henan Province, outside Xinjiang.A Times review of information shared by Temu vendors on Chinese social media sites also suggested that Temu did not require sellers to provide detailed information about where their products were made or which companies manufactured them.Vendors sharing tips online about Temu’s product review process gave several reasons that Temu commonly rejected new listings: for example, if the price was too high, if the samples were inconsistent with the photos or if the goods lacked consumer warning labels. But none mentioned concerns about links to Xinjiang or the U.S. import ban.Jordyn Holman More

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    in Economy

    Falling Used-Car Demand Puts Pressure on Carvana and Other Dealers

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    Dealerships are seeing sales and prices drop as consumers tighten their belts, putting financial pressure on companies like Carvana that grew fast in recent years.About a year ago, the used-car business was a rollicking party. The coronavirus pandemic and a global semiconductor shortage forced automakers to stop or slow production of new cars and trucks, pushing consumers to used-car lots. Prices for pre-owned vehicles surged.Now, the used-car business is suffering a brutal hangover. Americans, especially people on tight budgets, are buying fewer cars as interest rates rise and fears of a recession grow. And improved auto production has eased the shortage of new vehicles.As a result, sales and prices of used cars are falling and the auto dealers that specialize in them are hurting.“After a huge run up in 2021, last year was a reality check,” Chris Frey, senior manager of economic and industry insights at Cox Automotive, a market research firm. “The used market now faces a challenging year as demand weakens.”According to Cox, used-car values fell 14 percent in 2022 and are expected to fall more than 4 percent this year. That shift means many dealers may have no choice but to sell some vehicles for less than they paid.The industry’s difficulties have been exemplified by Carvana, which sells cars online and became famous for building “vending machine” towers where cars can be picked up. The company recently reported a quarterly loss of more than $500 million, and has laid off 4,000 employees.In the last 12 months, Carvana piled up debt. Its stock price has fallen by more than 95 percent in the last 12 months, and three states temporarily suspended its operating license after consumer complaints.“We think there’s a decent chance the company will end up having to file for bankruptcy protection,” said Seth Basham, an Wedbush analyst. “They have too much debt for the level of sales and profitability and can’t support that debt load, and likely will need to restructure.”In a statement to The New York Times, Carvana said it was confident it had “sufficient” funds to turn its business around, noting the company had $2 billion in cash and an additional $2 billion in “other liquidity resources” at the end of the third quarter.It has also hired the investment bank Moelis & Company and is working to reduce its inventory of vehicles and cut the cost of reconditioning them.Used-car values fell 14 percent in 2022. Some dealers may have no choice but to sell some vehicles for less than they paid.An Rong Xu for The New York Times“Millions of satisfied customers have responded positively to Carvana’s e-commerce model for buying and selling cars,” the company said. “Although the current environment and market has drawn attention to the near term, we continued to gain market share in the third quarter of 2022, and we remain focused on our plan to drive to profitability.”CarMax, another used-car giant, is also hurting, although it is on much steadier ground. In the three months that ended in November, its vehicle sales fell 21 percent to 180,000, and net income tumbled 86 percent, to $37.6 million.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    in Economy

    With Layoffs, Retailers Aim to Be Safe Rather Than Sorry (Again)

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    Companies that ramped up hiring in areas like technology over the past few years are cutting back as customers slow their spending.The retail industry is trying to figure out its correct size.Retailers, faced with sky-high demand from shoppers during the pandemic, spent the past three years ramping up their operations in areas like human resources, finance and technology. Now, times have changed.A public that rushed to buy all sorts of goods in the earlier parts of the pandemic is now spending less on merchandise like furniture and clothing. E-commerce, which boomed during lockdowns, has fallen from those heights. And with consumers worried about inflation in the prices of day-to-day necessities like food, companies are playing defense.Saks Off 5th, the off-price retailer owned by Hudson Bay, laid off an unspecified number of workers on Tuesday. Saks.com is laying off about 100 employees, or 3.5 percent of its workers. Stitch Fix laid off 20 percent of its salaried workers this month and closed a distribution center in Salt Lake City. Last week, Wayfair said it would lay off 1,750 people, or 10 percent of its work force, and Amazon started laying off 18,000 workers, many of them in its retail division. Bed Bath & Beyond cut its work force this month as it tries to shore up its finances and prepares for a possible bankruptcy filing.While it’s not unusual for major retailers to announce store closings and some job cuts after the blitz of the holiday season, the recent spate of layoffs is more about structural changes as the industry recalibrates itself after the rapid growth from pandemic-fueled shopping. And it accompanies broader worries about the state of the U.S. economy and layoffs by prominent tech companies.“Retailers are really being cognizant of capital preservation,” said Catherine Lepard, who leads the global retail market for the executive search firm Heidrick & Struggles. “They don’t know how long this cooler economy is going to last, and they want to make sure they have the right cash to get through that. For retailers that are struggling, it really means tightening the belt with some cost cutting.”Sales during the all-important holiday shopping season were weaker than in years past, when growth hit record levels. December retail sales increased 6 percent from the same period last year, but that number was not adjusted for inflation, which was at 6.5 percent.Department stores posted sizable sales declines. At Nordstrom, sales in the last nine weeks of 2022 decreased 3.5 percent from a year earlier, with the company noting that they “were softer than prepandemic levels.” Macy’s said its holiday sales had been on the lower end of its expectations.Macy’s holiday sales were on the lower end of expectations, the company said. Mathias Wasik for The New York TimesThe layoffs at certain retail companies are a sign that the industry is bracing for a slowdown and another change in how people shop.“To mitigate macroeconomic headwinds and best position our business for success, we have made changes to streamline our organizational structure,” Meghan Biango, a spokesperson for Saks Off 5th, said in a statement. “As part of this, we made the difficult decision to part ways with associates across various areas of the business.” The layoffs affected divisions such as talent acquisition and supply chain.The State of Jobs in the United StatesEconomists have been surprised by recent strength in the labor market, as the Federal Reserve tries to engineer a slowdown and tame inflation.Walmart: The retail giant is significantly raising its starting wages for store workers, as it battles to recruit and retain workers in a tight retail labor market.Tech Layoffs: The industry’s recent job cuts have been an awakening for a generation of workers who have never experienced a cyclical crash.Infrastructure Money: Government spending on initiatives intended to combat climate change and rebuild infrastructure are expected to land this year. The effects on the labor market will be deep but hard to measure.Restaurant Workers: Mandatory $15 food-safety classes are turning cooks, waiters and bartenders into unwitting funders of a lobbying campaign against minimum wage increases.Not all retailers are in a defensive crouch. For instance, Walmart announced this week that it was raising the minimum wage for its store employees in a bid to attract and retain workers in a tight labor market.Still, some retailers are becoming focused less on bringing in new customers — an expensive undertaking — and more on retaining those they gained during the pandemic.“There’s a sense of conservatism,” said Brian Walker, chief strategy officer at Bloomreach, which works with retailers on their e-commerce and digital marketing businesses. “They’re still adjusting in many ways to this omnichannel retail environment and are probably seeing this as an important time to calibrate their organizations and make sure they have the right people, and not too many of them to be pragmatic and weather a potential storm.”That means fewer projects that require lots of money and time and more investments where a company can start seeing results quickly, Mr. Walker said.Ms. Lepard agreed. “This isn’t the economy to really get creative and take on high risk,” she said. “There might be a pulling back of some of that innovation in future investment to make sure they’re pacing themselves.”It’s also a moment for retailers to assess what e-commerce abilities they need. In the early months of the pandemic, online sales exploded as many brick-and-mortar stores went dark. That growth has slowed. E-commerce traffic in North America declined 1.6 percent in the third quarter of 2022 compared with a year earlier, according to Bloomreach’s Commerce Pulse data. Conversion rates — the measure of someone’s buying an item after seeing it advertised — dropped 12 percent during the same period.“This is where people overshot the runway,” said Craig Johnson, president of the retail advisory firm Customer Growth Partners, who has tracked the industry for 25 years. “This works like a ratchet. It might go up to 27 percent, but that’s going to normalize,” he added, referring to the share of total e-commerce spending for the first year of the pandemic, when many stores were grappling with Covid restrictions and closures.When online spending was rising, many companies pushed to fill roles that could help them meet the demand. Now they have to adjust to a new reality.“Unfortunately, along the way, we overcomplicated things, lost sight of some of our fundamentals and simply grew too big,” Niraj Shah, Wayfair’s chief executive, said in a note to employees last Friday. His company, which reported in November that its net revenue was down 9 percent from a year earlier, is looking to save $1.4 billion.Demand for luxury goods is still there, but those retailers say they need to restructure to continue to innovate.Mathias Wasik for The New York TimesIn the luxury sector, the shopper demand is still there, but a restructuring is needed to continue to innovate. As part of its layoffs, Saks.com also separated its technology and operations teams.“We are at a point in our trajectory as a digital luxury pure-play where we need to optimize our business to ensure we are best positioned for the future,” Nicole Schoenberg, a Saks spokeswoman, said in a statement. “These changes are never easy, but they are necessary for our go-forward success.”While reducing head count might help save costs in the short term, retailers will have trouble in the future if they do not also address how to improve the customer experience online, said Liza Amlani, founder of Retail Strategy Group, which works with brands on their merchandising and planning strategies.“With Wayfair, and as with many digital players, what we’ve seen in the last three years is that they scaled and grew too quickly,” Ms. Amlani said. “They banked on an influx of spending across digital. They didn’t invest where they needed to invest.”The retail layoffs are an about-face from 2021, when companies couldn’t hire frontline workers fast enough. After the initial jolt of the pandemic, which led many retailers to furlough or outright fire workers, many people received stimulus checks from the government. They wanted to spend that money, and when companies needed to ramp up in-store services again, they often struggled to find enough workers.Recalling that difficulty might give some retailers pause before they lay off workers this time, Mr. Walker said. If a steep downturn never comes, or if there’s a sudden rebound in demand, companies don’t want to be stuck without enough employees.But the next few months could be rough for retailers, as profit margins shrink and revenue growth slows from what it was the past couple of years. In that kind of environment, investors generally like to see large companies take steps to cut costs. And once layoffs begin, a kind of industry groupthink can set in.“Once a couple of companies start to do it,” said Peter Cappelli, a professor at the University of Pennsylvania’s Wharton School who researches management and human resources, “then it creates some momentum where then you’ve got to explain why you’re not doing what everybody else is doing.” More