For many Americans, the end of the year is a time for parties, family gatherings, festive meals and, of course, shopping. And all that holiday celebrating makes the fourth quarter the most important time of the year for the U.S. economy. 1995 2000 2005 2010 2015 2020 🎁 🎁 🎁 🎁 🎁 🎁 🎁 🎁 […] More
Economists spent much of 2023 warning that a recession could be imminent as the Federal Reserve raised interest rates to the highest level in more than two decades. But for companies like Soergel Orchards in western Pennsylvania, a slowdown is nowhere in sight.“People are buying the decorative things,” said Amy Soergel, manager at the company who explained that gourds and cornstalks were in high demand and that customers were coming out to select pumpkins and apples. “People love to pick — people will pick anything.”Sales are up even though a string of rainy weekends have held back attendance at the farm’s annual fall festival. Demand at the hard cider shop has been solid. And the owners are bracing for a strong season in their store selling Christmas decorations.Soergel’s bustling business is a microcosm of a trend playing out nationwide. Consumer demand has unexpectedly boomed in 2023, defying widespread expectations for a slowdown and helping to fuel strong overall growth. The economy expanded at an eye-popping 4.9 percent annual rate in the third quarter, far faster than the roughly 2 percent pace officials at the Fed think of as its standard growth pace.That is great news for American companies. But it is a also a source of confusion. Why is the economy still growing so quickly more than a year and a half into the Fed’s campaign to slow it down, and how long will the upswing last?Fed officials have lifted interest rates above 5.25 percent, making it more expensive to take out a mortgage, borrow to expand a business or carry a credit card balance. Those moves were meant to trickle out through markets to cool the real economy. Some parts of the economy have felt the squeeze — existing home sales have slowed, for instance. Yet employers continue to hire and families keep spending.Customers were coming to Soergel Orchards to select pumpkins and apples.Ross Mantle for The New York Times“People love to pick — people will pick anything,” a manager said.Ross Mantle for The New York TimesCornstalks and gourds are in high demand at Soergel’s.Ross Mantle for The New York TimesIt is difficult to predict what comes next as the all-important holiday shopping season approaches. A solid job market and cooling inflation could combine to give consumers the wherewithal to keep powering the economy forward. But many companies are being careful not to build up too much inventory or predict too strong a sales outlook, worried that higher borrowing costs could collide with smaller savings piles and the accumulated effects of more than two years of rapid inflation to make Americans thriftier.“Sentiment definitely feels down,” Thomas Barkin, president of the Federal Reserve Bank of Richmond, said during an interview on Oct. 19. “The folks I talk to are still clamping down in preparation for 2024.”What happens with holiday shopping could help shape what the Fed does next.The central bank has been trying to slow growth for a reason: Inflation has been above 2 percent for 30 months now. To get prices under control, policymakers think they need to tamp down demand.The logic is fairly simple. If rapid hiring continues and wage gains prove quick, people who are earning more money are likely to feel confident and keep spending. And if shoppers are eager to buy restaurant dinners, new gadgets and updated wardrobes, it will be easier for companies to protect their profits by raising prices.That is why Fed officials are keeping an eye on how strong consumers and the job market remain as they contemplate what to do next with interest rates. Policymakers are almost sure to leave rates unchanged at their meeting on Nov. 1, and a number of them have suggested that they may be done raising borrowing costs altogether.Soergel’s owners are bracing for a strong season in their store selling Christmas decorations.Ross Mantle for The New York TimesBut top officials have kept alive the possibility of one final quarter-point increase, if economic data were to remain buoyant.“We are attentive to recent data showing the resilience of economic growth and demand for labor,” Jerome H. Powell, the Fed chair, said in a recent speech, adding that continued surprises “could put further progress on inflation at risk and could warrant further tightening of monetary policy.”So far, companies offer a mixed picture on the outlook. Many are suggesting that seasonal shopping is off to a strong start. Halloween spending is expected to climb to a record $12.2 billion, up 15 percent from last year’s record of $10.6 billion, according to the National Retail Federation’s annual survey. The group is expected to release its holiday forecast this week.Walmart reported strong sales during its back-to-school season, which its chief executive noted was a good indicator for how spending would look during Halloween and Christmas.“Typically when back-to-school is strong, it bodes well for what happens with Halloween and Christmas,” Doug McMillon, the Walmart chief, said on an earnings call in August.But some companies are uncertain. The Tractor Supply chief executive, Hal Lawton, said during an earnings call last week that the retailer was stocking up on fall and winter décor — selling, for instance, a skeleton cow that was a “TikTok viral sensation.”But “we acknowledge there is a broader range of estimates for holiday, consumer spending than we’ve seen over the last couple of years,” he added.And some analysts think winter shopping could prove weak. Craig Johnson, founder of the retail consultancy Customer Growth Partners, expects holiday sales to grow at 2.1 percent, the slowest since 2012, he said in a report released Oct. 17.“The fact that people had a good Halloween doesn’t necessarily mean that they’re going to have a good holiday,” Mr. Johnson said. “It’s a different buying mentality and there’s not a carryover — you’re not going to see apparel lines from Halloween extend over into Christmas.”Retailers report that they are carefully watching how much inventory they have headed into the holidays, and a Fed survey of business experiences from around the Fed’s 12 districts referenced the word “slow,” “slower” or “slowing” 69 times.Demand at the on-site hard cider shop has been solid.Ross Mantle for The New York TimesPart of the challenge in forecasting is that consumers seem to be splitting into two groups: Wealthier consumers keep spending even as the bottom tier of shoppers either pull back or look for deals.The department store chain Kohl’s says it is seeing this type of bifurcation play out in its customer base and is adjusting its stores accordingly.Shoppers at the Kohl’s in Ramsey, N.J., were greeted with a range of already-discounted Christmas items like miniature snowmen and ornaments at the front of the store. That design was done on purpose — Kohl’s executives want the section to appeal to deal-hungry shoppers.But in a sign that higher earners could fuel growth, it has also started to stock new category items like decanters, wine glasses and electric corkscrews.“We want to make sure we’ve got the right broad breadth of assortment for the breadth of customer base that we’ve got,” said Nick Jones, Kohl’s chief merchandising and digital officer. “And that’s an element of making sure everything’s got to be great value. But great value doesn’t always mean low price.” More
Retailers are expanding their own private-label food and beverage offerings, attracting customers looking for less expensive options.The snack chips had become pretty pricey.For years, customers stopping at Casey’s General Stores, a convenience store chain in the Midwest, hadn’t thought twice about snagging a soda and a bag of Lay’s or Doritos chips. But over the past year, as the price of a bag of chips soared and some customers felt squeezed by the high cost of gas and other expenses, they began picking up Casey’s less-expensive store brand.So Casey’s began stocking more of its own chips, in a variety of new flavors. This summer, Casey’s brand made up a quarter of all bags of chips sold, eating into the sales of big brands like Frito-Lay, which is owned by PepsiCo.“As inflation continues to ratchet up, more people are open to trying alternatives,” said Darren Rebelez, the chief executive of Casey’s, which has 350 private-label products and plans to add 45 this year. “If you put the alternative right on the shelf, right next to the expensive option, people may say, ‘What the heck,’ and give it a try.”Large food companies gobbled up market share during the pandemic. With supply chain issues affecting what was on the shelves, people were buying basically whatever they could find. And they kept buying even as prices soared when the food and beverage brands raised prices to maintain their profit levels while still covering rising ingredient and labor costs.But with retailers now expanding their store-owned food and beverage offerings, consumers are slowly shifting their spending. Overall, private-label foods and beverages have crept up to a 20.6 percent share of grocery dollars from 18.7 percent before the pandemic, according to the market research firm Circana.In some categories like canned vegetables and cheese, private-label goods have garnered a significant portion of the market.Andres Kudacki for The New York TimesBut a deeper look at some categories reveals private-label goods are gaining significant ground on national brands. Private labels snagged 38 percent of canned vegetable sales in the three months that ended June 30, according to Numerator, another market research firm. Numerator’s data also shows private-label cheese held 45 percent of the market and coffee nearly 15 percent.The shift in spending reflects a customer base that is nearing or at its tipping point. Inflation, which climbed to 3.7 percent in September, is running at a less-rapid pace than a year ago, but millions of shoppers still face increasingly high prices in grocery stores.The trend is having a greater effect among those with lower incomes, who spend a greater share of their paycheck on food, even as a pandemic-era policy that increased the amount of money that food-stamp recipients received over the last three years has ended. This month, payments on federal student loans, which had been on pause for the pandemic, also resumed. Adding to the financial burden, rates on credit cards and mortgages are rising.Two-thirds of consumers said in July that they bought less-expensive groceries at retailers, an increase of four percentage points from a year earlier, according to the consulting firm McKinsey. The shift, the firm said, was particularly pronounced among those with incomes less than $100,000 in categories such as meat, dairy and staples.“Consumers are trading down,” said Rupesh D. Parikh, an equity analyst at Oppenheimer & Company who covers food, grocery and consumer products. He recently bought a box of Kellogg’s Mini Wheats cereal at Walmart along with the Walmart version. “The Kellogg’s cereal was 75 percent more expensive, and I couldn’t tell the difference between them,” he said.Big brands, in response, are already starting to offer small sale prices on certain foods, like salty snacks. “The question is how deep they are willing to go in promotions,” Mr. Parikh said.The expansion in private-label goods is also a response to a changing grocery landscape. Competition is revving up because of consolidation, led by Kroger’s proposed $24.6 billion merger with Albertsons, and the push into the United States by entrants like the German discount chain Aldi, which stocks 90 percent of its shelves with private-label goods. In August, Aldi agreed to acquire 400 Winn Dixie and Harveys Supermarket stores, giving it a significant presence in the Southeast.Retailers say they need the private-label goods to give consumers a broader array of choices. The store brands are also typically more profitable for the retailers than products from big food companies.But perhaps the biggest factor is a seismic shift in consumer attitudes. Older generations that grew up with “generic” ketchup or soup recall them as bland, tasteless versions of the name brands. Retailers, which have dumped the term “generic,” insist that the quality of the private-label foods and beverages has improved substantially. Social media platforms like TikTok and Reddit are filled with young people hyping their favorite store brand foods at Aldi and Trader Joe’s.“If the food is not good quality, our reputation is at risk,” said Scott Patton, the vice president of national buying for Aldi, who said the chain was seeing increased traffic in all income levels. “If you’re going to sell a store-branded apple cinnamon ice cream, it had better be the best apple cinnamon ice cream you’ve ever had.”Retailers are offering customers “belly fillers,” basic foods at low prices that are virtual clones of national brands, but they are also hunting for ways to differentiate themselves, said Jordan Bouey, the owner of Silver State Baking, a Las Vegas-based manufacturer that makes cookies, bars and breads for grocery chains and retailers.“If there’s a category that doesn’t have a big national brand, retailers are looking to be unique and give the shoppers what they’re looking for, like a protein cookie,” Mr. Bouey said.The private-label pasta carried by Wegmans includes more high-end varieties aimed at “the food enthusiast,” an executive said.Andres Kudacki for The New York TimesAt a Wegmans in Hanover, N.J., the dried pasta aisle was stocked with fettuccine, shells and spaghetti from well-known brands like Barilla and De Cecco. But the vast majority of the pasta on the shelves was Wegmans’ own brand, one line priced at 99 cents a box and another, Amore, that is imported from Italy and $4.99 a box, about $2 more than some of the national brands.“We want our brand to serve the value customer who is on a budget,” said Nicole Wegman, who was named president of Wegmans Brand in 2021. Wegmans has expanded its private-label business in recent years to more than 17,000 products, including deli and prepared meals, frozen vegetables and healthy snacks.“But we also want products, like our cheese and our breads, that are fun for the food enthusiast,” Ms. Wegman said. “They’re specialty items and more expensive to make, so we have to charge more for them.”Indeed, executives at Casey’s, which started dabbling in private-label goods three years ago, said they were trying not to compete with the national brands but rather expand what’s available for customers. In some cases, that means offering flavors the national brands do not.Sales of limited-edition Casey’s chips in flavors like sweet corn, barbecue brisket and jalapeño Cheddar sold well this summer. “Those are the kind of products that a Frito-Lay is not going to make because it is not a national flavor profile that is going to work for their business,” Mr. Rebelez said.But he also acknowledged that some Casey’s customers were simply looking for deals.Take candy bars. For years, retailers would not compete against behemoths like Hershey and Mars because customers remained loyal to the brands they had grown up eating. But as the price of candy bars rose in recent years, some customers stopped buying.So Casey’s created four of its own lower-priced candy bars, including a chocolate with mint and a chocolate caramel.“I was skeptical going in, but those candy bars have performed really well,” Mr. Rebelez said, adding that Casey’s was working on more iterations. “There is a breaking point for consumers, and in certain products and categories we’ll provide an alternative.” More
After scrambling to fill out work forces in recent years, many companies are reporting more modest goals for temporary employment.As the most important selling season for retailers approaches, job applicants may feel a chill.Macy’s and Dick’s Sporting Goods plan to hire fewer seasonal workers after a surge in the past two years, when shoppers thronged to stores after pandemic lockdowns and employers struggled to keep up. Many retailers have dropped the incentives they used over the past few years to bring workers in the doors, such as signing or referral bonuses and steeper employee discounts.The career site Indeed said that searches for seasonal jobs were up 19 percent from last year, but that listed positions were down 6 percent. Companies helping businesses find temporary workers note that major retailers have been slower to release hiring plans this year. And on Indeed, fewer job postings are described as urgent needs.Seasonal hiring helps retailers handle the increased shopping during the fourth quarter, often referred to as “peak season.” Sales in November and December can account for a quarter of some retailers’ annual revenue. In the weeks leading up to Christmas, foot traffic in stores and online shopping are usually at their height.Early estimates point to an increase in retail spending this holiday season, but not at the fast pace of recent years.Some economists and consultants see the trends in hiring and pay as a sign that the red-hot labor market of the past couple of years has cooled. Retailers’ work forces, unsteady throughout the Covid-19 pandemic, are starting to stabilize. As inflation erodes shoppers’ budgets and confidence — and savings from pandemic relief programs are drawn down — the hiring plans may be part of a cautious approach that extends to inventories and sales projections.“The seasonal hiring market looks a whole lot more like 2019 than those pandemic bounce-back years,” said Nick Bunker, director of North American economic research for Indeed. “I really do think this is emblematic broadly of what we’re seeing in the U.S. labor market, where demand for workers overall is fairly strong but down from where it was in the last year and a half.”Macy’s is aiming to hire 38,000 workers, 3,000 below its 2022 plan. In 2021, Macy’s said it aimed to hire 76,000 people — in both permanent roles and seasonal jobs — during the holiday season. Of those positions, 48,000 were temporary.Dick’s said it would hire up to 8,600 seasonal workers, down from targets of 9,000 last year and 10,000 in 2021 — and up only slightly from 8,000 in 2019.“The seasonal hiring market looks a whole lot more like 2019 than those pandemic bounce-back years,” said Nick Bunker, an economic researcher at Indeed.Nam Y. Huh/Associated PressTarget and United Parcel Service plan to hire the same number of workers as last year, about 100,000 each. In a statement, Target said its seasonal associates would supplement the hiring it had done throughout the year to staff up its stores and supply chain facilities.“This year, we are starting the season with stability in our work force and a continued commitment to scheduling flexibility for our team, which has helped us retain team members and create a more experienced work force,” the company said in a post on its blog.Walmart, the nation’s biggest retailer, echoed that sentiment.“I’m also excited that we’re staffed and ready to serve customers this holiday season,” Maren Dollwet Waggoner, senior vice president of people at Walmart U.S., said in a post on LinkedIn. “We’ve been hiring throughout the year to be sure we’re ready to serve customers however they want to shop.”A Walmart spokeswoman added that if a store had additional staffing needs during the holiday season, it would offer extra hours to current employees before looking externally. Walmart did not say how many seasonal workers it planned to hire this year, as it did in years past. (In 2022, it said it was looking to fill 40,000 seasonal positions, including truck drivers and call center workers.)Amazon is a notable exception, saying it will hire more seasonal workers this year — 250,000, up from 150,000 last year. It also said that a $1.3 billion investment would bring the average hourly wage of those jobs to more than $20.50 and that it would still offer signing bonuses in some locations.Matching staffing to demand helps ensure that retailers eke out as many sales as they can.Seasonal workers are “the folks that are on the front lines of their business,” said John Long, North America retail sector leader at the consulting firm Korn Ferry, adding that aside from a store’s inventory, they “are going to be the make-or-break piece of the equation of whether the retailer makes their numbers or they don’t.”Amazon said it planned to hire 250,000 seasonal workers, up from 150,000 last year.Karsten Moran for The New York TimesAfter paring their work forces during the worst of the pandemic, employers in the retail and hospitality industries scrambled to fill open positions as workers sought more flexibility, switched companies frequently or stood on the sidelines. To get back to prepandemic staffing, retailers have used evergreen requisitions — continually displayed postings advertising essential roles that often need to be filled — and have started hiring seasonal workers as early as August.They have also given more hours to part-time workers and relaxed qualifications. To reduce turnover, many companies have bumped up their base wages for hourly positions.These factors have complicated the explanation for reduced seasonal hiring this year, said Melissa Hassett, a vice president at Manpower Group who works with large retailers, logistics and distributors across the country.“If you’re always hiring, you’re just not going to see an increase in postings happen very often,” she said. “So sometimes when you look at the increase in postings for retail it’s not as accurate as you think it is.”But there is also a feeling that the leverage of retail job applicants will fade.“In the past it felt like the workers had a lot more upper hand in terms of being able to demand what they need,” Yong Kim, founder of the staffing platform Wonolo, said. That dynamic has changed, especially for temporary positions.“There is definitely more tightening around companies wanting to hold off on hiring unless they really need to” and waiting to see how the fourth quarter pans out, Mr. Kim said. More
Consumer spending remains resilient, but retailers’ latest earnings offered a glimpse into worrying shifts in shopping habits.Consumers power the U.S. economy, and their capacity to spend has repeatedly defied predictions. In early 2020, after a short but severe recession caused by the pandemic, consumers splurged on big-ticket goods, from patio furniture to flat-screen TVs and home gym equipment. Then came what economists called “revenge spending,” with experiences that were off limits during lockdowns, like traveling and going to concerts, taking precedence.Now there are signs that some shoppers are becoming more cautious, as Americans’ savings erode, inflation continues to bite and other factors tighten their wallets — namely, the resumption of student loan payments in October. Financial reports from retailers — including Macy’s, Kohl’s, Foot Locker and Nordstrom — that landed this week suggest a shift is underway, from consumers buying with abandon to spending more on their needs.“Last year it was more psychological,” said Janine Stichter, a retail analyst at the brokerage firm BTIG. “But now that we’ve been dealing with inflation for as long as we have, I just think we’re getting to a point where savings are depleted.”In the aggregate, consumer spending remains solid. Retail sales in July were stronger than expected, leading some economists to raise their forecasts for economic growth this quarter. A robust labor market and rising wages have buoyed consumer confidence.But even retailers with strong sales say there are signs of economic strain among shoppers.“It is clear that the lower-income shopper, our core customer, is still under significant economic pressure,” Michael O’Sullivan, the chief executive of the off-price retailer Burlington Stores, said in a statement on Thursday. In the three months through July, Burlington’s sales rose 4 percent and its profit more than doubled.Discounters historically perform well during times of economic uncertainty as shoppers across the income spectrum look to save money. Burlington, along with Walmart, Dollar Tree and TJX, the owner of T.J. Maxx and Marshalls, all reported a rise in sales last quarter, as shoppers sought discounts on essential items like groceries, turned to cheaper private label products and reined in spending on discretionary goods.The strong performance at off-price and discount retailers stands in contrast to those at department store chains and many fashion and footwear retailers.In calls with Wall Street analysts this week, retail executives also flagged rising credit card delinquencies and higher rates of retail theft, ominous signs that consumers could be more strapped for cash.Jeff Gennette, the chief executive of Macy’s, the largest department store in the United States, said shoppers had “more aggressively pulled back” on spending in the discretionary categories, resulting in an overall decline in sales last quarter. Half of Macy’s shoppers make $75,000 or less.“They are not converting as easily and becoming more intentional on the allocation of their disposable income,” he said.“Probably the most important thing people are spending money on is general merchandise,” said Max Levchin, the chief executive of Affirm, which extends credit to shoppers at checkout via a so-called buy-now, pay-later model. “People are looking for more value for less money, or simpler functionality and lower price,” he said. The company reported an 18 percent rise in active customers from a year earlier.The finance chiefs of Macy’s, Kohl’s and Nordstrom told analysts that delinquencies on the department stores’ credit cards had risen. In Macy’s case, the increase in nonpayments last quarter was “faster than expected.”“When people are not paying their credit card bills, that suggests a really stretched consumer,” Ms. Stichter of BTIG said.And that means consumers are being more selective about where they shop and what they buy.“You’re going to see brands that are winners and losers,” Fran Horowitz, the chief executive of Abercrombie & Fitch, said in an interview. The fashion retailer reported a jump in sales of more than 10 percent last quarter, as it was able to “chase” the new styles that got more shoppers through the doors, Ms. Horowitz said.By contrast, on the same day Foot Locker reported a sales decline of nearly 10 percent for the quarter, it also cut its forecast for 2023 earnings for the second time this year, citing “ongoing consumer softness.”The back-to-school shopping season now underway is crucial for retailers, a harbinger of whether there will be strong sales for the rest of the year.And a new dynamic will soon come into play. In October, student loan payments will resume for about 44 million Americans, after a pandemic relief measure put them on hold in March 2020. Retail executives have warned that the payment resumption could further squeeze their shoppers’ budgets.Halloween, which is just weeks after repayments resume, will also be a barometer for people’s willingness to spend on discretionary items like costumes and candy, said Nikki Baird, vice president of strategy at Aptos, a technology company that works with retailers like Crocs, L.L. Bean and New Balance.She said that the repayments will most affect the age group that typically spends on Halloween. “I think that will really tell us what does this mean for the holiday season,” Ms. Baird said. “If Halloween is a bust, then I think we have to really start looking at whether consumers are going to go big for Christmas, because I think it says they won’t.” More
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
Simon Mackenzie, a security officer at the discount retailer QD Stores outside London, was short of breath. He had just chased after three shoplifters who had taken off with several packages of laundry soap. Before the police arrived, he sat at a back-room desk to do something important: Capture the culprits’ faces.On an aging desktop computer, he pulled up security camera footage, pausing to zoom in and save a photo of each thief. He then logged in to a facial recognition program, Facewatch, which his store uses to identify shoplifters. The next time those people enter any shop within a few miles that uses Facewatch, store staff will receive an alert.“It’s like having somebody with you saying, ‘That person you bagged last week just came back in,’” Mr. Mackenzie said.Use of facial recognition technology by the police has been heavily scrutinized in recent years, but its application by private businesses has received less attention. Now, as the technology improves and its cost falls, the systems are reaching further into people’s lives. No longer just the purview of government agencies, facial recognition is increasingly being deployed to identify shoplifters, problematic customers and legal adversaries.Facewatch, a British company, is used by retailers across the country frustrated by petty crime. For as little as 250 pounds a month, or roughly $320, Facewatch offers access to a customized watchlist that stores near one another share. When Facewatch spots a flagged face, an alert is sent to a smartphone at the shop, where employees decide whether to keep a close eye on the person or ask the person to leave.Mr. Mackenzie adds one or two new faces every week, he said, mainly people who steal diapers, groceries, pet supplies and other low-cost goods. He said their economic hardship made him sympathetic, but that the number of thefts had gotten so out of hand that facial recognition was needed. Usually at least once a day, Facewatch alerts him that somebody on the watchlist has entered the store.Mr. Mackenzie adds one or two new faces a week to the Facewatch watch list that stores in the area share.Suzie Howell for The New York TimesA sign at a supermarket that uses Facewatch in Bristol, England. Suzie Howell for The New York TimesFacial recognition technology is proliferating as Western countries grapple with advances brought on by artificial intelligence. The European Union is drafting rules that would ban many of facial recognition’s uses, while Eric Adams, the mayor of New York City, has encouraged retailers to try the technology to fight crime. MSG Entertainment, the owner of Madison Square Garden and Radio City Music Hall, has used automated facial recognition to refuse entry to lawyers whose firms have sued the company.Among democratic nations, Britain is at the forefront of using live facial recognition, with courts and regulators signing off on its use. The police in London and Cardiff are experimenting with the technology to identify wanted criminals as they walk down the street. In May, it was used to scan the crowds at the coronation of King Charles III.But the use by retailers has drawn criticism as a disproportionate solution for minor crimes. Individuals have little way of knowing they are on the watchlist or how to appeal. In a legal complaint last year, Big Brother Watch, a civil society group, called it “Orwellian in the extreme.”Fraser Sampson, Britain’s biometrics and surveillance camera commissioner, who advises the government on policy, said there was “a nervousness and a hesitancy” around facial recognition technology because of privacy concerns and poorly performing algorithms in the past.“But I think in terms of speed, scale, accuracy and cost, facial recognition technology can in some areas, you know, literally be a game changer,” he said. “That means its arrival and deployment is probably inevitable. It’s just a case of when.”‘You can’t expect the police to come’Simon Gordon, the owner of Gordon’s Wine Bar in London, founded Facewatch in 2010. As a business owner, “you’ve got to help yourself,” he said. Suzie Howell for The New York TimesFacewatch was founded in 2010 by Simon Gordon, the owner of a popular 19th-century wine bar in central London known for its cellarlike interior and popularity among pickpockets.At the time, Mr. Gordon hired software developers to create an online tool to share security camera footage with the authorities, hoping it would save the police time filing incident reports and result in more arrests.There was limited interest, but Mr. Gordon’s fascination with security technology was piqued. He followed facial recognition developments and had the idea for a watchlist that retailers could share and contribute to. It was like the photos of shoplifters that stores keep next to the register, but supercharged into a collective database to identify bad guys in real time.By 2018, Mr. Gordon felt the technology was ready for commercial use.“You’ve got to help yourself,” he said in an interview. “You can’t expect the police to come.”Facewatch, which licenses facial recognition software made by Real Networks and Amazon, is now inside nearly 400 stores across Britain. Trained on millions of pictures and videos, the systems read the biometric information of a face as the person walks into a shop and check it against a database of flagged people.Facewatch’s watchlist is constantly growing as stores upload photos of shoplifters and problematic customers. Once added, a person remains there for a year before being deleted.‘Mistakes are rare but do happen’Every time Facewatch’s system identifies a shoplifter, a notification goes to a person who passed a test to be a “super recognizer” — someone with a special talent for remembering faces. Within seconds, the super recognizer must confirm the match against the Facewatch database before an alert is sent.Facewatch is used in about 400 British stores.Suzie Howell for The New York TimesBut while the company has created policies to prevent misidentification and other errors, mistakes happen.In October, a woman buying milk in a supermarket in Bristol, England, was confronted by an employee and ordered to leave. She was told that Facewatch had flagged her as a barred shoplifter.The woman, who asked that her name be withheld because of privacy concerns and whose story was corroborated by materials provided by her lawyer and Facewatch, said there must have been a mistake. When she contacted Facewatch a few days later, the company apologized, saying it was a case of mistaken identity.After the woman threatened legal action, Facewatch dug into its records. It found that the woman had been added to the watchlist because of an incident 10 months earlier involving £20 of merchandise, about $25. The system “worked perfectly,” Facewatch said.But while the technology had correctly identified the woman, it did not leave much room for human discretion. Neither Facewatch nor the store where the incident occurred contacted her to let her know that she was on the watchlist and to ask what had happened.The woman said she did not recall the incident and had never shoplifted. She said she may have walked out after not realizing that her debit card payment failed to go through at a self-checkout kiosk.Madeleine Stone, the legal and policy officer for Big Brother Watch, said Facewatch was “normalizing airport-style security checks for everyday activities like buying a pint of milk.”Mr. Gordon declined to comment on the incident in Bristol.In general, he said, “mistakes are rare but do happen.” He added, “If this occurs, we acknowledge our mistake, apologize, delete any relevant data to prevent reoccurrence and offer proportionate compensation.”Approved by the privacy officeA woman said Facewatch had misidentified her at the Bristol market. Facewatch said the system had ”worked perfectly.”Suzie Howell for The New York TimesCivil liberties groups have raised concerns about Facewatch and suggested that its deployment to prevent petty crime might be illegal under British privacy law, which requires that biometric technologies have a “substantial public interest.”The U.K. Information Commissioner’s Office, the privacy regulator, conducted a yearlong investigation into Facewatch. The office concluded in March that Facewatch’s system was permissible under the law, but only after the company made changes to how it operated.Stephen Bonner, the office’s deputy commissioner for regulatory supervision, said in an interview that an investigation had led Facewatch to change its policies: It would put more signage in stores, share among stores only information about serious and violent offenders and send out alerts only about repeat offenders. That means people will not be put on the watchlist after a single minor offense, as happened to the woman in Bristol.“That reduces the amount of personal data that’s held, reduces the chances of individuals being unfairly added to this kind of list and makes it more likely to be accurate,” Mr. Bonner said. The technology, he said, is “not dissimilar to having just very good security guards.”Liam Ardern, the operations manager for Lawrence Hunt, which owns 23 Spar convenience stores that use Facewatch, estimates the technology has saved the company more than £50,000 since 2020.He called the privacy risks of facial recognition overblown. The only example of misidentification that he recalled was when a man was confused for his identical twin, who had shoplifted. Critics overlook that stores like his operate on thin profit margins, he said.“It’s easy for them to say, ‘No, it’s against human rights,’” Mr. Ardern said. If shoplifting isn’t reduced, he said, his shops will have to raise prices or cut staff. More
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
