The accessories industry is in a rut and has plenty to do to climb out of it.
That was the underlying message from Marshal Cohen, chief industry analyst, NPD Group Inc., who spoke of the sector’s woes and outlined remedies at the Accessories Council Summit at the Hearst Tower in Manhattan on Wednesday.
The industry, said Cohen, is “not doing enough to make bags innovative and coveted again. Accessories are too steeped in tradition. Department stores really rely heavily on the bag business and are the most affected.”
On Cohen’s to-do list for accessories firms:
• Create products that aren’t just “one-dimensional…a satchel can be a satchel and something else. Consumers want products that do more. They have to be multifunctional. You can’t rely on traditional styles and designs.”
• Create products that don’t just look good. Consumers “want things that make them feel better,” Cohen said.
• Consider less obvious markets for growth, such as the Carolinas and Las Vegas, rather than just relying on obvious markets like South Florida, California and New York.
• Focus more on Baby Boomers. “Boomers by 2025 will be the biggest growth in the population,” Cohen said. “This year, Boomers grew many businesses — not the Millennials.”
“More expensive products are driving a lot of declines in the market,” Cohen said, suggesting a reexamination of pricing strategies. He also suggested putting greater emphasis on leisure styles over work-related ones, and cited a rising interest among consumers for vintage and pre-owned products as well as for renting products.
The good news: “The accessories business can only go up, accessories should never be on the bottom of the list,” Cohen said. In contrast, “For three years in a row, beauty continues to be the best-selling business. They can transform who they are.
“Retail is not as depressing as it seems,” Cohen said. “As a whole, it’s running flat. In the next 18 months we will see a little bit of an increase.”
Cohen also projected that a recession is on the horizon, though not necessarily a big one, considering the economy “is in a good place.”
He did say e-commerce growth is slowing, while business in stores is in “a healthier place than the online environment,” though that is not the general school of thought. Twenty-four percent of the accessories business is conducted online, he said.
According to Cohen, Apple provides the best in-store experience, Lego demonstrates the most innovation, Nordstrom provides the best online experience and DSW generates the most loyalty. NPD bases its statistics and assessments on sectors and companies based on point-of-sale data, a panel of 10 million consumers, reading receipts, in-store visits and conversations with retail executives.
In a presentation at the summit on “Understanding Amazon,” David Spitz, chief executive officer of Channel Advisor, suggested the online dominance of the e-tail giant will only grow. Channel Advisor helps retailers and brands connect with customers, optimize operations and grow sales channels.
“Amazon is approaching 50 percent of U.S. e-commerce business. Amazon probably ends up being 80 percent of U.S. commerce. I don’t think any category is immune from Amazon or e-commerce.…The customer-centric nature of Amazon is pretty impressive,” Spitz said, adding that the foundation of the company rests on offering value, a really broad selection and providing convenience, which revolves around quick deliveries of orders. “They are maniacally focusing on them.”
Spitz, referring to figures from Prosper Insights & Analytics and The Wall Street Journal, indicated Amazon has a 43.5 percent share of U.S. e-commerce and does nearly $197 billion in annual sales.
In other predictions on Amazon in five years, Spitz said China-sourced products will account for about 50 percent of Amazon’s unit volume and 20 percent of Amazon’s sales volume will be from Amazon private-label products. Amazon will develop and monetize a global logistics network, and ad spend on Amazon will rival ad spend on Google.
Breaking down the Amazon business, Spitz said 13 million items on the web site are first-party, meaning Amazon-0wned, and 350 million items on the site are marketplace goods where Amazon gets a commission on selling them. “Half the unit volume comes from the marketplace,” Spitz said. Last year, there were 200,000 Chinese sellers on Amazon, which Spitz said “creates significant price competition.”
Based on ComScore research, Spitz listed Amazon as being considered the most essential app among 18- to 34-year-olds, with Gmail ranking just behind followed by Facebook. He said 50 percent of U.S. households are members of Amazon Prime, citing statistics from R.W. Baird and Google surveys.
Amazon Web Services is the most profitable part of Amazon. Fulfillment by Amazon is growing fast, representing $2 billion in volume last year from $1 billion in 2015, Spitz noted.
He also said Amazon has more than 70 private labels, many in apparel. The reason for the growth in private label is not so much a question of price, Spitz said, but more about the availability of market brands willing to sell Amazon. Fifty five percent of product searches in the U.S. start on Amazon, Spitz noted, crediting BloomReach research.
Discussing Amazon of the future, Spitz said, “We will see Amazon start to deliver products before you start to think you need to buy them,” emulating how such companies as Stitch Fix, Trunk Club and Kidbox operate. “With Amazon, consumers would be able to just pick up the packages by your front door and leave any returns by the front door for pickup.”
While Amazon is growing astronomically, it does face some issues, among them its impact on the environment due to all the packaging and waste involved in delivering goods, and pollution from the delivery vehicles. Spitz said Amazon is aware and working on solutions.
Another problem is with packages outside homes getting stolen, but Spitz mentioned the new Amazon system called Amazon Key that consumers can purchase, which allows the company to unlock doors remotely giving access to delivery people who are recorded by an indoor camera. Spitz wasn’t overly enthusiastic about the service.