When the book is written about what changed in consumer habits during the pandemic, I think we'll see there's a love affair going on between direct-to-consumer and the consumer herself. We have discovered it, and it isn't going away.
When you see that the e-commerce channel for Lululemon Athletica (LULU) comprised 43% of its total third quarter revenue and the margins are much bigger than the store's, you can tell that people just love it when clothes come to their door.
When you see Williams-Sonoma (WSM) have e-commerce accelerate 49.3% and is now 70% of total revenues, you know that people like cookware coming to their doors. That allows the company to close some costly stores that weren't doing enough business.
I bet when we see Nike's (NKE) earnings Friday, we will see a similar advance as the consumer knows his size and is happy to get the shoes he wants without going to the store.
What's really going on with the love affair with direct-to-consumer?
First, it takes so little time and time is what's precious. I think, for instance, that part of the success of Stitch Fix (SFIX) is that CEO Katrina Lake knows that a lot of her clients just don't have the time to shop, so they want to be dressed by competent people, using algorithms so they know they are wearing the right thing. Stitch Fix is about confidence in a box.
Second, buying from the smartphone is a heck of a lot easier than going to the store. A lot people in this pandemic figured out that if you can avoid the mall, it must be avoided. When you think about if you know your size or you know what gigantic pot you need, why go to the store or the mall to search for something you already have seen on your phone?
Third, who would have thought that simple things, things like deodorant or toothpaste or vitamins that you started taking to try to fend off Covid-19, could be purchased once and delivered forever? The idea of going for a purchase at a drug store or a supermarket for something seems foolhardy if you can order small batches of things that come when you need them so you won't run out.
Fourth, it is a heck of a lot easier to price shop on a cellphone than going to a store. My daughter recently wanted to buy a washing machine. She would never ever go to the store until she knew who had it and when it is available. That's what the site tells you. How long before you press a button and it's at your house as easy as if it were bleach or Tide?
Now, obviously Amazon (AMZN) is the big winner here, because it's been doing it for ages. Walmart (WMT) is second. Costco (COST) will be the third "one day." But of all these, my favorite is Target's (TGT) Shipt. We order all of the time from the office. We can't go anywhere. Most of us don't even have cars. That's why the Target purchase of Shipt was so brilliant.
I know that people are supposed to like to go to the mall. We are supposed to shop. But if it is easier and cheaper to have it delivered directly to the consumer, as we have learned during the great pandemic of 2020, we aren't going back to the old way any more.
(AMZN, COST, WMT, and NKE are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)
