That Style, Again? How Shopping Got So Boring
Manufacturers and retailers leaned on popular goods in the pandemic and often hit pause on innovating
4 min
The maker of Tonka trucks and Lite-Brite normally introduces four new toys a year. Last year, Basic Fun Inc. introduced one.
Manufacturers and retailers of everything from computers to dresses hit pause in the past few years when it came to innovation, the result of pandemic-related upheavals in the design, manufacture and distribution of goods, industry executives said. Shifting consumer demand and the expectation of an economic slowdown also played a role, the executives said.
New merchandise gives shoppers a reason to buy. Without it, sales tend to suffer. Retailers including Best Buy Co. and Gap Inc. said a dearth of new products, styles and colours contributed to lacklustre sales during the recent holiday season.
Now, the race is on to ramp up newness, the executives said. But the work that goes into creating new products often takes months, if not years. And some companies are reluctant to invest in the necessary research and development while economic uncertainty looms.
“The last thing you want to do is spend the money to create and market a new product and have it get stuck in the socio-economic crossfire of Covid, supply-chain disruptions and inflation,” said Basic Fun Chief Executive Jay Foreman. “All these things coming together at the same time means that you have to play it safe.”
Mr. Foreman said Basic Fun is delaying plans to relaunch its Littlest Pet Shop collectible figures until spring 2024 from fall of this year. “We anticipate the supply chain getting back to normal by the middle of this year,” he said. “But we’re still concerned about inflation and a slowdown in consumer spending.”
Gap Chairman and interim CEO Bob Martin said in an interview that a pile-up of excess inventory hindered the company’s ability to innovate.
“You stop leveraging creative strengths, you play it safe, and miss the bigger bets to get back on trend,” he said. Now that the company has worked through its excess inventory, he added, it has more room to devote to spring trends like eyelet and crochet tops at Gap, new suiting styles at Banana Republic, and Old Navy dresses with pockets.
There were 13% fewer new general merchandise items in 2022 compared with 2020, according to market-research firm Circana. The biggest declines were in beauty, footwear, technology, small appliances and toy categories.
Marshal Cohen, Circana’s chief industry adviser, said the decline is unprecedented and the result of several converging factors.
The Covid-19 pandemic radically altered consumption patterns, which forced manufacturers and retailers to pivot quickly to keep up with shifting demand. Supply-chain disruptions created first a scarcity of goods, and then a glut. With excess merchandise clogging shelves, retailers were unable to bring in fresh goods. Remote work made collaboration to dream up new ideas more difficult.
“Something as simple as a new flavour, colour or style can create demand,” Mr. Cohen said. “With a decline in newness, we are boring consumers to death.”
When demand for computers, TVs and other electronic gadgets surged, manufacturers focused on producing as much as they could of existing products to address shortages, Jason Bonfig, Best Buy’s chief merchandising officer, said in an interview.
Mr. Bonfig said he is starting to see an improvement in the flow of new products hitting stores, including TVs with larger screens and computers with longer battery life. “Vendors want to get back to growth,” he said. “They know new models are what brings people to our stores.”
Some retailers have acknowledged that the problem rests as much with them as with their suppliers.
“We didn’t have as many choices in women’s tops as we did in the past,” Ed Thomas, CEO of teen-clothing retailer Tilly’s Inc., said in an interview. “Part of that was our problem. We may have been offered styles that we said no to, because we were too gun-shy to take a chance. We had no idea where the economy was going, so we were more conservative in our buying.”
Nordstrom Inc. has set a goal this year of selling through its inventory at a rate 10% faster than last year, to allow it to bring in fresh merchandise more frequently, according to Pete Nordstrom, the department-store chain’s president. “We want our customers to say, ‘Every time I come to Nordstrom there is something new,’” he said.
Retailers said there are more new products hitting stores now that the supply chain is normalising and the excess inventory of past seasons has been cleared out.
But shoppers might not see a big change just yet.
“There is a disconnect between what’s in stores and what’s being shown on the runways and in fashion magazines,” said Lucia Gulbransen, a personal stylist. “You just can’t find the newness and the fashion-forward looks you see on Instagram.”
Some manufacturers said retailers are still too hesitant to pull the trigger on big, unproven bets.
“It’s an all-around risk-averse season,” said David Katz, chief marketing officer of Randa Apparel & Accessories, which makes clothing and accessories for brands ranging from Calvin Klein to Levi Strauss & Co. “There is more pushback than usual on new styles.”
Jackie Ferrari, CEO of clothing manufacturer American Fashion Network LLC, said basics such as T-shirts, tank tops and hoodies now account for about 60% of the assortment at large, mid tier chains, up from the low-50% range in 2019. Rather than adding new silhouettes, retailers are reordering best sellers with new colours and fabrics, she said.
The issue isn’t limited to companies selling consumer goods. Walt Disney Co. CEO Robert Iger recently told investors that the company needed to be careful about which comic-book characters and stories it develops into TV shows and movies from its Marvel Entertainment franchise to ensure “newness.” “Sequels typically work well for us,” Mr. Iger said. “Do you need a third or a fourth, for instance, or is it time to turn to other characters?”
Of course, there are always exceptions. Wide-leg jeans ushered in new clothing styles, including shorter tops and chunkier shoes, and luggage with built-in phone chargers spurred demand for new travel bags. But overall, retailers are still grappling with how to get more newness in front of shoppers, some of the executives said.
Customers are impatient. Robert Smith, a 49-year-old investment manager, said he started searching out smaller, more-unusual clothing brands online after showing up at a networking event wearing the same outfit as another attendee—a black linen shirt and matching shorts that he bought at a big-box chain.
“There isn’t much variety,” said Mr. Smith, who lives in Loves Park, Ill. “If you go to one store, you see the same thing at another store.”
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Strong family financial planning can help reduce taxes and support younger generations. From intrafamily loans and asset gifts to inheritance disclaimers, strategic cooperation can create meaningful financial benefits—when families have the trust and structure to make it work.
4 min
Happy is the family whose members—parents, grandparents and grown children—trust each other enough to cooperate on shared goals, especially financial ones. When that is truly the case, Uncle Sam’s tax rules can help as well.
This matters especially now that mortgage rates are above 7%, and many families are looking for ways to help younger members. If the elders have resources and are confident younger ones can cooperate, a family loan could make homeownership possible while providing the elders with a useful income stream.
Other strategies can actually lower taxes, such as when funding 529 plans or Roth IRAs, or when someone inherits a traditional IRA with required withdrawals larger than they will need.
Here are three strategies useful for functional families.
Intrafamily loans
It is perfectly legal for families to lend money to a relative for a down payment or even a private mortgage.
But it is important not to cut corners, says Ryan McKeown, a CPA with Modern Wealth Enhancement in Minnesota. If the loan is for a down payment, be honest with the mortgage provider and have a formal agreement. The lender owes tax on the interest payments received.
If the loan is for a private mortgage, both sides should have legal representation with a formal written agreement, including payment terms. The lender owes tax on the interest, and the borrower often can deduct it if he or she itemizes.
To avoid IRS trouble, the interest rate shouldn’t be lower than the agency’s Applicable Federal Rate at the time of the loan. Currently that is about 5% for loans longer than nine years; about 4.5% for loans three to nine years; and about 4% for loans three years or less. Currently, traditional mortgage rates are generally above 7%.
In addition, the lender could use the $19,000 annual gift-tax exemption (described below) to forgive some or all of the interest or principal annually. If both lenders and borrowers are married, that is up to $76,000 a year. There is no tax for the borrower on such forgiveness, because it is from a gift.
If you’re going this route, McKeown advises against having a fixed plan to forgive the debt. Instead, do it in one-off letters specifying the amount—and keep careful records. Otherwise the IRS might try to treat the loan as a taxable gift.
Asset gifts
Powerful tax-saving moves for families often use gift-tax provisions. Under current law, anyone can give anyone else up to $19,000 of assets annually, free of gift tax. That means a married couple with three grandchildren could give them a total of $114,000 in 2026.
The gifts can be cash or other assets, like stock. For noncash gifts, the cost basis—which is the starting point for measuring taxable gain after a sale—“carries over” to the recipient. So if someone buys $1,000 of stock and gives it away when it is worth $5,000, the recipient’s cost basis is $1,000. If the recipient later sells the shares for $8,000, the taxable gain is $7,000.
Here’s an example showing how gifts could save a family taxes. Grandma is a widow of modest means, while her child and spouse have prospered. The couple has two children, and they want to contribute $5,000 to a 529 college-savings plan for each—but they need to sell stock to do it. Their tax rate on the sale would be 18.8%, and they would need to sell about $11,000 of stock.
However, Grandma’s federal tax rate on the stock sale is 0%. If the couple gives $10,000 of shares to Grandma, she could sell them, pay no tax, and fund the grandchildren’s 529 plans. This saves about $1,000 of tax.
These moves are legal, and they could be used in other ways, such as to help a young person fund a Roth IRA.
But trust among family members is essential: Under the law, givers can’t put conditions on a gift. Grandma could use her stock proceeds to take a cruise, but she makes 529 contributions instead.
Mark Sellner, a retired tax attorney and CPA living in Sarasota, Fla., uses this strategy. His children sell stock he gives them and fund 529 plans for his grandchildren.
The family’s tax savings aren’t huge, but he likes other benefits. The sales by his children don’t boost his adjusted gross income, which in turn could raise his Medicare Irmaa premiums or his 3.8% surtax on net investment income.
Sellner doesn’t worry about his children using the funds for another purpose.
“There can’t be any strings attached to gifts. Of course, it is up to us to decide whether to make them in the future,” he says.
Two caveats: The “kiddie tax” applies to most children under age 24, and it is levied at the parents’ rate on investment income above $2,700 in 2026. Consider this before making gifts to a young person.
Investors who give away stock also forgo the step-up, an important provision that exempts assets held at death from capital-gains tax.
Sellner knows he’s losing a step-up, but says, “The children could use a little more now. Why should they wait 20 years to get it?”
Disclaimers
A disclaimer is a highly useful strategy in which one heir renounces an inheritance in favor of another heir. Assuming family members cooperate, this can save taxes.
Here’s one example. Dad died and had a large traditional IRA that he left to Mom. She has enough assets and income to cover her expenses, and she lives in a state with a stiff estate tax. The inherited IRA would put her estate over the threshold.
Also surviving are three young-adult children. If Mom disclaims all or part of Dad’s IRA within nine months of his death, that amount could go directly to the children. They will have 10 years to empty the account, and the family as a whole will likely save estate and income taxes.
Disclaimers have many key details, especially regarding beneficiary documents. Although heirs have great freedom in choosing what assets to disclaim, the rules about who gets disclaimed property are rigid. It is best if the original owner names tiers of heirs so that if one disclaims, the next recipient is clear.
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