Add GLP-1 is a Shape Shock

GLP-1 is a Shape Shock.-.md

@@ -0,0 +1,7 @@
+<br>Last year, the share of apparel exchanges in which shoppers traded down to a smaller size hit 14.6 percent, the third straight year it climbed, according to a review by returns-software firm Narvar of 38 retailers. Retailers think they know exactly what is going on: Customers on GLP-1 drugs are dropping close to a full clothing size a month, and they are mailing back everything that no longer fits. Impact Analytics, in its Retail Demand Reset report, estimates that for a billion-dollar retailer with a typical 20 percent return rate, a five-to-ten-point jump in returns erases about $20 million of gross margin, and that more than 400 million apparel units a year could be mis-sized by 2027, roughly $5 billion in capital and margin leakage. The case is being held up as a demand-destruction story: Food companies sell less, restaurants serve less, and the whole category quietly deflates as the country eats fewer calories.<br>
+
+<br>There is real evidence for the level effect: Researchers at Cornell and Numerator, using a panel of roughly 150,000 households, found that within six months of a member starting a GLP-1, a household cuts grocery spending by 5.3 percent. For higher-income households, the cut is more than 8 percent. Spending at fast-food, coffee shops, and other limited-service spots falls by about 8 percent. The level is the obvious number. I think the actual interesting story is that demand also changed shape, and the shape is the part nobody is managing. The average came down a little. The distribution moved a lot. A demand shock changes how much a category sells. A shape shock changes which items sell, to which customers, and how fast the answer moves, while the headline volume barely budges. Operations is the one discipline that lives in the shape of demand rather than its average. The category is not necessarily shrinking so much as it is deforming. Before we dig deeper, it’s important to note that this article is tone deaf by design.<br>
+
+<br>We don’t yet know whether taking GLP-1 drugs has long-term implications, but there is no question that, in the short term, the trends I mentioned above are good for society. This article is not concerned with the mental or [health care](https://www.foxnews.com/search-results/search?q=health%20care) implications of the drug since many others do that (and this is outside my area of expertise). This article deals solely with the downstream operational implications. Let’s start with where the 5.3 percent actually lands, because it does not land evenly. Savory snacks fell 10.1 percent. Sweet baked goods and cookies fell sharply too, if by a bit less, on the order of 6 to 9 percent. The headline decline is an average of a category that is being hollowed out in the middle and left mostly intact at the edges. A [grocer reading](https://www.google.co.uk/search?hl=en&gl=us&tbm=nws&q=grocer%20reading&gs_l=news) the top line sees a 5 percent problem. A grocer reading the planogram sees a near -10 percent hole punched directly through the center store, which is exactly where the high-margin packaged food sits.<br>
+
+<br>There is a second wrinkle in the grocery data that makes the mix problem worse: The cut is steeper for higher-income households, at more than 8 percent, compared with the 5.3 percent average. The shoppers walking away from the high-margin center-store basket are disproportionately the highest-spending, highest-income ones, the customers a brand can least afford to lose, and the ones most able to pay for the drug in the first place. In other words, the decline is concentrated in the most profitable products and among the highest-value customers who buy them. A University of Illinois farmdoc analysis models the country consuming on the order of 20 billion fewer calories a day and spending roughly $1.2 billion a week less on food at plausible adoption rates. That is the level effect, and it is large. It is also still not the part that should worry an operator most. The same thing happens to a restaurant ticket, and here it happens in a more painful place: [Medic GLP](https://cjicj.com/jaxonharwell83)-1 users are not eating out much less often.<br>