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Welcome to AI Decoded, Fast Companys weekly newsletter that breaks down the most important news in the world of AI. Im Mark Sullivan, a senior writer at Fast Company, covering emerging tech, AI, and tech policy. This week, Im focusing on the role of NSFW material on AI platforms, which could be complicated when AI platforms turn into social platforms. I also look at a powerful new Anthropic model for free Claude chatbot users. Sign up to receive this newsletter every week via email here. And if you have comments on this issue and/or ideas for future ones, drop me a line at sullivan@fastcompany.com, and follow me on X (formerly Twitter) @thesullivan. Sam Altman welcomes NSFW to AI Sam Altman casually said on X Tuesday that OpenAI is planning to introduce NSFW content on ChatGPT as soon as December. The comment, which came at the bottom of a discussion about user mental health, raises all kinds of questions about user safety and trust, and about what audiences OpenAI really wants to serve. Altman says the company hopes to implement a new agegating mechanism through which users will prove theyre old enough to consume adult content. On ChatGPT, that implies frank discussions about sex with the chatbot, or maybe some forms of entertainment such as role-playing with sexy AI companions. Elon Musks xAI has already gone well down that road with its AI Companions, which launched during the summer within the Grok chatbot. The companions, reserved for Premium subscribers on the Grok app, have a NSFW mode and are willing and ready to engage in sexy conversation. The way Altman frames NSFW AI sounds similar to Musks approach to appropriate content. As part of our treat adult users like adults principle, we will allow even more, like erotica for verified adults, he wrote on X. So its not hard to imagine ChatGPT going down some of the roads xAI has taken. To some extent, this may apply to image generators too. Musk has already gone there. In August, xAI released the image generator Grok Imagine, which reportedly has a spicy mode that lets users create sexually explicit content, including partial female nudity, via text prompts. Will OpenAIs new permissive attitude about adult content on ChatGPT extend to its other products as well? The companys second-hottest product is the new Sora 2 image generator. The difference between Sora 2 and Grok Imagine is that Sora is a social app. Using the Sora 2 app is a lot like using TikTok, only all the content thats viewed, shared, and created on it is AI-generated, not shot with cameras. That social aspect raises the stakes in the appropriateness question. Right now OpenAI is tightly controlling the content created on Sora 2 (currently invite only). No sexual content is allowed, and the company says it puts an even tighter filter on Sora generations that will be shared socially. The company is using both content moderation AI and human reviewers to detect material that might violate its guidelines. It provides a way for users to report offensive videos and uses an AI algorithm to detect accounts bearing the hallmarks one would associate with being owned by a minor. But the company also says its taking an iterative approach to its content moderation, so todays tight moderation standards could loosen in the future. This could be especially problematic when it comes to the image and likeness rights of Sora users. One of the main features of the Sora app is cameos where users can feature their own likeness, or their friends, or certain celebrities, in their video creations. Allowing NSFW content in this context could open up all kinds of safety and reliability problems for users, and for OpenAI. Altman was surprised by the splash his erotica post made on Tuesday. On Wednesday he tried to explain further in another tweet: As AI becomes more important in people’s lives, allowing a lot of freedom for people to use AI in the ways that they want is an important part of our mission . . . Without being paternalistic we will attempt to help users achieve their long-term goals. But we are not the elected moral police of the world. In the same way that society differentiates other appropriate boundaries (R-rated movies, for example) we want to do a similar thing here. And, safety concerns aside, the adult side of life has always been well represented on technology platforms from VHS to VR to social media. OpenAIs acceptance of adult content isnt likely to make ChatGPT any dumber or less useful, but it may give millions more people another reason to start using the chatbot. Anthropic brings a gift to free Claude chatbot users with new Claude Haiku 4.5 model Anthropic announced its new Claude Haiku 4.5 model Wednesday, which will become the default model for all free Claude.ai users. The model may be the most powerful model currently available to free users of chatbot apps. The arrival of Haiku 4.5 just two weeks after Claude Sonnet 4.5 suggests that things are still moving quickly on the research front. The new Haiku model matches Anthropics previous flagship Sonnet 4 model in software coding and even exceeds it in computer use tasks. Five months ago, Claude Sonnet 4 was a state-of-the-art model, Anthropic says in a blog post. Today, Claude Haiku 4.5 gives you similar levels of coding performance but at one-third the cost and more than twice the speed. It also makes applications like Claude for Chrome run faster. For business users, Haiku 4.5 can be used to power multi-agent workflows where multiple instances of the model work in parallel or collaborate with larger models. For example, Sonnet 4.5 (currently considered Anthropics best model for AI agents) can plan complex projects while several Haiku 4.5 subagents quickly complete individual tasks. The model’s speed and cost efficiency make it particularly well-suited for real-time applications including chatbots, customer service, financial analysis, and research, Anthropic says. What does human-centered AI really mean? I first came to know of the Stanford Institute for Human-Centered Artificial Intelligence around 2020. Its an interdisciplinary research institute focused on developing and guiding AI in ways that prioritize human values, ethics, and societal benefit. I had a vague understanding of the concept in 2020, but as AI advanced, post-ChatGPT, I realized that it may be among the most important themes of the 21st century. There are active and passive ways to use AI. You can ask AI to do your work for you, to create a final product. Or you can work with the AI, using it to pull knowledge and inspiration out of yourself. So many of us struggle to stay in that productive thinking space long enough to pull out good ideas. Thinking through something is difficult and requires concentration. Even good ideas that seem to pop up out of nowhere need to be carefully examined to find logical pitfalls. One AI researcher told me that he uses AI as a kind of thinking partner to help him stay engaged in that deep thinking space by providing thoughtful, sometimes critical, feedback. This example is a simple expression of human-centered AI, in which the AI is used as an enabler, not as a proxy for human creation. The problem is this: AI may advance to the point where it is good enough to reason through hard problems and create a good expression of a solution (or an important insight) at the end. In more and more use cases, the AI may be good enough to allow the human to relax while the computer does the work. And the tech industry has no qualms about offering us conveniences (like app-based food delivery) or entertainment (Netflix) that lets us disconnect our brains. But the tech industry has never sold anything as capable as AI. The more use cases in which the AI does the work, the more that human beings are sidelined. We may end up relaxing ourselves into irrelevance and then extinction. More AI coverage from Fast Company: The memeification of Sora 2 Are large language models the problem, not the solution? Exclusive: Big Philanthropy teams up to take on Big AI Overheating at night? An AI-enabled mattress cover could be the answer Want exclusive reporting and trend analysis on technology, business innovation, future of work, and design? Sign up for Fast Company Premium.
Category:
E-Commerce
When the lights finally dimmed at the 2025 Victorias Secret Fashion Show last night, the first thing guests saw was a gold light emanating from backstage. Model Jasmine Tookes, 9 months pregnant, opened the show in a gold macrame dress with drop pearls and a pearl and crystal wing in the shape of a clam shell. Art buffs might notice that the shell is a callback to Sandro Boticellis renaissance painting Birth of Venus, symbolizing sensuality, divine beauty, rebirth, and new beginnings. The cultural reference is a more elevated and considered nod to womanhood than the shows previous themes which have included Santas Helpers or delicious sweets. The lookand the showcertainly marked a new moment for Victorias Secret. And that was the intention of CEO Hillary Super, who said so in a note left at each seat. The show marked a new era of sexy, she wrote. Not one defined by a single look or mood, but by something deeper: the feeling of being truly comfortable and confident in your own skin. Victorias Secret is in dire need of a reset, and its new executive creative director Adam Selman delivered in this first time producing the mega-show. Selman, who joined Victorias Secret in April following three years as chief design officer at Rihannas rival lingerie brand Savage x Fenty, as well as running his own self-named label and Adam Selman Sport (ASS), If you cant tell by his sport label, Selman is not especially self-serious, but he is astute and forward-thinking, and his design and styling sensibilities deftly balance sophistication and fun. (The 2012 VS fashion show look and crystal naked dress he designed for Rihanna at the 2014 CFDA awards are ones for the history books.) Selmans goal was to bring capital-F fashion back to the Victorias Secret Fashion show, and in the process give the Victorias Secret brand a cultural revamp. In the week leading up to the show, he told me that the pressure was setting in. I’ve realized in the past few days that I’m the one person who oversees the whole thing. He pulled it off. The 2025 Victorias Secret show was so well-executed it may have outpaced the current authority of the actual brand and product. But Selman still has his work cut out for him. Everyone knows Victorias Secret. Following years of design and cultural irrelevance, not to mention self-inflicted business challenges including a toxic work culture and entrenched misogyny, and hundreds of store closures over the past five years, its been a long time since tastemakers have cared. Rihanna performs at Victoria’s Secret’s 2012 runway show. [Photo: Fairchild Archive/Penske Media/Getty Images] A new era for an old mall brand Selman isnt the only one tasked with trying. Victorias Secret has undergone nearly complete creative and brand marketing leadership changes since last years show. Super, who joined from Savage x Fenty just before the show last year, is still in. But Sarah Sylvester, executive vice president of brand marketing for Victorias Secret, who we spoke to about this event last year, is out. Earlier this year, the company made a slew of new exec-level appointments, mostly women: Anne Stephenson, its chief merchandising officer, as president; Ali Dillon, former president of Alex Mill as president of Pink, Amy Kocourek as president of beauty (formerly chief merchandising officer at Kendra Scott), and Selman as ECD in April. In May, the company also hired Elizabeth Press as its CMO, who formerly held the role at Anthropologie. Rihanna at the 2014 CFDA fashion awards. [Photo: Jamie McCarthy/WireImageGetty Images] These hires, and the companys renewed focus on its fashion show, are in service of what Victorias Secret calls its new path to potential growth strategy. It wants to build on its 4% Q2 comparable sales growth, reestablish Victorias Secret as an authority in bras, rebuild Pink as a distinct brand, and grow its beauty business. Brand awareness is incredibly high for this brand, Preis tells me about the objective of the fashion show. It’s more about brand relevance and brand consideration for the audience that doesn’t currently shop with us. (The company will also closely track show metrics like site visits, impressions, and social engagement, Preis says.) Candice Swanepoel, Adriana Lima, Joan Smalls, Bella Hadid, Angel Reese, Jasmine Tookes, Alex Consani, Gigi Hadid, Yasmin Wijnaldum, Alessandra Ambrosio at the 2025 Victoria’s Secret Fashion Show held at Steiner Studios on October 15, 2025 in New York, New York. [Photo: Gibert Flores/Variety/Getty Images] A FASHION FANTASY WORLD Selmans overall vision for the show was to elevate it by applying the creative direction one might have as the head of a fashion maison, not a languishing mall brand. For this years show, he crafted the narrative around an overall story arc (the theme is day to night), rather than the disparate themed sections that anchored previous shows. The show’s so big, the expectations are big, the personalities within it’s big, so I wanted to come up with a simple idea, says Selman. When I came into the brand, one of the first things I kept hearing on repeat was that Victoria’s Secret is unique in that we are the first thing she puts on and the last thing she takes off and I love that sort of sentiment. So I took that idea and I’m doing the context of day to night with the show. Gigi Hadid [Photo: Taylor Hill/WireImage/Getty Images] The golden first chapter that focused on the brands nudes and was opened by a radiant Tookes, was followed by a hot peony pink Bombshell, chapter. But you wouldnt know it without looking at the run of show. A circular stage emerged down the runway and showgirls with pink feather fans danced over from the aisle. Then, model Gigi Hadid emerged in an oversized peony opera coat, quickly followed by Irina Shank in a crystal fan headpiece and Paloma Elsesser in pink peony petal wings. The pre-show comments, at least on Victorias Secrets owned channels, called for long-standing brand icons: big hair, more glitter, and the return of models like Adriana Lima. (People want a little fantasy and theres no better brand to do that, says Preis.) This section brought all that, but not in a way youd expect. It was a sparkling glamorous, Ziegfeld-fantasy-inspired morning. Adriana Lima [Photo: Dimitrios Kambouris/Getty Images/Victoria’s Secret] That’s our first collection, or the first section of the show, and how that could come to life in a more fashion forward, thoughtful way? he asks. The show chapters arc toward dusk and bring in other moods and brand codes. The Pink halftime show was an exception and a weak chapter overall; with jean jackets, layered bikinis and black sweatpants that didnt communicate a new point of view. Hot pursuit opened with a grainy black and red interstitial mimicking old movie reviews and washed the runway in scarlet red, along with a slew of provocatively sexy custom designs, including a custom crystal backless minidress and g-string worn by model Amelia Gray and custom chrome angel wings worn by model Alex Consani. Magic hour followed, and brought outfits in gradient pinks, mandarins, and lilacs; followed by a black lace and crystal sparke in “black tie. Each chapter, by the way, links up with a fragrancea play for its emerging beauty lines [Photo: Victorias Secret] Renewed brand heritage Like many resurgent brands, the strategy is to shed what isnt working and leverage the cultural cachet of the brand heritage that does work. The trick is to reinterpret it in a new way that can reestablish contemporary relevance in the current market. The term fashion-forward came up again and again as a way this show would be new and more relevant. People complained last year that the garments looked cheap; the look of the clothes and styling were a night and day difference this year. If you know my work, it’s all centered around playfulness and color and expression, so that’s a big theme, he says. Referencing the shows of high-end designer brands, Selman says he sought to elevate the experience and integrate codes that stem from the brands history throughout each chapter of the show, and nod to whats happening in culture more broadly. I’m trying to think about the world that we’re building beyond just the show here, he says. One such example: Selman says hes showing how Victorias Secret can tap into current fashion trends through lingerie styling in the show; a fantasy with real-world applications. Naked dressing is so in right now, and showing our customer how to wear the product in a maybe a more fashion-forward way that resonates with fashion and culture outside of just the show is another focus. [Screenshots: Victoria’s Secret/TikTok] With a run time of about 40 minutes (about four times longer than a maison show), 72 looks, and 45 million of digital viewers, he brought the spectacle. Along wih a team of experts, Selman directed promo, motion design, event production, set design, model casting, curated front row seating, cast musical guests, and the looks themselves, down to the giant crystal earrings. Joan Smalls [Photo: Gilbert Flores/Variety/Getty Images] Selman worked with artisans in Paris and Italy to create the jeweled wings model wear on stage; its own lofty design challenge. Selman crafted remarkable reinterpretations of wings as headpieces, too, like the golden headpiece Joan Smalls wore in the opener, gracing her head like a dainty set of Apollo’s wings, or Precious Lees peony petal and crystal headpiece or Anok Yais stunning pink fringe and pearl headpiece in the bombshell segment. Today more than ever before, retail, if it’s going to be successful, there has to be an entertainment factor, says Preis. Victoria’s Secret created this incredible experience, right? says Selman. It is the biggest fashion show in the world and so there’s so much rich history and so much joy around it too. We have ravenous fans around those events, so I think it’s about owning it and really leaning into what we’re good at. Fans seem to want the fun and the spectacle of it all. Angel Reese [Photo: Victorias Secret] Pleasure, but not to please everyone The Victorias Secret show is a glitter bomb of frothy pleasure, but its not out to please everyone. It’s fun when it’s real, says Selman. Everything feels so phony right now. The more real that you can give peoplethat’s when things will really come to life. I think we can’t be everything to everyone. Precious Lee [Photo: Taylor Hill/WireImage/Getty Images] Selman says his show is for anyone who wants to be a part of itbut its ok if thats not you. I want everyone to see themselves in this brand. I want everyone to see themselves in the show and the power that we can provide; the power that lingerie can provide. If you see yourself in it, we welcome you. And if you don’t see yourself in it, that’s cool too. We still welcome you. Iris Law [Photo: Taylor Hill/WireImage/Getty Images] Brands rarely can make everyone their customer; in fact, its a fools errand to tryas long as your core audience buys in. The G-string-thin fine line for Victorias Secret however, is whether it can truly capture whats historically sellable about the heritage brandthe glitz, glamour, and sex appealwhile shedding the historically bad associations: getting women to buy into sex thats embodied through the male gaze and packaged us up as campy Christmas gifts, candy, or calendar girls. I want to look hot, and for me personally, that and taste are not mutually exclusive qualities. What does sexy mean in the future? asks Preis. There’s not just one definition. It’s really how it makes one feel and makes one feel good about themselves. We can and we should own that position. We already are known for that, and that’s something that we should continue on with.
Category:
E-Commerce
When my teenage son developed mysterious symptoms, I followed the same path anyone else would: I put his health in the hands of a team of medical professionals. Multiple myeloma is a rare blood cancer. It is so uncommon in 17-year-olds that it doesnt appear on diagnostic checklists. Despite having no clear starting point to work from, my sons doctors worked their way to an accurate diagnosis through a process of trial and error, bouncing ideas off each other and testing and discarding hypotheses until they could tell us what was wrong. The process felt inefficient and uncertain at a time when I wanted fast answers and cast-iron guarantees. But this messy and distinctively human approach saved my sons life. AI promises to improve processes like this, replacing the fallible and unpredictable human mind with the analytic power of trained and tested algorithms. As someone who helps organizations implement AI technology, I know just how much potential it has to make processes and workflows more efficient. But before we start replacing human judgment at scale, we need to think carefully about the hidden costs that can come with productivity gains. A recent study in The Lancet Gastroenterology & Hepatology presented some sobering findings for AI maximalists. Physicians who spent several months working with AI support in diagnostic roles showed a significant decline in unassisted performance when the technology was withdrawn. This kind of deskilling effect isnt unique to either medicine or AI. We have known for years that extensive GPS use leads to a decline in spatial memory and that easy access to information reduces our ability to recall facts (the so-called Google effect). {"blockType":"mv-promo-block","data":{"imageDesktopUrl":"https:\/\/images.fastcompany.com\/image\/upload\/f_webp,q_auto,c_fit\/wp-cms-2\/2025\/10\/creator-faisalhoque.png","imageMobileUrl":"https:\/\/images.fastcompany.com\/image\/upload\/f_webp,q_auto,c_fit\/wp-cms-2\/2025\/10\/faisal-hoque.png","eyebrow":"","headline":"Ready to thrive at the intersection of business, technology, and humanity?","dek":"Faisal Hoques books, podcast, and his companies give leaders the frameworks and platforms to align purpose, people, process, and techturning disruption into meaningful, lasting progress.","ctaText":"Learn More","ctaUrl":"https:\/\/faisalhoque.com","theme":{"bg":"#02263c","text":"#ffffff","eyebrow":"#9aa2aa","buttonBg":"#ffffff","buttonText":"#000000"},"imageDesktopId":91420512,"imageMobileId":91420514}} Most people are willing to accept these cognitive losses in exchange for convenience. And that is a trade-off that individuals need to decide for themselves. But when it comes to organizations and institutions, things are more complex. The first concerns that leap to mind are worries about losing access to our AI tools after outsourcing our skills to them. What if the system crashes or performance drops off? While this is a real problem, it is nothing new. We can design backup solutions where necessary, just as we always have with technology. But there is another set of problems that cannot be resolved simply by putting guardrails in place. Human skill sets are important not just because they let us act on those skills, but also because they let managers and decision-makers understand and supervise what is happening on the frontlines. If physicians lose their diagnostic chops, who will validate or audit the output of the algorithms? Who will notice that the edge casesthe patients with statistically implausible diseasesare not being diagnosed correctly? And, perhaps most importantly, who will take responsibility for the algorithmic judgments, whether they are right or wrong? For most organizations, maintaining public trust is a core part of their relationship with society. Just as we wont eat in a restaurant if we dont trust the kitchen to deliver safe food, so we avoid products and services that we believe may harm us. Without accountability, trust is impossible. As an IBM training manual put it nearly 50 years ago: A computer can never be held accountable, therefore a computer must never make a management decision. The same principle holds true for AI. Without a clear accountability trail that leads to a human decision-maker, it becomes impossible to hold anyone responsible for any harms that arise from the AIs behavior. And this accountability deficit can destroy the legitimacy of an institution. We can see these dynamics at work in the U.K.s 2020 exam grading debacle. At the height of the COVID pandemic, with normal exams cancelled, the U.K. government used an algorithm to assign grades. The algorithm imported biases and systematically favored children from wealthy backgrounds. But even if it had worked perfectly, something critical would still have been missing: institutions that can justify their decisions to those affected by them. Nobody will be satisfied by an algorithmic explanation for a result that might have lifelong effects. Ultimately, the government reversed course, replacing the AI judgment with assessments made by each students teachers. What this means for your organization The challenge isnt whether to use AIits how to implement it without creating dangerous dependencies. Here are specific actions leaders, managers, and teams can take: Implement AI rotation schedules: Ensure that teams rotate periodically from AI-assisted work to manual work to maintain core competencies. Create skill preservation protocols: Document which human capabilities are mission-critical and cannot be outsourced. Establish accountability chains: Specify which decisions require human sign-off. Institute analog days: Schedule regular sessions where teams solve problems without AI tools. Design edge case challenges: Create exercises focusing on unusual scenarios AI might miss. Maintain decision logs: Create institutional memory of the value and role of human judgment by documenting when and why you override AI recommendations. Practice explanation exercises: Regularly require team members to explain AI outputs in plain languageIf they cant explain it, they shouldnt rely on it. Rotate expertise roles: Ensure multiple people can perform critical tasks without AI support, preventing single points of failure. Warning signs your organization is too AI-dependent Watch for these red flags that indicate dangerous levels of depndency: Teams cant explain AI recommendations Acceptance of AI results without validation has become the norm Staff miss errors or outliers that the AI overlooks Employees express anxiety about performing tasks without AI assistance Simple decisions that once took seconds now require AI consultation If you spot any of these signs, you need to intervene to restore human capability. The path forward My sons cancer was successfully diagnosed thanks to structured redundancy in his care team. Multiple specialists approached the same problem through different lenses. The bone specialist saw what the blood specialist missed. The resident asked the naive question that made the senior doctor reconsider. This kind of overlap can look like inefficiency at times, but if we dont work to retain it, we lose something vital. We should not shy away from the advantages AI can offer when it comes to analytical speed and pattern-recognition. But at the same time, it is essential that we shield the decision-making process from being overwritten by a single algorithmic voice. We must keep humans in the loop both because they can look beyond statistical likelihood and because they can be held accountable for their final decisions. Yes, maintaining human capabilities alongside AI will be expensive. Training tracks that preserve human skills, AI-off drills, and rigorous human audits all cost money. But they preserve the institutional muscle memory that holds the whole edifice up. The cost of losing the human perspective is one we cannot afford to bear. {"blockType":"mv-promo-block","data":{"imageDesktopUrl":"https:\/\/images.fastcompany.com\/image\/upload\/f_webp,q_auto,c_fit\/wp-cms-2\/2025\/10\/creator-faisalhoque.png","imageMobileUrl":"https:\/\/images.fastcompany.com\/image\/upload\/f_webp,q_auto,c_fit\/wp-cms-2\/2025\/10\/faisal-hoque.png","eyebrow":"","headline":"Ready to thrive at the intersection of business, technology, and humanity?","dek":"Faisal Hoques books, podcast, and his companies give leaders the frameworks and platforms to align purpose, people, process, and techturning disruption into meaningful, lasting progress.","ctaText":"Learn More","ctaUrl":"https:\/\/faisalhoque.com","theme":{"bg":"#02263c","text":"#ffffff","eyebrow":"#9aa2aa","buttonBg":"#ffffff","buttonText":"#000000"},"imageDesktopId":91420512,"imageMobileId":91420514}}
Category:
E-Commerce
During a recent New York Fashion Week, a wood-paneled boutique popped up in SoHo next to Louis Vuitton and Bottega Veneta. On the racks were tailored, wide-leg jeans and simple black Henley dresses that signaled understated elegance. But unlike those of neighboring boutiques, the clothes werent from a storied European maison de couture. They were some of the newest collections from Scoop and Free Assembly, two brands led by Brandon Maxwell, creative director at the House of Walmart. The pop-upwhich featured items priced between $8 and $75was part of the Bentonville, Arkansasbased retailers strategy to get its products in front of urban shoppers who might not be familiar with its growing array of fashion-forward budget brands. The SoHo stint was just one of the ways chief merchant Latriece Watkins a 25-year veteran of the company who joined the C-suite in 2023is positioning Walmart to appeal to a broader spectrum of shoppers. Our goal is to refresh and elevate all of our fashion brands, Watkins says. Were only 10% of the way there. For six decades, Walmart has been the go-to retailer for rural, lower-income Americans. But at a time of inflation and economic uncertainty, Americans of all backgrounds are more budget conscious. Prices have gone up for three years, says Mickey Chadha, a retail analyst at Moodys. Even the wealthy are looking to save money, and theyre gravitating toward Walmart. This presents the retailer with the opportunity to win over more affluent consumers, snagging them from competitors like Target and Amazon. Watkins has been introducing higher-end brands, like Apple, Sonos, and Nikes Air Jordan, both into stores and on Walmart.com. Her team is also developing and refreshing private labels that look premium but are inexpensive, with a focus on growth areas, such as apparel. In addition to working with Maxwell to reimagine the Scoop and Free Assembly lines, Walmart relaunched No Boundaries last year. The 30-year-old fashion brand, which generates $2 billion a year, has been updated to appeal to the tastes of Gen Z, with prices under $15. This July, the company unveiled Weekend Academy, a new trendy label for tweens. Watkins is also targeting Walmarts grocery business, which makes up 60% of its sales. Last April, the company launched Bettergoods, its first new private-label food brand in two decades; the line of 400 attractively packaged globally inspired food items has quickly lured new customers into stores. Theyre already among the fastest-moving items we sell, Watkins says. The strategy is working: While roughly 45% of Walmarts customers earn less than $50,000 a year and only 7% earn more than $100,000, the companys share of high-income customers is expanding. In the first half of 2024, households earning more than $200,000 drove growth in the grocery business, making up 8% of customers. And in the third quarter of 2024, customers who earn more than $100,000 accounted for 75% of Walmarts gains in market share, a trend that continued in 2025. Now, Watkinss challenge is to continue winning over deeper-pocketed customers while keeping the budget-conscious ones happy. We have a core customer we will never alienate, she says. But we now have an opportunity to delight them with merchandise that goes beyond the essentials. The typical Walmart store looks nothing like its swanky New York pop-up. Under fluorescent lights, youll find aisles stacked with 120,000 products, from cereal to apples to sneakers to candles. Watkinss team of merchants selects every one of these goods. Just as importantly, theyre responsible for how much each item costs. As merchants, we take a ton of responsibility for the prices customers see, Watkins says. Price has always been Walmarts critical advantage. When Sam Walton founded the company in 1962, he had the radical idea of selling products as cheaply as possible when the conventional wisdom among retailers was to charge the highest price the customer was willing to pay. Waltons approach meant lower margins, so he focused on selling in volume, creating vast stores in small, rural towns underserved by other retailers. By pursuing this approachthe most successful in retail historyWalmart has become the largest company in the world by revenue, to the tune of $681 billion in 2024. It has 10,750 stores in 19 countries. In the United States, its 4,605 stores are within 10 miles of 90% of the population. And since Walmarts prices remain 10% to 25% lower than those of its competitors, it often serves as the primary retailer for low-income families in nonmetropolitan areas, according to research by the Analysis Group. Watkins has no intention of changing this. Were going to keep serving the customer who has trusted us for years, she says. Yet Watkins believes her team has an opportunity to serve a wider demographic by adding more products to the assortment. Walmarts merchants track the tastes of higher-income consumers and bring in premium brands that will appeal to them. In recent years, thats included Oxo kitchenware, DeLonghi coffee makers, and La Roche-Posay skincare. Walmart pores over its store data, selectively placing these higher-end products in areas with higher incomes. All of them also appear on Walmarts website, which includes half a billion items. Its a formula thats working, says Chadha. Walmart is growing year over year by gaining customers on the high end without losing customers on the low end. But adding upscale brands can only take a retailer so far. The way to turn someone into a regular Walmart customer is to get them hooked on products they cant get elsewherewhich is why Watkins is so focused on bolstering the companys private labels. We want to have an assortment of items that customers want to repeat-purchase, says Watkins. If you make an item people love, they will come back for it again and again. Of Walmarts 90 house brands, 22 generate upwards of a billion dollars in annual revenue, including Wonder Nation kids clothing, Ozark Trail outdoor gear, and Onn electronics, which includes TVs and tablets. These brands have historically focused on no-frills essentials. But to appeal to richer customers, Watkins is rolling out in-house brands that focus on quality and design. The move is straight out of Targets playbook at a time when the Minneapolis-based retailer is flagging. Over the past two decades, while Walmart was serving rural, working-class Americans, Target was capturing trendy urbanites by focusing on good design. Target partnered with high-end designers to create cheaper versions of their products and launched private labels that mimicked the popular new brands on the market. But over the last year, Targets sales have declined amid operational challenges and boycotts from consumers over its reversal on DEI initiatives. This has given Walmart an opportunity to win over some of Targets waffling shoppers. Bettergoods is Walmarts first big play to steal Targets thunder. After researching food trends, Watkinss team noticed that Walmarts customers were looking for more global flavors, plant-based ingredients, and foods that cater to dietary restrictions. Our food business is so large that we have insight into everything thats happening in the food industry, she says. It was clear that the customer profile was changing. In response, the company developed Bettergoods specialty grocery items, including macarons, gochujang sauce, and mushroom umami seasoning, that wouldnt be out of place at a pricier retailer. Even so, 70% of Bettergoods products cost less than $5. While other Walmart food brands have a budget aesthetic, Bettergoods has a custom typeface and multicolor packaging that looks as good as in-house brands at Target and Whole Foods. This postioning is paying off. So far, 60% of people who buy the brand have never previously purchased from Walmarts private labels, and their repurchase rate is 40%. Bettergoods also introduces shoppers to other Walmart offerings. Walmart is succeeding at picking up a share of the wealthy consumers basket, says Sucharita Kodali, a retail analyst at Forrester. If they start shopping at Walmart for food, they may pick up tablecloths, bug sprays, and socks. To help build knowledge of its house brands outside the store, Walmart has recently created an influencer network to showcase its private labels on social media, and last fall, it embarked on a 29-city Style Tour in a blue camper van that let people shop items from 15 of its fashion labels. Weve been able to expose our assortment to people who dont have stores as close to them but can access these products the same or next day by shopping online, Watkins says. Our differentiator is our ability to serve customers in multiple ways, all at the same time. Thanks to Watkinss merchandising strategy, more high-income consumers are now online-only Walmart shoppersan important step in helping Walmart catch up to Amazons e-commerce dominance. Over the last decade, Walmart has invested in its website, from launching a third-party marketplace to improving delivery speeds to offering a Prime-like membership program called Walmart+. At $100 billion, Walmarts online sales are significantly smaller than Amazons $480 billion, but they are growing twice as fastby 20% in 2024, compared to Amazons 11% sales growth. Last year, Walmart dispatched 6.5 billion items via same- or next-day delivery. The e-commerce capabilities of Walmart and Amazon are head-to-head at this point, says Chadha. Walmarts advantage is that it has a significant store footprint, which they can integrate into their e-commerce by turning them into distribution centers. In some cases, Watkins says wealthy consumers order from Walmarts website in order to shop the budget retailer discreetly, but she believes elevating product design and quality will help change peoples perceptions. I received a note from someone who said she got so many compliments on a dress she wore to her friends wedding. No one knew it was from Walmart, she says. Were focused on being a place where people feel so good about their purchases, they want to tell their friends about it.
Category:
E-Commerce
For a generation of young Americans, choosing where to go to college or whether to go at all has become a complex calculation of costs and benefits that often revolves around a single question: Is the degree worth its price?Public confidence in higher education has plummeted in recent years amid high tuition prices, skyrocketing student loans and a dismal job market plus ideological concerns from conservatives. Now, colleges are scrambling to prove their value to students.Borrowed from the business world, the term “return on investment” has been plastered on college advertisements across the U.S. A battery of new rankings grade campuses on the financial benefits they deliver. States such as Colorado have started publishing yearly reports on the monetary payoff of college, and Texas now factors it into calculations for how much taxpayer money goes to community colleges.“Students are becoming more aware of the times when college doesn’t pay off,” said Preston Cooper, who has studied college ROI at the American Enterprise Institute, a conservative think tank. “It’s front of mind for universities today in a way that it was not necessarily 15, 20 years ago.” Most bachelor’s degrees are still worth it A wide body of research indicates a bachelor’s degree still pays off, at least on average and in the long run. Yet there’s growing recognition that not all degrees lead to a good salary, and even some that seem like a good bet are becoming riskier as graduates face one of the toughest job markets in years.A new analysis released Thursday by the Strada Education Foundation finds 70% of recent public university graduates can expect a positive return within 10 years meaning their earnings over a decade will exceed that of a typical high school graduate by an amount greater than the cost of their degree. Yet it varies by state, from 53% in North Dakota to 82% in Washington, D.C. States where college is more affordable have fared better, the report says.It’s a critical issue for families who wonder how college tuition prices could ever pay off, said Emilia Mattucci, a high school counselor at East Allegheny schools, near Pittsburgh. More than two-thirds of her school’s students come from low-income families, and many aren’t willing to take on the level of debt that past generations accepted.Instead, more are heading to technical schools or the trades and passing on four-year universities, she said.“A lot of families are just saying they can’t afford it, or they don’t want to go into debt for years and years and years,” she said.Education Secretary Linda McMahon has been among those questioning the need for a four-year degree. Speaking at the Reagan Institute think tank in September, McMahon praised programs that prepare students for careers right out of high school.“I’m not saying kids shouldn’t go to college,” she said. “I’m just saying all kids don’t have to go in order to be successful.” Lowering college tuition and improving graduate earnings American higher education has been grappling with both sides of the ROI equation tuition costs and graduate earnings. It’s becoming even more important as colleges compete for decreasing numbers of college-age students as a result of falling birth rates.Tuition rates have stayed flat on many campuses in recent years to address affordability concerns, and many private colleges have lowered their sticker prices in an effort to better reflect the cost most students actually pay after factoring in financial aid.The other part of the equation making sure graduates land good jobs is more complicated.A group of college presidents recently met at Gallup’s Washington headquarters to study public polling on higher education. One of the chief reasons for flagging confidence is a perception that colleges aren’t giving graduates the skills employers need, said Kevin Guskiewicz, president of Michigan State University, one of the leaders at the meeting.“We’re trying to get out in front of that,” he said.The issue has been a priority for Guskiewicz since he arrived on campus last year. He gathered a council of Michigan business leaders to identify skills that graduates will need for jobs, from agriculture to banking. The goal is to mold degree programs to the job market’s needs and to get students internships and work experience that can lead to a job. A disconnect with the job market Bridging the gap to the job market has been a persistent struggle for U.S. colleges, said Matt Sigelman, president of the Burning Glass Institute, a think tank that studies the workforce. Last year the institute, partnering with Strada researchers, found 52% of recent college graduates were in jobs that didn’t require a degree. Even higher-demand fields, such as education and nursing, had large numbers of graduates in that situation.“No programs are immune, and no schools are immune,” Sigelman said.The federal government has been trying to fix the problem for decades, going back to President Barack Obama’s administration. A federal rule first established in 2011 aimed to cut federal money to college programs that leave graduates with low earnings, though it primarily targeted for-profit colleges.A Republican reconciliation bill passed this year takes a wider view, requiring most colleges to hit earnings standards to be eligible for federal funding. The goal is to make sure college graduates end up earning more than those without a degree.Others see transparency as a key solution.For decades, students had little way to know whether graduates of specific degree programs were landing good jobs after college. That started to change with the College Scorecard in 2015, a federal website that shares broad earnings outcomes for college programs. More recently, bipartisan legislation in Congress has sought to give the public even more detailed data.Lawmakers in North Carolina ordered a 2023 study on the financial return for degrees across the state’s public universities. It found that 93% produced a positive return, meaning graduates were expected to earn more over their lives than someone without a similar degree.The data is available to the public, showing, for example, that undergraduate degrees in applied math and business tend to have high returns at the University of North Carolina at Chapel Hill, while graduate degrees in psychology and foreign languages often don’t.Colleges are belatedly realizing how important that kind of data is to students and their families, said Lee Roberts, chancellor of UNC-Chapel Hill, in an interview.“In uncertain times, students are even more focused I would say rightly so on what their job prospects are going to be,” he added. “So I think colleges and universities really owe students and their families this data.” The Associated Press’ education coverage receives financial support from multiple prvate foundations. AP is solely responsible for all content. Find AP’s standards for working with philanthropies, a list of supporters and funded coverage areas at AP.org. Collin Binkley, AP Education Writer
Category:
E-Commerce
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