In this episode of Industry Focus: Consumer Goods, Emily Flippen is joined by Fool contributor Dan Kline to discuss the latest innovations happening in the retail and consumer goods space. Innovations have been necessitated and have picked up pace because of the pandemic. Our hosts look at how retailers and consumer goods companies have handled changes during these difficult times, where they can improve, and much more.

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This video was recorded on July 21, 2020.

Emily Flippen: Welcome to Industry Focus. It's Tuesday, July 21st, and I'm your host Emily Flippen. It should come as no surprise to our listeners that many of the innovations we've seen over the past month are directly related to the pandemic, but joining me to explore specifically how retail and consumer goods companies have handled innovation during the time of the plague is Dan Kline. Dan, welcome back.

Dan Kline: Hey there, Emily. So, one of the things that struck me is, have you noticed how every fast food company goes out of its way to tell you that it doesn't touch your food after it comes out of the oven? Was that a thing beforehand, like I don't want to joke about it, but I took for granted that Domino's didn't touch your pizza after it came out of the oven. I get it. They have to make the pizza, they have to do the twirly thing, they have to put the toppings down. I assumed the oven was hot enough to kill any germs. The fact that they're bringing it up in every commercial suggests to me that the old policy was just like a guy with tough arms just slid his [laughs] hands under the pizza, threw it in the carton. So, we're going to talk about some silly changes like that, but also some serious ones.

Flippen: That reminds me of the marketing campaign McDonald's (NYSE:MCD) ran maybe about a decade ago at this point, where they started to advertise their Chicken McNuggets as made with just white meat chicken. And while I understand there's dark meat, right, it did cause [laughs] everyone to sit there and scratch their head and say, wait a minute, what was it before? [laughs]

Kline: Well, they used to have that, you get the, like, one nugget shape that was all white, and then you get the smaller nugget shape that looked like it was filled with like a gray foam. And that was [laughs] very questionable, what's in a Chicken McNugget. Though, I have not eaten one for a very long time.

Flippen: [laughs] But delicious nonetheless. But as you alluded to, we will talk about things that are maybe more relevant than a decades-long debate over what Chicken McNuggets are made out of. And part of that is really just the acceleration we've seen that the pandemic has forced onto, especially, retail companies to innovate in these really tumultuous times. You know, for anybody who listened to the Industry Focus I taped last week with Meilin Quinn, one of the things that I reiterated across that episode was the importance of innovation. And I'm a big believer in the idea that people innovate the most, and companies innovate the most, when their backs are pushed against a wall, when they're given an opportunity, they have no other choice but to make changes. And we're seeing that happen.

But it does beg the question, and this is a question you asked me is, do these innovations just go away when the pandemic goes away or do they stick around? So, I kind of want to pick your brain here about some of the stuff that you've seen happen. You mentioned, obviously, the advertisements that all these fast-food restaurants are making. I wouldn't say that not touching your food is exactly an innovation, but I know that there have been a lot of innovations.

Kline: Yeah, Emily, let's start first with bad companies that have been forced to innovate after the fact -- not that good companies didn't further innovate, but let's look at who the winners are here. The winners are Starbucks (NASDAQ:SBUX) and Domino's and McDonald's, you know, retailers like Best Buy that already had built out a robust digital sales channel. All Starbucks had to do was put more work behind its drive-thru; it already had contactless payment. So, you had the ability to pull up your Starbucks app, order your thing, walk into a store, grab your stuff, not touch or talk to a person. That is called contactless payment. McDonald's allowed for that, you know, Dunkin' Donuts -- any of the winning retailers. And you didn't even have to be at the forefront.

The Dunkin' Donuts strategy is to see what Starbucks does, see if it works, and then go, OK, let's do that. So, you just have to constantly at least follow the leader, but how many brands were caught flat-footed where -- you know, look, still, my son likes PDQ, which is a chicken chain. And when you go to PDQ, they have to hand out, like, the card reader, and you have to put the card in. And the whole thing is uncomfortable, a person's leaning over your car, like, it's the only time picking up drive-thru, I put on a mask. Actually, I do at Starbucks now, because Starbucks has a -- I'm not sure if it applies to drive-thru, but they have a mask policy, so whatever, I put it on.

But it's places like that that just, they're not going to be doing that well, because they weren't set up with the app, you weren't already in their ecosystem. Contactless payment made sense before this, not because we didn't previously want to touch people, but because it was convenient. I could go to Starbucks, get my coffee. There are days I don't want to talk to the barista, there are days I really do want to talk to the barista, because that's the only person I speak to, not so much now that we're doing podcasts and other things more often.

But that said, contactless payment makes things easier, it frees up the line. We've talked about this with McDonald's kiosks, Emily. The goal of the McDonald's kiosk was two things; well, it's really three things. They want to eliminate some human labor. They always say they don't. They always say it's going to shift elsewhere, but they do. They don't want six people at the front of a McDonald's, they want two helping you order at the kiosk. But it gets rid of order shame. So, if you're eating three Big Macs, you can order three Big Macs, you can go pick up the bag. Nobody knows who you're with, who you're not with. You go back in the corner of the McDonald's, eat your three Big Macs.

It also makes it just so you don't have to deal with the awkwardness of payment. You can have your credit card and swipe it through quickly. These technologies made sense; in a nonpandemic world, they're crucial. Now, the kiosks aren't great, because you have to wipe those down and do other things, but all the functionality of that is in the McDonald's app. The ability to deliver is a sort of secondary feature of contactless payment. Well, Starbucks and McDonald's, they were already partnered with various delivery partners ready to go, other companies that had to scramble -- were you really going to order Chuck E. Cheese, just 'cause, like, late in the game they got on under a fake name on Grubhub? And under their real name too? You weren't going to, because they weren't there before. We're sort of doubling down on companies we're comfortable with. And contactless payment was something that was coming anyway. Money is gross, you know, we've talked about this, you know, the War on Cash that Jason Moser talks about.

I still carry cash, that's probably a by-product of being someone who goes to casinos, because the last thing you want to do is have your credit card tied to your ability to gamble in a casino, which you can do on cruise ships, you can actually take money directly out of your account, which is, you know, dangerous if you haven't planned for that.

But that said, the more we can do, that's easier, we saw it with the evolution of Panera's 2.0. At first, it was very awkward and you ordered and you didn't know where you were going to get your food, but you paid for it. And then they figured out, let's just buy a bookcase at IKEA and put the food in an alphabetical order. Okay, I don't have to talk to anybody. I can order whatever I want. I can get my order right, because I want that sandwich and I only want mustard on one side of the sandwich and I want to put that instruction in, because I'm sharing it with someone who doesn't like mustard or whatever it is. The ability to get your ridiculous order right is that much better. So that, to me, is one of the most positive things, but largely the companies doing it well are the ones that were doing it before.

Flippen: Yeah. And, in particular, for the contactless payment, this is one of those trends that we saw exist way before the pandemic, but what's really interesting is, when I look at the space and I compare the developments that we've seen just here within the United States versus internationally, it's a different landscape. The lack of willingness [laughs] for many Americans to make a shift to contactless payments is really tangible when you go elsewhere in the world and you see how rapidly, especially countries in Asia, have adopted contactless payments, it makes you feel like -- you know, Jason Moser always talks about the War on Cash -- it makes you feel like this War on Cash is really just getting started here in the U.S. In my opinion, there's no doubt that the pandemic has accelerated a shift to contactless payments, but it's so much more than just using your credit card as opposed to using cash, because that's what the War on Cash makes you think. It's much more driving members to the app. I think Chipotle has done -- I'm not sure if I'd go as far as to say a good job, but has made a conscientious effort to expand its app presence during this pandemic to get people to pay and order over the app that would significantly reduce the amount of engagement you have. But I know you didn't have the best experience with Chipotle recently, Dan. [laughs]

Kline: So, here's the thing, Chipotle is in inning one of doing this. What they haven't figured out is they have these Chipotlanes, which you're supposed to order on the app and go pick up, and it tells you when to pick up, but it doesn't really account for the guy in line in front of you came too early and he's going to clog up the line, it's not a great system. But that said, once you have the system, I think it'll take them six to eight weeks to figure it out; much like I just talked about with Panera, where at first, the 2.0, it was very muddy. You'd walk in and maybe it was behind the counter, maybe at some stores it was where they keep your order when you order in and you have to go get it over there. Putting it all in one dedicated place made a ton of sense.

Even figuring out like Chipotle, you know, the bags and the packaging, I have a common name and they were using first names. So, they had four orders for Daniel. So, I had to tell them -- and there's a barcode and I held up the barcode, like, we don't have [laughs] a barcode associated with the orders. So, I don't know how -- this is a brand-new Chipotle, it's only been there for a few months -- I don't know at what level this has been rolling out, but I think places will get this right. It's just not quite there yet.

And I'll give one more example. So, you know, Apple Pay is something I use a ton. And there's a vending machine in my building that takes Apple Pay. The problem is, you need to do a facial scan and where you put your reader is way down, you have to crouch down. So, I have to crouch down to get my face and it's not logical, it's not a reasonable set up to do it. So, obviously, people are going to see that as a pain point, and the next generation of vending machines is going to move the credit card swiper to the top, to where your face is.

Americans are pretty reluctant to do this, because it doesn't always work that well. I mean, how many times have you been in -- I hate to pick on Panera again, but the only places I regularly do this is Whole Foods and Panera, and Whole Foods it works pretty well. You hold up your Apple Pay to the thing and it pays. At Panera, you have to do this, you have to move your hand around endlessly to try to eventually hope to get it, and then frustratingly pull out your credit card, [laughs] because it only works half the time.

That said, I'm pretty confident the pandemic is going to accelerate, we're going to see where those pain points are and we're going to fix them. Starbucks did a great job of figuring out the process of combining someone who orders at the microphone, the speaker in the drive thru-line and somebody who places an order in the app for pick-up through the drive-thru line. If you're out of order, they'll tell you, hey, just pull up to a space and they'll send a runner out who will -- they'll leave it in your backseat if you want, they'll leave it, you know, however you want to do it.

I will also say that contactless is relative. Because they always talk about this, Starbucks is handing you, and so are other fast food places, they put your order in like a bin or on like a pizza delivery, you know, that that big platform that you would serve a pizza on. Somebody had to handle it to put it on there. So, the fact that they're not actually touching you, it's really -- that to me is more gimmicky, I don't care if you hand me my drink, I'm not going to --

Flippen: It's optics.

Kline: Yeah, it is. I understand that at some point you had to pour the drink and I'm going to assume that you're being as hygienic as you possibly can.

Flippen: And you mentioned growing pains and how the pandemic has accelerated a lot of things for good companies, companies that were doing well before the pandemic that are being forced to innovate. And sure, they might have some growing pains with their innovation, but they'll get there. How about we talk about some dying pains? [laughs] Maybe that's not the right word. But these were companies that weren't doing well before the pandemic that have now tried to innovate with, again, their backs against the wall. But I can see an argument that, long-term, nothing really changes. I think one that comes to mind that I know we've talked about previously, Dan, is Gap (NYSE:GPS), as a good example.

Kline: Yeah, I mean, so I'm on the fence about Gap. For Gap to have any chance, they have to give you a reason to go to the Gap, and I don't know what that reason can possibly be. It's not going to be that Kanye West designed some cool clothes. That could be part of the reason, but Gap has fallen so far out of favor that it doesn't speak to me, it doesn't speak to my, you know, into-closish teenager, it doesn't speak to you, I'm going to assume. Even the Athleta brand, which right now should be on point, you know, it's high-quality relatively low cost compared to lululemon athletic leisurewear. And it just somehow isn't speaking to the marketplace. I do think this is an opportunity -- and we talked about this on an earlier program -- this is an opportunity for them to reset, they can get out of some leases they don't want to be in, they're having a rent fight with Simon right now. They're all in court, that Simon Property Group.

That said, they can emerge smaller, maybe they can figure out how to let Old Navy lead the way; that's still a relevant brand. Maybe they can pump up Athleta and just make Gap a smaller part of the portfolio. And maybe Gap goes back to, like, collaborations with celebrities and functional pieces, like, redo the Gap jeans line and make them affordable but stylish jeans, which seems to be a market that they could own, that they used to own, they just haven't.

And one of the things that we're seeing, as a pandemic change, is this sort of rightsizing. Companies are obviously using this as a way to get rid of -- sometimes employees they don't want to get rid of, but also the employees they probably wanted to get rid of that it just wasn't easy to do, and that could be a benefit for a company like Gap. In theory, Gap could say, OK, you know, we're going to close 300 stores. Just because you're in a store that's closed, doesn't mean you're going to get laid off. We might go to that manager and say, well, you're a great manager, do you want to go be a manager in this other store that has more potential, but the manager there is not great. I hope these are very well managed closures where companies work hard to keep their best people and put people in the best position to win.

And look, there's all sorts of other transformations that are happening right now, that probably should have happened pre-pandemic. You know, we talked about Best Buy a minute ago. Best Buy, Walmart, Target, they were doing omnichannel, meaning you could buy it at home and pick it up in the store, you could see it in the store, order it for home delivery, you can get it delivered but then return it in the store, whatever combination of that. Every store needs to do that.

And you look at the struggling retailers. Macy's (NYSE:M) has done a bad job with omnichannel. I have no idea if JCPenney has a website, and I shop pretty regularly at JCPenney. Well, I know they do, because half the time you go to JCPenney and they don't have the size you want and they direct you to buy it online to get it delivered in store. So, think about that, I'm standing in a store that doesn't have what I want, what they should be saying is, here's 10% off to get it delivered in home and it's free delivery, and we can just do that with like a swipe or like some very easy system, instead I have to, on my phone, go to their website, [laughs] it's not necessarily even the same price as the store, and then I have to come back and pick it up at the store [laughs] or I have to pay a delivery charge? You know, companies have to get that right.

And you know, look, good companies were already doing this. I think the mall operators are going to figure out how to help some of the bad companies; and I hate to use that word. But companies that maybe -- I'll give an example, Forever 21 is probably largely an in-person business, but in this day-and-age, and they're partly owned by Simon, they're going to have to do more omnichannel sales, and they're going to have to get better with returns, because there's no dressing rooms in stores right now. So, even if you go to the store, that's not going to be Forever 21 leading the way, that's going to be Simon and Brookfield figuring out mall-based solutions that allow smaller retailers to have access to warehousing and return points and things that are relatively simple for bigger companies to do. It's a massive change and it should happen three years ago.

Flippen: This is going to sound, kind of, blasé, and I don't mean for it to come across that way, but ultimately it feels like this pandemic has offered an out for companies to figure out how to right-size their operations. That's a word you hear used a lot. But ultimately, if you were struggling before the pandemic, you now have an easy copout for saying, look, we're going to cut all these stores, we're going to right-size our staff, whatever it is that you feel like you need to do to get your company back to the point where it can operate at a profitable ongoing basis. Now it is your opportunity to do that. And when you mention companies like Macy's, in my opinion, not really taking up the opportunity the way that a company like Gap is, or a Walmart, which is not a company that was struggling first, but has made a lot of innovations over the past few months. That, to me, just feels, like, you're not thinking long-term.

Kline: Yeah. So, you look at Macy's; and you know, I ran a store, we've talked about this a lot, I ran a gigantic toy store that was a destination. And one of the first things I did when I took that job, is I said, OK, what's our traffic flow? Well, we're really busy on Saturday and Sunday. We have 50 to 100 kids that come in on Friday night and they play Magic the Gathering. So, I started, OK, how do I optimize those hours on Friday night. So, I'm going to leave the front desk open, so kids can buy candy bars, we'll sell a few hundred dollars worth of candy bars. On Saturdays and Sundays, I'll put someone in the parking lot, which was crowded, to direct traffic. That makes sense.

Okay, when are we not busy? Well, we're not busy during the week from, like, 10 in the morning to 4 in the afternoon. Well, who's home? Moms and kids. Okay, let's do story time. Let's have DUPLO playtime, let's break out some Hot Wheels cars and have, you know, come in, and mom can have a free cup of coffee and we'll have an ex-teacher or something like that run the situation. So, a lot of things like that where we really figure out, how do we best use it. And that's what Macy's isn't doing.

Macy's should say, OK, when do we not have traffic? Well, we don't have traffic from 11 to 1. Who's available from 11 to 1, and how do I incentivize them to come into my store? Is it a yoga class, is it a free glam photo session? I have no idea; I don't run Macy's. It's always driven me nuts.

We'll talk about a non-public company, Barnes & Noble. Barnes & Noble has giant empty areas in their store. They sell sheet music, why do they not offer music lessons? You could bring in music lesson pods, mom and dad could go get a cup of coffee, they might buy a book, there's a Starbucks in the store, there's people who work there all day that can do the scheduling, teachers pay you a rental fee, it's zero cost to you. Every retailer should be figuring this out.

Best Buy sat down and went, what if we went to the local cable provider and had them put their store within our store? Hey, that works. What if we went to Verizon and Apple and Microsoft, and, oh, wait a minute, they're all paying us rent to be in our store and they're selling stuff? This is a model that works. Look, Walmart has renters in its stores. They have Music & Arts, they have Subway, they have pretzel places, whatever, it differs by market. But there's definitely lots of things you can do.

And do it now, [laughs] you know, if your Macy's and you don't make this pivot -- and, you know, we talked about places using space well. Walmart having, like, drive-in movies in its parking lots during downtime or during close time. They might close at eight o'clock at a mall on a Sunday and then throw a movie. If you're paying rent on space, figure out how to use it.

I'll go back to the toy store. We did Friday night babysitting. Hey, mom and dad, I've got school teachers, certified licensed school teachers, drop your kid off for two hours and go to dinner, we are close to a lot of restaurants. We're going to charge you $20 for that. They saw our toy store, they paid us $20, they had a really good feeling about us, because they got to go to dinner. [laughs]

Like, if I can think of that, why can't the executives at JCPenney or Macy's? And Jill Soltau at JCPenney has some good ideas with yoga studios and some other things, but it's the leaders who continue to lead. It's Walmart and Best Buy and Target, who have really been ahead of the curve with the pandemic. I am not sure if any of the suffering retailers is going to figure it out and come out of this stronger.

Flippen: So, let's talk about another winner in the space that we haven't mentioned yet, that has been innovating amid this pandemic. And you threw this company into the outline. I am a shareholder in this company, I'm a big fan of this company, even though I do not wear a lot of makeup, and that's Ulta. Ulta has been so innovative, even though virtually all of their business, before the pandemic, was happening in stores. So, how has Ulta innovated?

Kline: So, Emily, this is something you actually -- I don't want to say, turned me on to, because it's not like I'm using it, but it's something you made me aware of. They have something called the glam lab, where you can go online and try on makeup. I was pretty skeptical that this would work well, only because colors are not a definitive thing on the internet. They're going to be better on, I think you're using a MacBook, on our MacBook with retina screens -- nope, she's not -- than they are necessarily on my secondary monitor which cost $89. [laughs]

So, that part, but people give it very rave reviews. And I think we're going to see an acceleration. We've talked about this a lot of times. They have not figured out how to do clothes sizing. You know, a really good online tailor. So, I can get what I want, whether that's custom-made jeans, whether that's a shirt that I ordered and it's going to fit me, that's coming. I've seen enough innovation in that, you know, at Shoptalk, which is a trade show I go to once a year. I'll be going to virtual Shoptalk in September. I'll be in Las Vegas; they just won't be. [laughs] So, I'm still going, they're just having the tradeshow remotely this year.

But last year, during their innovation session, they had like a couple of hundred start-ups. And I try to move through it pretty quickly, because they all want to talk to me. But the ones I stopped at were people doing that sort of like, how do you make it as simple as possible? You want to just be able to hold up your iPhone and see what something looks like or get sized, you don't want to have to, you know, MTailor, and take your clothes off and spin around and send the photo somewhere. You want it to be like that, sort of, Star Wars, it maps your body completely and tells you exactly what the right shirt is. And maybe even AI that can tell you, hey, Dan, that shirt will fit, it's not going to be very flattering though. Like, that I think is going to happen. And I think we're seeing the push to that innovation accelerate. For Macy's, where they've hinted at it, is eventually having stores that don't have the inventory in the store. Where you can do that, sort of, virtual try-on, and then the outfit is waiting for you at your home the next day. I'd love to see that happen. I feel like it's probably not going to be Macy's that innovates it, but, hey, surprise me.

Flippen: And before we finish up here, I want to sneak in a story. And you rightfully pointed out that this topic probably deserves a full episode on its own, and maybe we'll take that in the upcoming weeks or months. But back-to-school spending. This is typically a big boon for retailers. And clearly that's not happening this year. What I think is really interesting is that actually, the amount of money that's expected to be spent on back-to-school items is actually expected to increase this year. This is because families are investing in expensive items, technological items [laughs] to improve the learning from home capabilities. But clearly, retailers, people who are selling back-to-school clothing, notebooks possibly, more pens, as opposed to working online. These are companies that are not going to be getting that historic boom. Is there innovation that these companies could do to bring some of that back-to-school spending back to their businesses or has that ship sailed?

Kline: I hate to say this out loud, because my cousin, Michael, is an executive at -- not a high-level executive, but he runs a marketing department for Office Depot. And he is fighting leukemia and health insurance is really, really important to him. So, it pains me to say this, no, that ship has sailed. We've talked about this many times. Those were the traditional back-to-school winners along with the places you're already going; Walmart, Target. I have a hard time believing, unless there are shortages, that we're all of a sudden going to discover the website for these places and start shopping when Amazon sells all the items. It just doesn't make any sense.

Target and Walmart have most of these items. The day for those companies, for Staples and Office Depot to win in this space, were long ago. They have to pivot their business to something else. The other thing that I think is going to be heard here, is many of these ailing mall retailers, I don't know that my son needs 10 new $30 t-shirts from Zumiez or wherever it is he was getting t-shirts from, because he's going back to school, when he's not going back to school. You know, he said to me, hey, can I get new sneakers? And I said, I don't know, why don't you get new sneakers like when you actually go back to school? I lost that fight; he's going to be getting new sneakers sooner than necessary. [laughs]

But I did say to him like, you know, the laptop you're using, are you comfortable with it. You're going to have to use it a lot more, you know, should we get something else, should I give him my secondary Mac and get another Mac for myself? You know, that could happen only because I want another Mac for myself. [laughs] But this is going to hurt the mall. I think there's no other way to say it. There's just not a lot of incentive to buy clothing, especially if you have to buy a $600 iPad for your kid or you have to buy a $400 or $500 laptop, and not that there aren't cheaper options, there are certainly viable Chromebooks and other things. But you almost have to be more tech-savvy to do that rather than less tech-savvy.

I was shocked when I saw those numbers. Those are National Retail Federation numbers that said, spending was going to go up pretty dramatically, and really dramatically for college students. College students I would have guessed, because a lot of them are upgrading. If you have to use your laptop all day long, you want it to be a great laptop. You're going to need things like cameras and all the other stuff.

But that said, yeah, the existing winners, the Best Buys, the Walmarts, the Targets, the Amazons, they're going to win. I have a hard time believing that, you know, not to pick on Forever 21 or Macy's or Zumiez or the Gap or some of these -- not that kids are super into the Gap, but let's pretend they were-- even like an H&M, I don't see a big need for that level of purchasing when you're only seeing your friends. And, Emily, you know that I do own 10 of these. You know that I own 10 of these, but you don't know if I'm wearing the same one I wore yesterday. [laughs]

Flippen: Your shirt, you mean? [laughs]

Kline: [laughs] Yeah. I'm sorry, I'm pointing to myself, because you can see me, forgetting that the podcast audience could not see me. But, yes, I was pointing to my shirts, which I do wear the same shirt and own a lot of. And again, I know I changed, but you don't. And certainly, if it was my son, there's zero possibility he would change a shirt every day [laughs] if we didn't tell him. So, yeah, back-to-school spending is not going to be pretty for retailers that needed the money.

Flippen: And I'm really not jealous of the position that these retailers are in for losing their back-to-school spending, but more importantly, the situation that kids are in. You mentioned your son, but even kids who are going to college or trying to go to grade school, it's not going to be a fun semester or potentially even year ahead of them having to do remote learning. So, my thoughts [laughs] go out to everybody affected.

Kline: Yeah. And a big loser of this is going to be a company we talked about a bunch, JCPenney. That is a nice --

Flippen: Yep, back-to-school has always been big for them.

Kline: It's an affordable place to go, but the reality is, when it's uncomfortable to go places, I'm probably already at Target or Walmart. And you know, Target has upped its game in terms of clothing, where it's now an acceptable place, at least for many kids. I'm sure there are trendier kids that it would not be. But it's an acceptable place to go for clothing. And I know as a parent, I'm limiting my exposure to malls, not that I haven't been to the mall, I have, but I'm more likely to go to our outdoor outlet mall where you -- you know, Nike is doing a really great job of spacing people out. Nike is the one place where the discounts haven't been particularly good, whereas other places that are less popular have had really good sales, and that's going to hurt back-to-school. If I can go to the outlet mall and buy Under Armour shirts at 75% off, I might not go to JCPenney and buy shirts at full price. It's going to be an ugly season for retailers that have already been suffering.

Flippen: Yeah, this is definitely an area that is warranting a deeper look from us, but until then, Dan, as always, thank you so much for joining me.

Kline: Thank you for having me.

Flippen: Listeners, that does it for this episode of Industry Focus. If you have any questions, you can always reach us at IndustryFocus@Fool.com or tweet us @MFIndustryFocus.

As always, people on the program may own companies discussed in the show, and The Motley Fool may have formal recommendations for or against any stocks mentioned, so don't buy or sell anything based solely on what you hear.

Thanks Tim Sparks for his work behind the screen today. For Dan Kline, I'm Emily Flippen, thanks for listening and Fool on!