Issue no. 246. The last one had a 39.1% open rate with 🔥 8.76% of you reading up on how Warby Parker's cofounders built their brand from scratch, becoming the pioneers of the DNVB craze. Listen to Lumi's Well Made podcast for some additional insight into what I think about commerce and disruption.
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Stitch Fix is also an oddball for not wanting or needing to collect vast sums to support itself. It has sold just $42.5 million in stock to private investors since the company started in 2011. That is a dinky amount of capital by current Silicon Valley standards. On a single day this week, on-demand ride company Lyft sold $1 billion worth of stock. And that wasn't even the biggest startup funding news within a 24-hour period.
Retail: It was a scorching day outside, hot even for late summer in Ohio, and yet I was freezing. I had stepped inside the EB Ice Box, a meat-locker-like display at the Eddie Bauer store here that was cooled to 13 degrees Fahrenheit. The metal-sheathed room looked out onto the promenade of an upscale shopping mall, and featured a large block of ice for a bench. Even though I was wearing a down jacket (the room is meant to be a place where customers can test Eddie Bauer wear), the frigid air had gotten under my skin.
eCommerce: In its fiscal year ending July 29, 2017, Stitch Fix generated $977.1 million in net revenue, up 33.8 percent from $730.3 million in 2016 and 113 percent from $342.8 million in 2015. While the company reported a net loss of $600,000 in 2017 (compared with net income of $33.2 million in 2016), adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation) in 2017 was $60.6 million, down from $72.6 million the year before.
Logistics: On Thursday, Kion came back to earth with a bump. Order intake at its supply-chain business, mainly Dematic, is weaker than expected. Some customers have delayed projects, while others have defected to rivals after delays caused by operational issues at Dematic's Mexican plant. As a result, full-year sales at the unit could be as much as one-fifth lower than anticipated. The stock fell about 13 percent.
Brand: Brands need to plan for the culture war by playing a conscious part in their employees' and customers' emotional journey. It is necessary to understand the interconnected -- and interdependent -- relationships between your brand and popular culture. Social media listening, customer service, public relations -- these groups must become the front lines of information for senior executives creating a go-forward strategy. Often, the writing is on the wall that an organization is vulnerable to a sensitive issue. Take Colin Kaepernick, who "took a knee" in August 2016 and has been a lightening rod for popular culture discussions ever since.
AdTech: Digital has also opened up endless possibilities for one-to-one connections. But this has been filled with cheaply produced, vacuous, branded moments that people skip or avoid with ad blockers. Since 2012, marketing effectiveness has declined significantly. This has been demonstrated by detailed analysis of over 500 effectiveness papers by Peter Field and Les Binet of the Institute of Practitioners in Advertising.
DVNB: Uniquely J will offer a variety of goods, including toilet paper, coffee and laundry detergent. In keeping with its focus on "metro millennials" the company has placed emphasis on items that are sustainable and on-trend with young consumers. Among its offerings are lemon thyme basil cleaning wipes that sell for $5.37 and organic teriyaki sauce that was $3.48 for a 14-ounce bottle, all delivered in artist-designed boxes.
eCommerce: After 831 days, Alibaba Group Holding Ltd. regained the title of the world’s biggest e-commerce company, albeit briefly. The Chinese retailer surpassed Amazon.com Inc. Tuesday on an intraday basis as the U.S. retail giant’s stock continued to stall after second-quarter earnings missed estimates and the merchant forecast a possible operating loss for the third quarter. Alibaba -- whose stock is up over 109 percent this year -- held the top spot for the first 9 and a half months after its initial public offering in 2014.
eCommerce Strategy: While one e-commerce strategy has been to have a single big website, Dunn said he's learning from the Walmart brands that "it's about an ecosystem." "It's not about just one place people are going shop online, it's shopping with the sites that they really love," Dunn said. With competitors like Amazon continually expanding their business as well, Dunn said they're not in it just to survive. "We want to win. And we think that this is a really interesting and different way to win. When someone's zigging, you've got to zag, and I think customers still love brands. Brands are not going away."
eCommerce: Kroger has revealed a new initiative, dubbed Restock Kroger, that aims to build out its e-commerce and omnichannel businesses, Internet Retailer reports. Kroger is the second-largest grocer in the US, and appears to recognize that a revamp of its digital options is in order if it's to maintain that position. The initiative is expected to cost $9 billion over the next three years.
One passage stood out when I read Richie Seigel's latest for his Loose Threads project.
While many people believe that Digitally-Native Brands have both larger addressable markets and cheaper acquisition avenues to realize their potential—leading to this influx of capital—there is little proof that these theories will result in long-lasting or profitable companies.
Building a successful brand takes time. While many Digitally-Native Brands have tried to take shortcuts—raising more money and spending it faster—many of these companies find themselves in precarious positions, with investors breathing down their necks, employees’ livelihoods in their hands, and uncertainty about what comes next.
When I reached out to a prominent (profitable) DNVB founder / CEO to discuss this prediction, we both agreed that it had merit. There will be many bad DNVB exits. But there will be even more heritage brands that will fail along with the stores that propped them up for years.
You know that age old adage, you only have to outrun one person to escape a bear's pursuit? In this analogy, heritage brands are the ones being outrun by DNVB's.
Of the heritage brands that Seigel lists in his second para, the publicly traded ones are trading at an average of -25% on the year. This includes Columbus's own L Brands (owner of Victoria Secret); VS is a heritage brand that's anchoring a crumbling stock due to inbound intimates competition from a growing number of DNVB's.
In addition, most heritage brands rely upon department stores and costly ten-year leases to bolster sales. Most of these investments are quietly financed by toxic amounts of private equity. Someone check on J. Crew for us.
Wal-Mart, who invests heavily in DNVB's, understands the importance of the internet as a platform for retail. They are doing something interesting to compete against Amazon:
"Wal-Mart Stores Inc. is near a deal to add Lord & Taylor to its website, part of a broader effort by the retail giant to build an online shopping destination that can compete with Amazon.com Inc., according to people familiar with the matter." - WSJ
This is why Wal-Mart is doing this:
They will now sell fashion's heritage brands through Walmart.com, becoming a new-aged destination for all things department store: including Patagonia, Ralph Lauren, Nike, and maybe even Commes De Garcons.
This is while their six most recent acquisitions are also helping them appeal to new audiences. Jet.com has already announced a private label. And it's no secret that Wal-Mart is building a strong case with Mark Lore's new strategy. In time, Wal-Mart will be a machine capable of launching new private-labeled brands that target the consumers of the heritage brands of old.
Mark Lore's recent Lord & Taylor move has Bezos' tutelage written all over it.
Amazon, Alibaba, and Wal-Mart are vying to become this century's version of the department store. And every brand should be nervous but it's the (eCommerce-lagging) heritage brands that should be most afraid of the bloodbath. These brands have invested little in eCommerce and even less in the types of communities that innovators like Stitch Fix seems to have fostered.
As consumers become more brand agnostic, heritage brands are closest to being devoured by the bear.
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