This is issue no. 225. The last issue had a 46.95% open rate with 8.03% reading up on the four companies that could eat Under Armour's lunch. Take a look at Amazon's expanding retail footprint here and their fulfillment centers here (via Loose Threads).

D2C Startup Spotlight: Have you heard of Movebutter?

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Today's Top Intelligence (15 Reads)
The Direct-to-Consumer Revolution
The rise of D2C companies follows off the back of what General Catalyst’s Hemant Taneja refers to as “economies of unscale.” Modular services have greatly reduced the barriers to launching a D2C strategy. Back in the early 2000's, it was difficult for an e-commerce startup to build and manage aspects of their business. Now, a startup can build an e-commerce website with Shopify, manage payments processing with Stripe, talk to customers with Intercom, and manage logistics and customer service through Fulfillment by Amazon. 

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The Takeaway: The major driver, it seems, is food, which is more experiential, and a greater part of the popular culture, than ever. “Food with a capital F,” as Jamestown’s Phillips says. “It’s fundamental to creating a real place. After all, millennials spend 44 percent of their food dollars on eating out compared to 40 percent of baby boomers, according the Department of Agriculture’s food expenditure data from 2014.

The Takeaway: Once a BuzzFeed writer has chosen your product to feature, a unique link is created for BuzzFeed to embed in its content or product listing ads promoted on Facebook. The link drives customers directly to your online store, tracking attribution for BuzzFeed sales, and organizes a monthly payout of commissions after you’ve received the customer’s payment.

The Takeaway: The two-year deal marks one of the largest show development deals Snap has landed to date and shows how Snap is attempting to reinvent television for young, mobile users. In a video for the company’s roadshow before its public offering, Snap’s chief strategist, Imran Khan, framed Snap’s opportunity by highlighting how young people ages 18 to 24 have shifted their attention to mobile phones from traditional TV.

The Takeaway: The company’s origins are well-known within the retail set. Mr. Krim and his co-founders argued that the traditional way of buying mattresses — going to a retailer like Sleep Train, for example — was hugely uncomfortable and very expensive. So they instead began selling a memory-foam mattress online that arrived in a modest-size box.

The Takeaway: The Swedish startup founded by Daniel Ek is preparing for life as a public company sometime this year or next. The arguments put forth in its newly released 2016 financial statement sound like a dress rehearsal for those it'll make to potential investors.  But the band needs a few more sound-checks before stepping into the stadium spotlight. Despite truly impressive revenue and user growth, Spotify's losses are deepening. 

The Takeaway: Cost aside, the real estate community is also becoming more receptive to the idea of pop-ups because many major retailers are closing stores, and the rental market shows no love for landlords. For instance, in the first three months of this year, asking rent for retail space in trendy SoHo experienced the largest year-over-year drop ever — 12 percent to $488 per square foot, according to real estate company Cushman & Wakefield’s 2017 report on retail in Manhattan.

The Takeaway: Doubters of Amazon’s strategy can point to the fact that groceries are a terrible, low-margin business. That’s true—almost as terrible and low-margin as e-commerce, where Amazon has already demonstrated that it can hypnotize Wall Street’s myopic financiers, while it spends tens of billions of dollars building a global warehousing and delivery infrastructure for a shopping future that is moving online. In short, Whole Foods was in a free fall, and Amazon is the perfect net to catch it.   

The Takeaway: At the heart of the site’s problem appears to have been luxury brands’ wariness about the creeping level of control that Condé Nast could wield. While Sewell had always promised that she would have no influence over the editorial coverage, the fashion houses were unconvinced.
The Takeaway: As e-commerce expert Arvind Singhal, Chairman of Technopak Consultancy, says, a private label needs not just normal promotions, but branding like the kind Biba and Anita Dongre have. “It is more important than profit to push your USP; so give it more screen time. Exclusivity is the prime factor since it gives repeat customers,” he adds.

The Takeaway: To outmaneuver traditional TV—and secure Google’s future—YouTube’s CEO must satisfy homegrown creators, risk-averse advertisers, Hollywood celebs, and a billion-plus viewers. 

The Takeaway: At Stitch Fix, Yee is joining a company that appears to be on a fast track to an IPO. The company recently said that it recorded revenue of $730 million in its last fiscal year — just its fifth year of operation — which ended almost a year ago.

The Takeaway: Haselden said Lululemon is aiming to have an initial line of product from the collaboration with 7mesh in stores by the middle of 2018, aiming to take advantage of the key cycling season. When asked if a full takeover for 7mesh could occur down the road, the financial chief said simply "that door is always open."

The Takeaway: As Mackey surely understood, this meant that AmazonFresh was at a cost disadvantage to physical grocers as well: in order to be competitive AmazonFresh needed to stock a lot of perishable items; however, as long as AmazonFresh was not operating at meaningful scale a huge number of those perishable items would spoil. And, given the inherent local nature of groceries, scale needed to be achieved not on a national basis but a city one.

The Takeaway: Each one is trying to become more like the other — Walmart by investing heavily in its technology, Amazon by opening physical bookstores and now buying physical supermarkets. But this is more than a battle between two business titans. Their rivalry sheds light on the shifting economics of nearly every major industry, replete with winner-take-all effects and huge advantages that accrue to the biggest and best-run organizations, to the detriment of upstarts and second-fiddle players.

eCommerce and Middle America
The differences between Alibaba and Amazon are numerous but there is one glaring difference. eCommerce in America is increasingly marketed as a solution for the middle-to-upper class. In China, eCommerce has made progress opening channels to rural and poorer citizens. Here, it is a novelty and growth is more difficult. In China, eCommerce is an economy open to all (mostly out of logistical necessity).

At last survey, eCommerce has a 30%+ adoption rate in China vs. 12%+ in the United States.

Why the difference? eCommerce is a relative luxury in America and the cost of fulfillment is to blame. With the (1) proliferation of "free" shipping, (2) the skyrocketing costs of warehousing, (3) and the slim margins of many major eCommerce players, adoption is reduced to a smaller slice of the American population than our Chinese counterparts.

In short: in America, we only market to people that can best support our rising logistics costs.

It is through this lens that you should view Amazon and Walmart's recent developments. While we've all read the strategic differences between Amazon's acquisition strategy and Walmart's, one similarity is that both are moving upmarket. Solid Yarn Spun Tees and Kombucha Tea anyone?
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