2PM - No. 849: The Middle-Class Opportunity

Memo / Excerpt: Winmark’s business model is the right one for the moment. It offers affordable, practical goods for middle class Americans who, as Once Upon A Time franchisee Diane Hubel says, need to be efficient with their dollar as inflation has spiked and wages remain stagnant for most. It even offers them a way to make money in return by selling off stuff they no longer need. And because the products are secondhand, the supply chain problems plaguing other retailers don’t exist within Winmark’s portfolio of retailers. The stock isn’t guaranteed, which can be a disadvantage, but it’s reliable in that it can typically provide some option, even if it’s not the first preferred. (Read More)

The retailer quietly beating the S&P 500

Feature Article / Forbes: The outpost is part of a little-known resale empire out of Minneapolis, called the Winmark Corp., which oversees 1,300 franchised stores under a variety of names: Plato’s Closet, Play It Again Sports, Music Go Round, Once Upon A Child and Style Encore. Last year, system-wide sales jumped 31% to $1.4 billion, as it benefited from customers returning to brick-and-mortar stores. Winmark takes a 4% to 5% cut of those sales as royalties, which generated the bulk of its $78 million in revenue in 2021. 

Nike touts its DTC and data-hungry wholesale deals

Omniversal Brands / AdExchanger: Nike has proven that it decides its own fate when it comes to distribution. The one piece of the puzzle Nike doesn’t currently oversee? Resale. The sneaker resale market has become a robust secondary trade that marks the most coveted shoes on the internet. Nike accounts for the vast majority of sneakers sold at auction at Sotheby’s, according to the NYT. Companies like Stockx, Stadium Goods and more have built entire businesses around selling after market Nike sneakers. If Nike were to bring sneaker resale under its own hood, that would disrupt the entire sneaker ecosystem. More Here: The company has now united its main eCommerce site, Nike.com, under one data-driven roof along with its direct-to-consumer retail presence and Nike+, its product personalization and loyalty membership program.

Daily Harvest sued over illness linked to lentils

B. DTC Brands / NBC News: On Monday, an Oklahoma woman, Carol Ann Ready, sued the company, alleging she was hospitalized after eating its "French Lentil + Leek Crumbles" and had to get her gallbladder removed. At least 470 people have reported illnesses after consuming the crumbles, according to Daily Harvest. Ready's attorney, Bill Marler, said he is now representing nearly 100 people with potential claims against the company.

Here is our report from June 22: The Daily Harvest Ordeal 

The most American form of architecture isn't going anywhere

Retail Real Estate / The Atlantic: These articles cannot be written without bringing up the legacy of Victor Gruen, here is what we published about him in 2019: The Gruen Transfer. More Here: As the design critic Alexandra Lange writes in her consummate study Meet Me by the Fountain: An Inside History of the Mall, “Malls have been dying for the past forty years. Every decade rewrites the obituary in its own terms.” 

Updated for July 1: the next update goes live for Executive Members for the upcoming Wednesday letter. Here's last week's top 15:

Poppi aims to ‘saturate’ New York City

DTC Brands / Digiday: Poppi spent a little over $1 million for this campaign, according to Ellsworth, and the budget was split between OOH, print ads, influencer marketing, Amazon, and social media marketing through TikTok. Starting in July, it will run for six weeks. Ellsworth did not give exact figures on which channel received how much. However, Ellsworth estimated that 80% of the budget went toward influencer marketing.

RH says high mortgage rates killing demand for luxury

Consumer Trends / PYMNTS: “With mortgage rates double last year’s levels, luxury home sales down 18% in the first quarter, and the Federal Reserve’s forecast for another 175 basis point increase to the Fed Funds Rate by year end, our expectation is that demand will continue to slow throughout the year,” RH President and CEO Gary Friedman said, adding that he expects “the next several quarters” will be challenging.

Shipping costs to add 1.6 percent to inflation

Logistics / WWD: The sharp rise in global shipping costs — spurred by the war in Ukraine and the spike in energy prices — is projected to lead to an additional 1.6 percent increase in consumer prices worldwide and induce an average rise of 11.9 percent in global import price levels, a United Nations report said.

eCommerce: at the center of profitable growth

eCommerce / McKinsey: Not only will the growth of eCommerce endure beyond the pandemic, but its evolution will also. The proliferation of new platforms, channels, and available data will only continue. This dynamic creates both opportunities and challenges for consumer goods companies as they determine how to best engage their customer bases. 

The American middle class has changed in the past five decades

Data / Pew Research Center: The shrinking of the middle class has been accompanied by an increase in the share of adults in the upper-income tier – from 14% in 1971 to 21% in 2021 – as well as an increase in the share who are in the lower-income tier, from 25% to 29%. These changes have occurred gradually, as the share of adults in the middle class decreased in each decade from 1971 to 2011, but then held steady through 2021. 

Manufacturing PMI at 53%

Supply Chain / Institute for Supply Management: The June Manufacturing PMI® registered 53 percent, down 3.1 percentage points from the reading of 56.1 percent in May. This figure indicates expansion in the overall economy for the 25th month in a row after a contraction in April and May 2020. This is the lowest Manufacturing PMI® reading since June 2020, when it registered 52.4 percent.