Morning Brew - ☕ Small but mighty

The quirky, complicated ways the SBA defines a small business
Morning Brew September 15, 2022

Retail Brew

Snapchat

It’s Thursday, in mid-September—just in time to figure out if it will be sweater weather this weekend.

In today’s edition:

—Andrew Adam Newman, Erin Cabrey

RETAIL

Small wonder

An illustration of three storefronts of markedly different size on a street with a sign that says "Small business street." A butcher shop is very small, a bakery is about twice the size of the butcher, and a supermarket is about twice the size of the bakerly. Grant Thomas

In the US, where the Small Business Administration (SBA) helps with loans, determines government-contract eligibility, and provides free business consultants, it pays to have the agency consider you a small business. But determining if you are one is not as simple as sidling up to the are-you-tall-enough-to-ride sign for the roller coaster.

Depending on the type of business, the SBA’s litmus test is either a company’s maximum annual revenue or its employee count. Unlike such sectors as manufacturing, farming, and wholesalers, which are evaluated on employees, retailers are considered on revenues.

Biggie smalls: The revenue standard varies widely, even among retailers that may seem similar.

  • Men’s clothing stores qualify as small businesses if revenues are <$22.5 million, but the upper limit is $30 million for women’s clothing stores and $41.5 million for family clothing stores.
  • Markets that exclusively sell meat, seafood, or produce qualify if they make <$8 million, but the upper limit is $14 million for baked-goods stores, $32 million for convenience stores, and $35 million for supermarkets.
  • Hardware stores qualify if they make <$14.5 million, but the upper limit is $30 million for paint and wallpaper stores and $41.5 million for home centers.

Tom Sullivan, VP of small-business policy at the US Chamber of Commerce, told us that the way that SBA employees assisted companies during the pandemic was “the definition of public service.” But when it comes to how the agency determines what a small business is?

Keep reading here.AAN

        

TOGETHER WITH SNAPCHAT

AR you ready to elevate your brand’s reach?

Snapchat

Augmented reality (AR) is the retailer’s gift that keeps on giving, especially as the busiest shopping season approaches. AR inspires the purchases of a whopping 66% of shoppers—and AR users spend more $$$ during the holidays, too.

Since Snapchat is already the No. 1 platform for sharing purchases and shopping content, Snapchatters are leading the way in how their generation researches, shops, and shares brands they love.

What does this share-centric culture mean for your brand? Your campaign can journey seamlessly from device to device, inspiring gift ideas and creating long-term customers who’ll use immersive AR to discover how your brand fits into their lives.

Tap into the buzz this holiday season and drive results in a Snap. Here’s how.

        

DELIVERY

Reorder

Reorder Olive

In February 2021, Jet.com co-founder Nate Faust debuted Olive, a sustainability-focused B2C platform that consolidated orders from 100+ fashion retailers into a reusable tote delivered weekly. So when brand partners suggested Faust try a different model, he didn’t listen—at first.

“The very first brand CEO that I ever spoke to for feedback on the concept…said, ‘Hey, I love it. [Could] you do this for all our orders?’ And I basically said, ‘No’...You should always listen to your customers, and I didn’t do that early on,” Faust told Retail Brew.

At the time, Faust assumed that the suggested change would lead to higher logistics costs, but last summer, he began to rethink things. Now, Olive is officially switching gears, relaunching today as a B2B business that partners with retailers’ fulfillment centers to directly pack, ship, and deliver orders in reusable packaging, like soft-side zipper envelopes and collapsible boxes.

  • While its previous revenue biz received ~10% of each sale, Olive is now paid directly by retailers, matching the cost their typical packaging providers charge.
  • Faust said the shift to B2B, which began last summer, was a “pretty significant rebuild,” including a Shopify app and POS integrations.

Olive delivers to consumers through its own service in the New York metro area and carriers like FedEx, UPS, and the USPS in the rest of the US.

“We didn’t love that we were intercepting that packaging midstream anyway, so it was an easy decision to focus on waste elimination, given that our whole purpose as a company—and our mission—is to reduce the waste from e-commerce,” Faust said.

  • Its partners include Rent the Runway and men’s apparel brand Rhone.

Package deal: Olive also makes $$ through a new offering that allows customers to use Olive’s packaging to send clothes they want to consign.

  • Olive sells the clothes through Linda’s Stuff, a reseller it recently acquired, roughly splitting the revenue with consumers.
  • This helps cover the cost of the packaging returns, and also extends Olive’s mission beyond just “circularity of packaging, but to driving the circularity of goods.”—EC
        

TOGETHER WITH GLOBALEDIT

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SWAPPING SKUS

Today’s top retail reads.

In the spotlight: Inside the tried-and-true strategy of building a brand around a single, leading ingredient. (Thingtesting)

All together: Tommy Hilfiger has made the case for diverse casting at his recent Spring 2023 presentation, with models of many sizes, ethnicities, and gender identities. (Vogue Business)

Comeback season: From Ulla Johnson to Eckhaus Latta, how the cocktail dress made a triumphant return to the New York Fashion Week runways this season. (Harper's Bazaar)

Make money moves: Meet Money Scoop, our personal finance newsletter covering everything you wanna know about student loans, mortgages, and retirement planning—plus plenty more. Sign up here.*

*This is sponsored advertising content.

RETAILERS: THE CLOCK IS TICKING

Snag advanced ticket pricing for The SKU! This all-day event will cover the future of shopping, sustainability, customer loyalty, and omnichannel everything. You’ll hear experts from TikTok, Crocs, Harry’s Inc., and more. See you there!

WHAT ELSE IS BREWING

  • Amazon is being sued by California for its anti-competitive contracting practices, which are allegedly driving up consumer prices.
  • The EU has suggested prohibiting products made with forced labor.
  • The possible US rail strike, which may be still averted, might worsen existing inflation woes.
  • Patagonia founder gives the company away to a nonprofit fighting climate change.

NUMBERS GAME

The numbers you need to know.

Last month, Retail Brew dove into the concept of Made in America—what it means, how retailers approach domestic manufacturing, and the supply-chain issues that come with the practice.

In January, New Balance opened a new facility in Methuen, Massachusetts, where the company seeks to create 750,000 pairs of shoes annually by the end of the year.

  • For the storied shoe brand, Made in America means sourcing at least 70% of materials domestically.

Domestic manufacturing really comes down to price points. US labor costs way more than places like Asia, and building facilities isn’t cheap either. “All these factories require huge investments, and there’s a couple of years of planning to open one,” Felipe Caro, professor of decisions, operations, and technology management at UCLA, previously told Retail Brew.

  • A way to shorten lead times and ease constraints is to source close to the US, but not on American soil.
  • Honduras produces 5% of the clothing made in the United States for companies like Nike, Under Armour, and Adidas, Ricardo Ernst, professor of operations and global logistics at Georgetown University’s McDonough School of Business, said.

American Giant, a San Francisco-based DTC brand, prides itself on the quality of its apparel, charging $138 for a hoodie. It’s part of the elevated costs associated with Made in America.

  • “That was the first customer that I could remember that said, ‘I don’t want to do it the cheapest. I don’t want to compete with Fruit of the Loom. I don’t have to,’” Bryan Ashby, president of Carolina Cotton Works, a partner with American Giant, told Retail Brew.

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Written by Andrew Adam Newman and Erin Cabrey

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