2PM - No. 923: GROWTH DIFFICULTIES IN ECOM

What we can all learn from Walmart: To make sweeping, effective changes requires top down decision-making, humility, and curiosity. Walmart, in 2016, deserves the credit for its senior-level executives’ willingness to listen to innovative problem solvers introduced to the team from the outside.

The recent off-loading of Bonobos and Eloquii were not signs of failure – they were signs of Walmart’s ultimate success in transitioning into a new-age version of itself. This decade is part of an era of corporate retail defined by marketing arbitrage, who achieves it, who lags behind, and who all together ignores it. It’s a tale of complacency and arrogance versus a corporate DNA of humility and curiosity.

The eCommerce industry has many stories of retailers earning effortless growth. They don’t realize at the time that what they’re experiencing is actually well-executed arbitrage. But then the effects of that arbitrage are dampened by saturation. The CMO search ensues and now the pressure is on. Their first task will be to explain to the CEO that the company has the DNA of a laggard and that old ways of doing business needs to cede to newer ways. In a number of ways, Marc Lore, Andy Dunn, and the many women and men who joined Walmart as result served in this role for Walmart between 2016 and 2020. Three years later and the last, formal signs of that have departed. But the DNA of innovation remains at Walmart.

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Walmart keeps selling, as retail M&A picks up

Excerpt: Walmart continues to unwind Marc Lore's DTC buying spree, selling two more companies in just the past week.

• Eloquii, a plus-sized fashion brand purchased in 2018 for $100 million, was sold to FullBeauty Brands for an undisclosed amount.
• Bonobos, a menswear brand acquired in 2017 for $310 million, was sold to WHP Global and Express for $75 million.
• This follows recent Walmart divestitures of Art.com (to Trends International) and Moosejaw (to Dick's Sporting Goods), plus the shuttering of Jet.com and sales of Modcloth and Bare Necessities.

Inside Vuori's Remarkable Rise (Founder Interview)

Excerpt: How Vuori pivoted its way to incredible success is worth your time 🔥: We pivoted with the remaining dollars we had left, and the clock was running out for us so we decided to try an ecom-first strategy. And that was when we started to define our growth, develop a relationship with a customer where we could learn from the customer. [...] So we started speaking honestly about how the customer was using the product, and what we heard over and over again was that versatility that I talked about. 

From the archives: Size Charts, Returns, and EBITDA - Over the course of the pandemic, Vuori became one of the fastest-growing modern brands in the fashion retail space. When the retailer landed its $400 million Softbank investment (at a $4 billion valuation) in 2021, I admittedly didn’t understand the buzz. Then I bought my first pair of joggers from them around a year later."

What marketers need to know about 'Generation Zennial'

Excerpt: "Zennials also seem to be more interested in saving for long-term goals like starting their own business (they’re 64% more likely to do this than other groups) and thinking about retirement and other investments. One in four Zennials said they were saving up to buy a car, while one in three said they were saving up to buy a house."

Retail store closures to sharply accelerate going forward

Excerpt: The retail sectors that will see the most closures, based on Lasser's work, includes clothing accessories and consumer electronics stores at an estimated 23,000 combined. Lasser pointed to several key drivers for the looming closures:

• A slowdown in consumer spending

• A reduction of credit availability

• The rising penetration of e-commerce shopping

• Higher costs to operate retail stores

P&G invests in digital as consumers shift CPG spending online

Excerpt: “As ad spending becomes more efficient, with our ability to [bring] in-house both scheduling and buying of media, more digital capability to be more targeted,” Chief Financial Officer Andre Schulten said. “That increases the ROI of every dollar we can spend.”

Why Gen-Z loves dupes

Excerpt: According to Tong, the dupe effect is doing a combination of things: dupe brands, namely E.l.f., are syphoning off a little bit of demand from prestige alternatives, but they’re also just reaching a whole new consumer. Middle-market labels will likely be squeezed by dupes, said Tong, and luxury labels that use makeup as an entry point for new consumers could also feel the impact.

Some de-SPACed companies seek chapter 11 protection

Excerpt: The SPAC IPO market began to wane in late 2021 and contracted further in 2022. The number of de-SPAC transactions also declined: Just 100 de-SPAC mergers closed in 2022, compared to 200 in 2021. In addition, it became harder for SPACs to complete mergers with operating businesses as investors became more risk averse.

Member Brief / How history’s longest bull run influenced poor innovation. I received an early A.M. message from my younger brother, an employee at Meta, who messaged with tears of relief that he wasn’t one of his many friends and peers who were laid off today with 4,000 others in technical roles. It got me thinking: where did all of this go wrong? I attribute it to four distinct influences: the end of the bull run, nagging inflationary pressures, misreading the market, and Elon Musk (though not in the way you’re probably thinking).

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Note: if not yet a member, here is another new long-form published just a few days ago. It explains the impending "Richcession."