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Preview 🔐: This post was written to the 2PM executive membership with the hope that more decision-makers in CPG, big retail, big grocery, and the platforms that support them would be inclined to incorporate the suggestions into future plans.
Dear Leaders of Industry,
Four years ago, this month, I explained that HENRY was “equipped to hold steady.” This was a fallacy. But an earlier commentary was not: “HENRY is a transitional cohort, not a class. A cohort that can no longer be ignored.” That cohort is dying as many have either transitioned to notable wealth or the vast majority with none at all. This is about the latter majority.
The landscape of American consumerism is undergoing a tectonic shift. Gone are the days when rising tides of economic growth lifted all boats. Today, we find ourselves in a place where many are struggling just to keep their heads above water. Inflation is soaring, wages are stagnant, savings are dwindling, and housing costs are skyrocketing. This is a clarion call to the many brands: it’s time to adapt, and quickly, to the realities of a growing number of Americans.
Continue Reading: How Growth Minded Brands Will Adjust
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Luxury Economy / Excerpt: "It was great while Chinese shoppers were spending money, but as they reined that in, Gucci slumped. Just as Gucci relied too heavily on one designer and on aspirational consumers, it relied too heavily on China."
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DTC / Excerpt: Larroudé is just one example of this generation of post-pandemic digitally-native brands. Determined to avoid the fate that had befallen their predecessors, they are taking voracious steps to profitably grow sales in a market that demands nothing less.
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HENRY / Excerpt: My understanding is that Outdoor Voices was generating more than $60 million in net sales in 2021 and 2022 under Conforti. The first half of 2023 was okay, too. But like most smallish apparel companies, especially ones that have raised several rounds of funding, OV had mounting debts.
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DTC / Excerpt: Putting the pieces of its recent past together doesn’t spell success: “I don’t think the trajectory looks very good for Peloton, to be honest,” Saunders said. “I see them as a company that will continue to shrink, that will continue to have to make very difficult decisions around restructuring, and as a company that will remain low to no profit in the foreseeable future.”
Archives: The company is prioritizing subscriptions at the risk of turning off old and new customers looking for the hardware to take part in many of its classes. The stock is up 23% in the last seven days and the company is trading at a $5.5 billion cap at the writing of this update. I don’t believe that subscription-first is a sustainable model for Peloton. The market will decide, either way. (January 2023)
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Advertising / Excerpt: Shop Campaigns is a big step into handling marketers’ advertising budgets. But inventory is limited to sponsored product listings in Shopify’s marketplace app, called Shop, and on Meta’s apps. But Shop Campaigns will eventually extend to other platforms as well, according to [Andres] Baranauskas.
Archives: While Shopify is less a marketplace and more a software solution, “Audiences” is a tool that bridges the gap between Shopify’s current stance on impartiality and Ebay and Etsy’s approach towards building a profitable advertising marketplace atop its eCommerce sales. By leveraging the data and reach that it already has, Shopify can also offer first party-driven, off-site advertising solutions for businesses that may lack the means or sophistication to rely on traditional programmatic advertising. (February 2023)
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Latest Update (4/20), presented by Bold Metrics. All brands are updated with the secondary interest poll. The sixth update of 2024 sees some major movers: Caraway (+348 spots), Care / Of (+256 spots), Prima (+122), Bloom & Wild (+100), Cowboy (+100), Lane Eight (+96), Partake Foods (+92), and Larq (+91).
800+ Brands Measured
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CPG / CNBC: Later, inflation pushed prices of food and housing higher and inspired more shoppers to try store brands, which are often cheaper. Plus, the growth of low-priced grocery chains like Aldi, Lidl and Trader Joe’s — which prominently feature their own private labels rather than national ones — and the popularity of Costco’s Kirkland has changed customers’ perception of store brands.
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eCom Brightspot / Insider: Amazon reported that it delivered more than 2 billion items in a one-day window in the first three months of 2024. If it were to keep that pace, it would top 2023's numbers, which Amazon previously said totaled 7 billion units delivered on the same day or the next day during the yearlong period.
And here's another take on the matter by Marketplace Pulse.
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NATSEC / Bloomberg: Worldwide, TikTok’s e-commerce platform had more than 15 million sellers in December, adding more than 6 million in the second half of the year, the company said Tuesday in its first TikTok Shop Safety Report.
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DTC Brightspot / The Information: This is an exceptional piece on an amazing product. "Apple remains far and away the industry leader with its Apple Watch. Google has a strong footing with its Pixel Watch and FitBit. And Samsung, which already has a popular line of smartwatches, will reportedly release its Galaxy Ring wearable later this year. And Whoop continues to face competition from a few smaller rivals, like Oura, which makes a sleek ring wearable that’s popular with the Hollywood set."
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DTC Brightspot / Inc: There may be no one-size-fits-all solution for DTC brands to thrive in today's retail ecosystem--but there are some strategies that have proven effective. Blank shares her company's path to sustainable growth and more than $75 million in lifetime sales.
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Subject: The landscape for CPG brands is undergoing a seismic shift, marked by increased challenges in distribution avenues, market consolidation by retail giants, diminishing venture capital interest, and heightened cost pressures. This confluence of factors is rapidly closing the window of opportunity for CPG brands to achieve widespread distribution and visibility.
This explains in 1,200 words 🔓: Foxtrot Market’s failure stemmed from fundamental misalignments with the convenience store model. Initially, Foxtrot aimed to differentiate with a unique, upscale product mix and aesthetic appeal. However, their strategy overlooked the essential role of meeting everyday consumer needs which is crucial for driving frequent customer visits. Foxtrot focused on specialty items rather than staples like bread, milk, and convenient services, which are critical for repeat business in the convenience sector. What is Foxtrot? The neighborhood stop focused on locally sourced products, foodservice, grab-and-go item in a “cozy, upscale neighborhood market feel.”
While Foxtrot offered an appealing store design and high-end products, it failed to integrate essential convenience items and services that fulfill daily consumer needs and compete with traditional and app-based delivery services. The lack of basic convenience store elements, such as walk-in coolers and gas pumps, and the shift towards city center locations with high rents and declining foot traffic, further strained their operations.
Ultimately, Foxtrot’s business model was not sustainable in the highly competitive convenience store market. I believe that Foxtrot’s failure is a part of a much larger narrative that also includes the potential shelving of TikTok as an advertising channel, retail media’s increasing costs (96% of CPGs are managing spend on three or more networks), and the galvanizing of CPG distribution at the top of the market (Walmart, Costco, and Kroger).
Continue @ 2PM
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Data / Brookings Institute: Because demographic shifts are incremental, gradual, and long-term, most people do not look carefully at new data until the change is so significant that they are forced to pay attention. Last year marked three demographic milestones: The global population topped 8 billion; India overtook China as the most populous country in the world; and China saw its first population decrease in decades.
Cognitive Prerogative: Here's what I recently published on my platform for understanding medical research on longevity and health span.
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Data / Newsweek: About two thirds of Americans believe food prices will go up this year, according to a survey from the Consumer Food Insights at Purdue University.
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Data / Quartz: The supermarket chain is seeing an increase in shoppers on the hunt for bargains, according to Jason Hart, chief executive officer of Aldi’s U.S. operations, who spoke to the publication.
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