2PM - No. 368: Problem and Resolution

The DTC reckoning is real. What next?

DTC Brands / Business of Fashion. A number of venture capital and private equity firms have lost their investing appetite for DTC fashion and apparel brands and are now targeting companies in more stable retail categories such as health and beauty and more relevant ones such as in-home fitness. That has left some DTC brands that are in need of funding staring at cram-down investments or expensive debt from their existing capitalisation tables, options that only allow them to kick the can down the road in terms of solving the strategic and operational challenges that they will eventually have to face anyway.

Editor's Note: If you read nothing else, this op-ed does a great job framing a much needed discussion. Online retail growth continues to compound and digitally native brands are in the spotlight. In the latest Member Brief (linked here), 2PM highlights the importance of fundamentals and sustainability in DTC. This op-ed and our most recent essay packs a one-two punch that may be helpful those who are building the next great (sustainable) brands.

While growing an empire, Shopify manages to play nice

eCommerce / Modern Retail. This is part of a special package from Digiday Media about what comes next, looking to the other side of the current crisis to explore the lasting changes that are coming about. In some ways it seemed like a deal with the devil. In June, Shopify announced a new partnership with Walmart.

The wonder wheel of GOOP

Sociology / The Sociology of Business. The Wonder Wheel model is also applied when a service creates a product (e.g. Food52, Barbara Sturm), when a media company launches e-commerce (Highsnobiety), or when a retailer creates an experience (Restoration Hardware Restaurant or Shinola Hotel). Rimowa started from a single product, and is now, as part of LVMH, progressively building its product range to include sunglasses and collaborations.

Operator concepts, new spin: Full Report (5/2019)

Challenger brands have – thus far – avoided ruthless, direct competition. As mentioned earlier, many brands have the same design and development partners (see: agency database). And some founders share investors and b-school graduating classes. In short, symmetrical competition has been chummy so far. Very few companies imposed their expansion strategies on the existing verticals of their DTC peers. But this is changing.

As brands become more competitive – despite belonging to the same venture portfolios and social circles – competition will take on a unique flavor. These companies have taken on common enemies: incumbents, major retailers, and general inconvenience. But retail allegiances have shifted for some time now.  Major retailers have become advocates of DTC brands and incumbent brands have improved their online retail operations. The playing field has leveled for all competitors.

Nostalgia doesn't need real memories

Research / Aeon. In contrast, marketing researchers tend to use historically dated external cues, such as ‘think of TV shows in the 1980s’, to elicit feelings of nostalgia – which are then associated with some sort of consumer behaviour (eg, TV ratings). Unsurprisingly, there is much psychological overlap between the two experimental strategies. Some marketing studies report that, when cued with products, participants can recall precise autobiographical memories, while other times they bring to mind less spatiotemporally precise events (eg, ‘my time in grade school’).

Why the world needs deep generalists, not specialists

"PM" / Jot Form. For example, Nobel Prize-winner Francis Crick credits his background in physics to intuiting the structure of DNA — a problem previously deemed unsolvable by modern biologists. Richard Feynman, another Nobel Prize-winner, generated his ideas about quantum electrodynamics while watching a guy spin a plate on his fingers in a cafeteria. The realization came after Feynman had rededicated himself to interests outside of physics.

Reimagining marketing in the next normal

DTC Industry / McKinsey. For marketers, this means rethinking how to connect with consumers. Clearly a stronger emphasis on e-commerce and digital channels is crucial, including consideration of the role of direct-to-consumer (D2C) e-commerce channels. One European retailer built a functioning e-commerce platform in 13 weeks. 

Roblox launches a private venue for virtual birthday parties

Linear Commerce / TechCrunch. Roblox had already begun catering to players’ interest in social gaming with its launch of its “Play Together” game sort in April, which made it easier for players to find those games where you socialize with others — like visiting a virtual shopping mall, going camping, or riding virtual water slides, for example. These games also offer an option for private servers VIP servers, often for a small fee paid in Roblox’s virtual currency, Robux, which renewed on a subscription basis until you canceled.

Can loathe turn to love for brand marketers?

eCommerce / The Drum. Amazon's power as an e-commerce platform is unquestioned, however it's past dealings with brands have not always been so positive. Given how fast Amazon moves and the changes that have occurred, it's important to level-set past perception and current reality. Marketplace consult Travis Johnson shares eight ways Amazon has changed.

What more are we willing to sacrifice at the altar of eCommerce?

eCommerce / Venture Beat. The recent explosion of e-commerce driven by COVID-induced lockdowns around the world has been met with almost unanimous and giddy excitement. I have been thinking a lot about why, as a society, we seem to be so invested in e-commerce?

Editor's Note: I disagree with this perspective but it's worth a read. 

Retail bankruptcies 'tip of the iceberg', says Levi Strauss boss

Retail Real Estate / Financial Times. A spate of bankruptcies in retail is the "tip of the iceberg", Levi Strauss's chief executive has warned, as the fashion company seeks to capitalise on industry turmoil that is bringing about years of change within a few months.

Excerpt: We will need more generational brands. My concern is that today’s format may not yield them. This isn’t an argument for or against venture capital. The constraints that venture capital places on a brand may not lend itself to this outcome. As Poulin noted, hockey stick growth is so uncommon for retail brands that it makes little sense to fund many retail businesses through venture firms. Venture most commonly seeks to identify hockey stick growth. The five to seven year horizon is nonsensical. Even a seven to 10 year horizon is limiting. I’d argue that a brand requires 15 years to understand what its potential may be at years 30, 50, and 100.

Read the unlocked memo here