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Featured Insight / S&P Global: This one was entitled "The Fallout from Short-Term Planning." There have been two major signs of disruptions to supply chains in North America in the first half of 2021 and they will likely unwind during the second half of the year.
Exclusive Analysis: Today, it is hard to buy: lumber, stone, a sectional sofa, a dress shirt, yoga pants, basketball shoes, or luggage. Even the most sophisticated retailers are struggling, now imagine the nascent brands. The current struggle is an opportunity to reinforce our back office supply chain and logistics strategies.
We evangelize the marketers and not the logistics and supply chain leaders. In the world of CPG and DTC, many assumed demand generation was the difficult assignment. But today, so many will fail to reach their potential because they have much less to sell. Or because they can no longer mitigate shipping costs. There's simply no supply and each day sees rising demand.
The world’s supply chains were already in a precarious state before the pandemic. Now, after a period of extreme disruption, manufacturers can’t meet demand, resulting in a chain reaction of delays and out-of-stock products. While out-of-stock inventory can signal high demand and appeal for a brand, eventually the allure runs out when there’s no back supply.
And as customers in the US embark on revenge shopping that shows no signs of slowing down (back-to-school shopping is expected to amount to $33 billion, according to Deloitte), the supply chain will continue to be strained and products will continue to be unavailable. Take a recent article on The Strategist as proof of how pronounced this situation is: The machinations of the global supply chain, when operating right, should be invisible to the average end consumer. The Strategist, a consumer shopping title, published a piece last Friday guiding customers on how to shop right now despite a shortage of availability for high-demand products and incredibly long lead times. The world is reopening, people want to buy. Right now, supply isn’t meeting demand and logistics costs are eating into margins.
S&P Global published a report analyzing what’s happening in the global supply chain, finding that retailers are trying to fix this problem by increasing imports:
Retailers have certainly attempted to keep up with demand growth. U.S. seaborne imports of consumer discretionary goods in May increased 88.2% year over year and by 32.9% compared with 2019, led by shipments of home furnishings and household appliances.
Yet, the increased level of imports has not been enough to support sales on the basis of falling inventory-to-sales ratios. Materials are still in short supply like aluminum and lumber. An increase in imports means there’s a bottleneck, slowing and delaying shipments into the US. And as the New York Times reported in June about a long-standing supply chain solution known as “Just In Time manufacturing”, where manufacturers receive components, materials and other parts only as they need them in order to minimize costs of overhead. The practice started in automotive production and rippled to other categories including fashion and food. That short-term solution has led to a period of extreme underpreparedness:
Still, the shortages raise questions about whether some companies have been too aggressive in harvesting savings by slashing inventory, leaving them unprepared for whatever trouble inevitably emerges.
To get out of this, retail supply chains will need to find both short-term solutions as well as rethink dependency on complex supply chains. Brands will invest heavily in flexible processes that can account for moments when things don’t run as planned. For now, expect delays.
Hilary Milnes and Web Smith, About 2PM
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Travel / Snaxshot: Airports are also where c-store snacks get the Erewhon treatment, a Twilight zone where you have no choice but to splurge $10 for that Dasani water and equally as much for a bag of hot Cheetos. There is also the occasional minimalist kiosk that offers cake-flavored nutritional bars or chickpea puffs, that satisfy that perception of “healthy” but the truth is that overall, airport snacking is lacking. It’s why I’m looking forward and allowing myself to imagine what it could look like, for the betterment of us all.
Editor's Note: her work is getting better and better.
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eCommerce / Bloomberg: The bevy of small businesses that have sprung up in recent years to sell their wares on Amazon’s vast marketplace. They’re being snapped up by Wall Street-backed startups known as aggregators, which are betting that their teams of eCommerce veterans can transform products into global brands.
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Sponsored: With logistics in focus and eCommerce increasing in popularity, Swyft believes that more brands should have access to same day delivery. So they equip carriers with the software to offer it with efficiency. The company recently raised $17.5 million from a set of investors that anyone in commerce would want.
Democratizing access to same-day delivery
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Consumer Data / Mobile Dev Memo: Shopify is leaning into the Content Fortress paradigm by allowing major platforms to avail themselves of its tools. Per 2PM, a DTC analytics consultancy, about 59% of DTC brands sell through Shopify. If privacy regulations will soon undermine the viability of independent storefronts, why shouldn’t Shopify expand its payment offering to non-Shopify merchants?
From the archives: Linear Commerce and Content Fortresses
First-party data was well on its way to becoming the key asset for advertisers; Apple’s decision further moved advertisers to prioritize its collection, refinement, and monetization. Apple will eventually eliminate data sharing across vendors, a long-time complaint of many of its users. In doing so, walled gardens will take the place of the open web funded by this data practice.
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Brands / Business Insider: For weeks, Alexandre Arnault, then the 27-year-old CEO of the premium luggage brand Rimowa, was hyping up the company's ski-themed holiday party. Held in December 2019 in Paris, the celebration would be at a ritzy venue overlooking the hilltop district of Montmartre. Employees would compete in games to win Rimowa suitcases as prizes.
From the archives: Away vs. Rimowa
With a Borsche-designed typeface and branding completed by Commission Studio, the 24 year old Arnault canceled the majority of his wholesale contracts to emphasize the reinvigorated label’s approach to authenticity and exclusivity. This coincided with a rise in earned media and awareness.
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Updated July 12: Yeti breaks into the top 10. Barstool finally falls out of the top 25. On the heels of the Olympic partnership, Skims rises to 12. Summersalt establishes itself as the top DTC swimwear brand. Peloton sinks to 26. Rtic rises from 126 to 42, nibbling at Yeti’s ice chips.
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Digitally Native / Bloomberg: Warby Parker’s ability to grow through physical stores isn't just important to potential investors in its public offering. It could be seen as a proxy for all these young consumer brands. Can they really mature past the fad stage and push sales into the billions by dotting America with physical locations? With the cost of online advertising continuing to rise, using stores to acquire customers, while also pricey, is a choice more will likely make.
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Modern Retail / Fortune: The deal will mean that Nordstrom stores will carry ASOS merchandise and be a place where ASOS customers can pick up or return online orders, giving ASOS a much coveted, large physical footprint North America. For Nordstrom, the benefit would be to get a whole lot more twenty-somethings into stores that are still disproportionately patronized by people in their forties and older.
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Audio / The Verge: Under the deal, TED is free to sell brand partnerships or ads, if it’s interested, and Clubhouse won’t take a cut, a spokesperson confirms. The partnership makes sense given that people often compare Clubhouse rooms to TED talks, essentially meaning people wax on about big ideas and often do so in the style of a conference presentation. The company is also already a major success in audio through its podcasting efforts, so it’s possible a form of these chats might be distributed outside the app as an RSS feed.
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Learn about the house that Pyer Moss used (NewsDeal). Dead startup toys (MSCHF). Phoebe Philo goes solo (NYT). Inside American Airlines' new first class (Fortune). Outdoor Voices' Amateur Sporting Club (OV). And a great ABG S-1 breakdown (Digitally Native).
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All New: the 2PM team updated this property with the help of Grace Clarke's well-written introductions to each essay. The new sections: Linear Commerce, Metaverse and Web3, eCommerce as Infrastructure, Consumer Economics, and Polymathic Thinking. We have also updated design. Enjoy!
📚Continue to The Study...
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