2PM - No. 762: SMART MOVES

Netflix x Walmart / Fortune: Today, Walmart announced that it has created a dedicated online hub for selling Netflix merchandise, marking the biggest step yet by the streaming giant to grow its retail business. The move helps give Netflix merchandise greater visibility on a site that attracts millions of online shoppers, many of whom want T-shirts, plushies, and collectibles related to their favorite movies and series.

Netflix Playbook 2.0 Revisited: On Friday, we covered the Squid Game effect 🔓, and how Netflix is parlaying its most recent hit into a bigger-than-TV vehicle. Its online store was selling T-shirts and sweatshirts; now, the retail operation behind Squid Game and other Netflix shows is expanding beyond Netflix itself. Walmart and Netflix have announced the “Netflix Hub”, a digital storefront on Walmart’s website that will carry merchandise from major shows including Stranger Things as well as Squid Game. Netflix has been ramping up its merchandise model to diversify its business beyond streaming subscriptions. It’s also an awareness play, according to the Wall Street Journal:

[Netflix vice president of consumer products Josh] Simon said revenue won’t be the only measuring stick of success for the venture. “The real value is in reinforcing fan love for the shows and films they see on Netflix,” he said.

And further on:

Netflix Chairman and Co-Chief Executive Reed Hastings has said he doesn’t expect new business lines such as eCommerce and videogames to be significant revenue generators.

Josh Simon’s hiring in February 2020 was a tip-off that Netflix would be investing in a commerce model. While the merch may not be a cash cow for the business, turning popular shows into products is a necessary move for the streaming service as competition in streaming picks up. Disney’s playbook is heavily focused on the IP of its most popular franchises; without those inherent fanbases, Netflix is climbing an uphill battle. It’s not only about the revenue. Netflix began its licensed merchandise push with Netflix.Shop. The expansion with one of the fastest growing eCommerce operations in the United States gives the streaming king more ground to test the cultural impact of its content.

Netflix Chairman and Co-Chief Executive Reed Hastings has said he doesn’t expect new business lines such as eCommerce and video games to be significant revenue generators. The mania around Netflix's breakout hit is widespread, however. He may change his tune in the coming years. In Dubai, this week, the UAE Korean Culture Centre is hosting its own (non-violent) Squid Game.

It’s necessary, now, for Netflix to turn its shows into something bigger than the shows themselves. It’s not a foolproof plan. Only a few Netflix shows have become cultural hits, and without knowing the size of Netflix’s eCommerce business, it’s hard to know if the strategy is resonating beyond marketing. But the marriage of DTC retail and streaming underscores the need to be more than a one-note platform. In the streaming era, linear commerce will become a significant piece of the business model.

At the conclusion of Netflix Playbook 2.0, 2PM explains: "If the streaming giant proves that IP-fueled merch can sell, so might brick and mortar retail, pop-up experiences, and amusements. Don’t be surprised if Netflix’s digital experiments precede its venture into physical retail, events, and a permanent home for its beloved original properties. It’s created franchises that are valuable." 

The nasty logistics of returning your too-small pants

Reverse Logistics / The Atlantic: When people can’t touch things before buying them — and when they don’t have to stand in front of another human and insist that a pair of high heels they clearly wore actually never left their living room — they send a lot of stuff back. The average brick-and-mortar store has a return rate in the single digits, but online, the average rate is somewhere between 15 and 30 percent.

Millennials drive demand for DTC brands

Consumer Data / Retail Dive: Over the past six months, millennial consumers have driven a rise in shopping with direct-to-consumer brands globally. More than half of shoppers ages 25 to 34 reported buying online directly from international brands, according to a survey from eShopWorld. Echoing previous findings of an eCommerce boom, more than half (52%) of shoppers overall and 58% ages 25 to 44 years old shopped online due to the COVID-19 pandemic and the subsequent closing of brick-and-mortar stores.

Updated October 11: The revamped list has some major movement this week. Vuori has broken the top 40, alas. Rogue is back in the top 50. Homage is in the top 100 thanks to the success of the Cleveland Browns and Cincinnati Bengals. Rowing Blazers is in the top 90, Babar must be popular after all. Outdoor Voices drops from 24 to 98. 

How to think about Africa's creator economy

The Creator Economy / Communiqué: In theory, the Internet gives us access to a global audience. In reality, this isn’t always the case. More often than not, for African YouTubers (and creators), their content will mostly be consumed by a local audience. That means they can’t generate as much as they’d like from ad revenue because of their audience’s location. It also means they’ll need to amass large followings before brands even consider them for partnerships.

Parade is now valued at $140 million

DTC Brands / CNBC: That risk paid off: Parade has sold over two million pairs of underwear since its launch and is currently valued at $140 million, with funding from investors like Neil Blumenthal, Shakira and Karlie Kloss. Parade has found success by representing what the traditional underwear market isn’t. Instead of enforcing a popular standard of sexiness that relies on supermodels and expensive lingerie, Parade has focused on creating comfortable, affordable undergarments that celebrate all body types.

Yale's Stephen Roach sees growing risks of stagflation

Economics / Quartz: As Roach sees it, we’re getting a glimpse of what happens when supply chains are dismantled — we get goods shortages and higher prices, slower expansion in gross domestic product, and, eventually, higher unemployment than we’ve gotten used to. The senior fellow at Yale University says the Biden administration needs to consider those consequences, which look eerily similar to the stagflation of the 1970s, as it aims to yank supply links out of China.

How 2021 became the breakout year for sober october

CPG Brands / AdWeek: To capitalize on the trend, brands in the formerly micro-niche space of alcohol-free alternatives are using Sober October as a way to catapult themselves into the mainstream, some breaking out of ecommerce and into physical retail for the first time. Others are stepping up their marketing and discounts, partnering with online communities and influencers, sponsoring fashion events and launching speakeasy-style pop-ups.

eCommerce effect overrated, says retail expert

eCommerce Counterpoint: Berne, who touts himself as one of North America’s leading experts and futurists on urban and downtown/Main Street districts, as well as the retail industry, said that despite the “gut punch” that downtown districts and retail in general suffered during the pandemic, not all is as bad as some have opined. “Retail is the most intricate and fast-moving property type there is,” he declared. “It goes in directions that most people never would have predicted.” Simply extrapolating the future from current trends “is where we run into problems,” he added.

Editor's Note: there are quite a few fundamentally incorrect points in this one but it's the best counterpoint that I could find because the eCommerce effect is not, in fact, overrated.

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