2PM - No. 769: THE DELIVERY COMPANY

Amazon, The Delivery Company / Quartz: Something to consider: "In 2014, Amazon delivered approximately 0.2% of all US packages. Today, Amazon controls one-fifth of the delivery market, and is on track to overtake UPS and even the US Postal Service (USPS), according to data from the logistics firm Pitney Bowes." In 2020's Q4 Logistics and Chaos, I wrote: 

Amazon will spend $52 billion on warehousing and shipping, according to Digital Commerce 360 research. According to Bank of America’s Global Research, Amazon is now in command of nearly 175 million square feet of warehousing with the ability to process, pack, and deliver over 50% of the goods that it sells.

Amazon is approaching a truly vertically integrated logistics network on par with the largest delivery companies in the world.

This investment is paying off for Amazon and it seems as though UPS will be the next competitor to be surpassed within the next eight quarters. 

Are separate dot-com and store companies in the cards?

eCommerce / WWD: Member Brief / No. 766 kicked off with this thought: This is a tipping point for the online retail economy and if this happens more splits may follow. The Macy’s eCommerce operation could soon head the same way as Saks Fifth Avenue, which earlier this year split its retail operation in half, dividing its eCommerce business from its department stores. "Will Kohl’s Corp. be the next retailer pushed to spin off its dot-com into a separate company? Financial sources say Kohl’s, with its underperforming stock, is expected to fall under pressure from activist investors later this year to spin off its eCommerce operation, mirroring what the Hudson’s Bay Co. has already done with its Saks."

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A. The Anatomy of a DTC Exit / Retail Dive: Historically, brands had two major options when forming an exit strategy: selling shares on the public market through an initial public offering or direct listing, or selling to another company. Over the last decade, acquisitions by a corporate or strategic buyer have been the most popular option among direct-to-consumer brand exits, hitting above 100 every year from 2016 to 2020, according to data provided by PitchBook.

Allbirds targets a more than $2 billion valuation in upcoming IPO

B. The Anatomy of a DTC Exit / CNBC: There’s a chance for Allbirds to become one of the most relevant suppliers of sustainable materials to the apparel and accessories brands that seem to be pivoting to them. This is one of the bull cases for Allbirds as a public company. "The company is expected to list on the Nasdaq exchange under the ticker symbol BIRD. Allbirds also divulged Monday that its losses mounted in the latest quarter due to higher expenses. It said it expects to book a net loss of between $15 million and $18 million for the three-month period ended Sept. 30, compared with a loss of $7 million a year earlier."

Spanx at $1.2 billion was brokered by an all-female team

C. The Anatomy of a DTC Exit / Quartz: "CEO Sara Blakely, who started Spanx with just $5,000 in 2000 and became the world's youngest self-made billionaire in 2012, worked on the deal with an all-female team led by Blackstone managing director Ann Chung, as the Wall Street Journal first reported."

But 1998: Sara Blakely is a DTC legend. Spanx isn’t often thought about in context of the broader DTC boom and though it fell before the usual "modern retail" period, it deserves the designation. Founded in 1998, the brand has remained privately owned with no outside investors before Blackstone. Seventy percent of revenue is direct to consumer. Blackstone is counting on a beefed up eCommerce team improving customer acquisition tactics while Spanx's growing retail teams expand owned store footprint and third-party wholesale channels. So far, the eCommerce team has operated considerably leaner than companies of its market size. And the only owned stores currently exist in airports. 

This is another notch in the belt of the DTC acquisition boom. Chubbies shorts brand was acquired in September by Solo Stove. Now Solo Brands, the company plans to go public under the ticker DTC. Brilliant Earth IPOd recently, as has Warby Parker, Honest, Stitch Fix, and Figs. Other brands (including Allbirds) plan to go public this year. The exits are here.

But more important than exits, the Spanx deal marks a new way of managing a company that caters exclusively to women by putting women in charge of operations as well as on the board. That’s a choice that permeates into the marketing and product — and one Victoria’s Secret didn’t think to make until it was too late.

Santa Claus is coming — but he'll skip some stores

Holiday Shopping / Wall Street Journal: Retailers have brought on the holiday cheer early in years past, but we’ve never seen anything quite like this. The supply chain fallout should serve as an alarm to consumers to take this season’s shopping seriously. "Keeping things on store shelves when demand for wares is strong is another matter: The ratio of inventory to sales at retailers of all stripes is significantly lower than it was before the pandemic. That’s because people are heading into the holidays with plenty of available money to spend: Rising incomes, government relief checks and reduced spending early in the pandemic have left people with more to spend."

Cameo acquiring marketing and merchandising platform Represent

Linear Commerce / Axios: And to think, this strategy loosely began with a tire company rating luxury restaurants in 1889. "The acquisition will give Cameo celebrities a new option to sell merchandise to hyper-loyal fans, as well as fundraise for various charities and non-profit organizations. The company said that while fans won’t see a change immediately, it plans to eventually offer merchandise directly through it’s site and app."

The DTC economy faces its biggest test yet

DTC / Business of Fashion: This is a report on Rent The Runway and Shopify; the Shopify portion is glowing, this one not so much. Between changes in consumption behaviors and supply chain issues, this is a test indeed. "Active subscribers hit a low of 54,000 in the summer of 2020, compared with 133,000 pre-Covid (the company reported over 111,000 active subscribers as of the end of September). The Delta variant indefinitely put off the mass return to the office that could have been a boost to Rent the Runway’s short-term prospects."

Chewy CEO Sumit Singh on pets, the pandemic, and profits

Marketplace Strategy / Fortune: "After reporting two straight quarters of profit earlier this year, it had a tiny loss in its most recent quarter. That might not seem like a huge win—until you compare it to the massive net losses Chewy racked up in 2018 and 2019. The company lost more than $250 million in each of those years, due to the astronomical costs of marketing and of beefing up its e-commerce infrastructure."

Etsy wants to build the anti-Amazon

eCommerce / Forbes: Etsy will play an enormous role in holiday season 2021 as many shoppers will rely on resale and artisanal markets to fill supply chain gaps.  "Let Amazon, Walmart and Target battle to deliver mass-produced items as cheaply and quickly as possible. Etsy has empowered an eclectic (and mostly female) community of crafters with the same cutting-edge AI, data science and marketing tools that the retail giants use."

NEW AND UNLOCKED: The internet is reshaping class. Everyone is quitting and few understand why. I believe that I do. We are redefining our class system, and some are dissatisfied with their ranking.

Technology has always played a role in designing class structure in the United States. At the 1939 World’s Fair in New York City, Westinghouse Electric screened a one-hour film called “The Middletons“, featuring an Indiana family who visits the fair and sees the futuristic definition of the middle-class lifestyle:

The Middletons are designed to represent the middle class response to the Fair’s imagined future.

The past is prologue because our class system is once again reconfiguring around consumables and societal improvements. The current influx of resignations are highest in industries like leisure, hospitality, trade, and transportation. Fortune’s recent, detailed report noted that while the economy is bigger than it was pre-pandemic, there are 5 million fewer US workers. [1] We are buying more products, paying for more services, and stressing a system already at its point of inelasticity. At a last recorded 2.9%, the Bureau of Labor Statistics’ “quits rate” has never been higher. Some of this is typical: retirements, layoffs, terminations, and taking time off for life’s pleasures. But there seems to be something deeper at play here. What’s been billed as The Great Resignation is actually an eCommerce-influenced reshuffling of a class system that’s only existed since World War II.

Member Brief (🔓)