2PM - No. 777: Newly Acquired

Casper goes private / TechCrunch (🔐): This is a worthwhile, premium report by TechCrunch. In an earlier thought comparing Purple and Casper, I explained: "One was run like a company that raised $340 million and one was run like a company that raised $2 million. Venture capital isn't the manufacturing plant for DTC success. Capital constraint can influence extraordinary brand and operational creativity. "Since its early-2020 IPO, Casper has struggled as a public company, seeing the majority of its value evaporate after its operating results failed to excite investors. Casper will sell for $6.90 per share, or around a 94% “premium to the closing share price on November 12, 2021,” per its own mathematics. When it listed, Casper sold its stock for $10 per share, rising above $15 per share in its early life before falling as low as $3.18 per share more recently."

Here's the takeaway: Casper has been acquired by PE firm Durational Capital Management for roughly $300 million ($6.90 per share), about a year and a half after it went public in February 2020. In a year of high-profile DTC IPOs that have followed, the bed-in-a-box brand’s fate is now a cautionary tale for companies like Warby Parker and Allbirds.

As it’s taken private, Casper’s biggest missteps were strategic errors (Unlocked Member Brief) that positioned the brand as a tech company while overlooking the best DTC practices. Profitability was elusive. It chased retail partnerships instead of expanding its own store network. They were overly reliant on review sites and customer acquisition arbitrage, a window now closed. By not focusing on the mechanics of retail, they’ve fallen to the trading multiples of a run-of-the-mill retailer, which is far from what the company set out to do. With new ownership, Casper will be restructured, primed for profitability and revenues, but it will be a different company than the DTC brand that set out to rethink the way we sleep. Its outcome is the product of a lack of focus.

For other DTC brands to succeed on the public market, they will need to do two things at once: maintain their SaaS multiples that has them trading with multi-billion dollar market caps, and also build viable retail companies in the meantime. Companies like Allbirds and Warby Parker are doing things Casper did not, like building out large store networks. But right now, neither are profitable and it could eventually spook investors. Profitability, as quickly as possible, needs to be the goal. Otherwise, downgrades will come and potential privatization is not far off.

Making acquisitions to control the supply chain

Supply Chain / Bloomberg: "If you want to understand the future of commerce, look at American Eagle Outfitters’ now four acquisitions in its 44 year history: Tailgate Clothing (2015), Todd Snyder (2015), AirTerra (2021), and Quiet Logistics (2021). Retail brands will own supply chain moving forward." This was written in a recent member brief and it seems to be playing out as expected. "CEOs are betting that vertical integration of manufacturing and distribution operations will give them earlier insight into potential pain points and more flexibility to address them. The current crunch has exposed the vulnerabilities of overly globalized supply chains and also the risks of being dependent on someone else — wherever they might be located — to meet customer demand."

Black Friday Special: Conversion Bear has partnered with 2PM Inc. throughout the month of November to help brand retailers sell more products. They're offering a 30-day trial during the year's most important month. You're going to want to be store #2. 

How a Farfetch-Richemont deal would shape the future of luxury online

Luxury / Business of Fashion: For those who don't care as much about luxury consumer, this may seem uninteresting. But what it does indicate is that eCommerce is not just commoditizing the sale of inexpensive goods. It is also becoming key to luxury retail. "Richemont and Farfetch are in "advanced talks" on a partnership that would potentially include a spinoff of Yoox Net-a-Porter. The deal could see Farfetch technology power Richemont stores, and the conglomerate's brands sold on the online marketplace; Farfetch could also take a minority stake in YNAP."

Macy's CEO fights to fit in the Amazon future of retail

eCommerce / CNBC: Saks is the example to follow. In a letter to vendors in September, CEO of Saks.com Marc Metrick wrote a vote of confidence for the strategy, in part assuring that the two sides of the business hadn’t become totally separate thanks to “scores” of service agreements between both sides. It takes work to make it work, and Macy’s is currently bogged down by plenty of work to improve its store operations. Curation remains a problem and competition is fierce online. "Given that Macy’s dotcom sales have been outpacing same-store revenues for years — and that the company operates 788 stores across its portfolio — begs another question: Is Macy’s current management team the best choice for leading the nation’s largest legacy department store into the new era of retail that is increasingly sophisticated, digital and dominated by digitally-native competitors like Amazon?"

Disney could win big by acquiring Peloton

DTC +  Media / Front Office Sports: This could be smart for Disney. A notable percentage of the Peloton user base (54% of which earns over $100,000 annually) probably relies on other fitness apps, equipment manufacturers, or digital fitness machines to diversify their own home training experiences."During the company’s earnings call, CEO Bob Chapek said, “We remain focused on managing our DTC business for the long-term, not quarter to quarter.” With long-term growth in mind, slowing subscriber growth, and declining ARPU, Disney could use an injection of life. Enter Peloton. While we spent ample time outlining the company’s struggles, there is a bright spot to focus on. Subscription revenues have increased every quarter since September 2019. If Disney wants to supercharge its subscription growth, why not target Peloton?"

Shopify's Hydrogen, a new take on React

Engineering / The New Stack: For those of you who want to understand Shopify at its core, here is a great one to review as the company's framework grows more capable by the day. "Shopify has launched a new React-based web development framework, called Hydrogen. It’s open source and available now as a developer preview. Hydrogen is similar to Next.js, perhaps the most popular React framework, only it was built especially for the needs of eCommerce developers. In another twist, Hydrogen was developed on the premise that “commerce needs to be dynamic” — which means the focus is on fast server-side rendering. This reverses the default React approach of client-side rendering."

A DAO is trying to buy a rare print of the US Constitution

Consumer x Crypto / The Block: Whether you care to understand Web3 or not, this may be the event that piques your interest. This is truly remarkable. "Appropriately dubbed ConstitutionDAO, the idea is to raise enough cryptocurrency in the form of ether or ETH to buy the copy of the U.S. Constitution at auction. Currently, ConstitutionDAO is not technically a DAO since there are no tokens binding everyone together or enabling them to control the future direction of the project, but that's where it's headed. In the interim, the group's efforts are taking place via a dedicated Discord server."

How philosophers think

Deep Generalism / David Perell: I love the way that Perell thinks. For early-stage retailers, brands, or independent media companies, Perell’s wise words should be law. Through his prolific content creation schedule, his penchant for research, and his ability to share the messages of others in a way that helps them to identify value in him, he’s effectively teaching a course for free. "That thinking process happens through writing, where we navigate the hazy labyrinth of consciousness. Most roads lead to a dead end. But every now and then, the compass of intuition leads to a revelation that the top-down planning mind would’ve never discovered. To that end, most of the time a philosopher spends writing doesn’t involve typing. Rather, it’s a form of intellectual exploration — following intellectual embryos and running into various roadblocks on their way to discovering an idea’s mature form."

Here's what I wrote about Perell: On His Step Function 

Consumer x Crypto, Part I: The popularization of crypto wallets, NFTs, and marketplaces like OpenSea pried the door open to more interest in the metaverse. An NFT exists on the blockchain, uniquely representing a digital or real-life asset. It is common to see a social media user proudly showcasing their NFT as their preferred identity over their own likeness. Nike is betting that this will extend to how you want to represent online through your own apparel and accessories. Popularized over the pandemic, the convergence of the physical world and the digital world is being led by commerce as much as it is community. 

Consumer x Crypto, Part 2: publishing on Wednesday 
 

CryptoKicks and The Metaverse (🔓)