Memo: New York, Los Angeles, and Columbus

One line from a book written 130 years ago would influence marketing and branding for ages to come. In his novel Five Hundred Dollars, Horatio Alger writes: “I don’t know but I can wait two or three weeks,” he said slowly, “if you are sure we shall play at Peoria.” This line gave the advertising industry “Will it play in Peoria?”, an old adage that is traditionally used to question whether a product, person or theme will appeal to the average person in middle America. It’s a question that answers a product’s potential role in the lives of a broader demographic or psychographic. In today’s digital age, for brand owners, Peoria is worth your time and here is why.

The Trope

The trope was meant to characterize the Midwest as somewhat of a lesser-than place where uniformity, simplicity, and a resistance to modernity reigned supreme. Don Marine, a professor of theater at Illinois State University once said:

The widespread appeal of this verbal maligning by comics, actors and other performers suggests Peoria as a paramount example of the dull, banal, and provincial theatrical road stop. But the popularity of the “put down” suggests as well that the city possesses a theatrical heritage of considerable longevity.

If you close your eyes, you can imagine Don Draper sitting in his office on Madison Avenue, asking, “Will it play in Peoria?” as he decides between models for a new Dodge ad. Today, the concept of a test city is more likened to Columbus, Ohio – the city where I choose to live despite my deep love for the pace and promise of cities like New York, Los Angeles, and San Francisco.

Sometimes, a city can fail to understand its own power. Columbus is affectionately (yet restrictively) known as “Test City, USA” because it accomplished what Peoria only did in America’s 19th and 20th century imagination. A 2012 CBS News report says it well:

With Ohio State and dozens of other colleges, the student population here is massive, and there’s a strong international presence. It all adds up to a near-perfect cross-section of the country’s consumers. It’s Middle America – but that doesn’t mean it’s average.

The perfect mix of consumers and the perfect volume of them has collectively reassured corporate brands that they are ready for market expansion. I grew up believing I needed to be in New York, Los Angeles, or San Francisco to succeed. If you were a child from the South or the Midwest, unless you were well-traveled, you believed that your success would rely on your proximity to the centers of the world. In reality, you are always at your own center – especially now. This is beginning to reflect in certain circles: technology companies are thriving in Miami, Tampa, Austin, and Atlanta. But for the most part, product brand development still lags behind. There are exceptions of course: Outdoor Voices (Austin), Summersalt (St. Louis), Mizzen + Main (Dallas), and Jeni’s Ice Creams (Columbus).

Line up 10 brands and you will see similar attributes driven, alone, by their geography. There are the internal similarities: design agencies, performance marketing agencies, product development consultants, public relations firms, the same industry events, newsletters, Discord servers read, and degrees had from Wharton or Columbia. And there are the external similarities: product packaging, copywriting styles, typefaces, front-end design, and distribution strategies. In fact, when new ideas come along, they are well-rewarded simply because they are fresh. Snaxshot is like a breath of fresh air because Andrea Hernández is different, Ruby’s marketing strategy woke up the blands, and Parade’s sex-positive marketing strategy broke open a boring underwear industry. But these are mere exceptions.

If you query 1,000 people interested in DTC culture, the majority of them will know several millionaires and Ivy League graduates. It’s a very coastal, affluent club of people with (or nearing) lots of money had. If you ask 100 founders where they will be this weekend, 70 of them will say Los Angeles or New York. As a whole, the disruptors have fallen in line, savoring the laws of best practices and oldened rules of perceived aspiration. If you want a pop-up, why else would you choose a neighborhood away from Soho, Atwater Village, or Fillmore Street? The DTC industry is a club and clubs have rules made to be broken. The first rule to break?

Build for New Yorkers, San Franciscans, and Los Angelenos.

Modern brands must understand that there are consumers outside of major coastal cities. And it is the spaces outside of these comfort zones that may end up determining the long-term viability of the brands themselves. Of course, some of the industry’s pioneers understood just that.

The Reality

Warby Parker launched one of its earliest DTC brick-and-mortar retail experiments in history. They chose a small corner of the Columbus, Ohio neighborhood known as the “Short North.” Dave Gilboa and Neil Blumenthal of Warby Parker sought to understand whether it “played in Peoria.” The showroom was a success. Today, the official Warby Parker store sits just steps away from its original 20-square-foot Ohio showroom. The company recently filed an S-1 for their IPO.

Observing this early Warby attempt (in addition to co-founding Mizzen+Main with Kevin Lavelle on the same street) was my inspiration for helping Tenfold agency CEO Rachel Friedman with her latest project, Tenspace. It’s the latest retail experiment to cater to the DTC industry, located just down the street from that first Warby Parker showroom and the original Mizzen + Main flagship store.

Tenspace is an ever-changing, brick-and-mortar store in the Short North that will share stories of rising online brands with the public in an interactive, experiential format. Every two months, the space is transformed to immerse customers with new brands. Web Smith, founder of 2PM, a subscription-driven media and e-commerce company, was integral in the Tenspace launch. [1]

The process was not kind to Friedman. Over the course of months, several New York and San Francisco-based retailers inched towards the finish line before cancelling or stalling their decisions to engage altogether. A few, worried about stepping outside of the DTC playbook, cited things like, “…Not New York…” or “…I am so busy….” or “…we have another pop-up in Santa Monica….” But the irony is that in no way was any labor expectation placed on any of the brand partners. In a way, they said no out of underestimation of Friedman. I began to take it personally, for her sake! The premise was simple: take a brand and editorialize it through physical expression, retail installment, and a multi-media depiction of the brand’s roots. In this way, she is using real estate as media, not as the retail format that we are accustomed to. And I am comfortable suggesting that there are few if any operators in modern retail who are as talented as she.

Friedman, a forum mate of mine in Entrepreneur’s Organization, committed a reported hundreds of thousands of her own capital to bring the first show to life. I stood by as a late-night ear at times while she coped with her investment. I’ve been there. Her two-pronged strategy was failproof, in my opinion. The comfort that I provided, if any, was grounded in my confidence in: the idea, her execution, and market timing. Her strategy for recouping that investment is two-pronged:

  1. Show brands her storytelling capability and they will flock to her for the experience.
  2. Provide data around visibility to potential sponsors like Shopify, BigCommerce, Yotpo, Loop, Klarna, Lumi, or Lightspeed Venture Partners and await their interest.

They are flocking and they are interested. By all accounts, this strategy is playing out just as anticipated. She has outside interest and a growing book of potential sponsors and brands. But to get to this stage, she needed her first brand partner. And heading into the early months of summer, I was short on DTC contacts who understood retail markets outside of Los Angeles and New York. Five well known DTC brands turned down the opportunity to work with Friedman and each were based in New York, the Bay Area, or Los Angeles.

As I stood watching our daughters play in a tense soccer match, I recalled that there was a brand that may have the appropriate context to understand the opportunity after all. I didn’t have to call, tweet, or text anyone. I looked over to my left at Ohio State wrestling legend and former National Team wrestler Tommy Rowlands, and told him: “I have an idea for you and I need you to say yes.” Tommy, a stoic and imposing friend of mine listened intently and quipped, “Sure, let me talk to her.” The her was Friedman.

Rudis social growth

Rowlands and his partner Jesse Leng are co-founders of Rudis, a brand that is on the precipice of leaving behind the niche of wrestling apparel thanks to savvy sponsorship of high-profile Olympic athletes like Kyle Snyder and Tamyra Mensah-Stock, the first African-American woman to win a wrestling gold, plus a timely partnership with Authentic Brands Group to market products with the licenses of Muhammad Ali, Jesse Owens, “Rocky” Balboa, and Vince Lombardi. With these forces working in its favor, Rudis launched as the first Tenspace partner just eight weeks after the sideline soccer match presented the opportunity. Over those weeks, Friedman and team developed, fabricated, and stocked the brand’s show. The reception has been extraordinary, quantifiably and qualitatively. The retailer’s social channels have grown, sales have reflected new interest, and the media from within the walls of the Tenspace installation have amplified the brand to the far ends of the internet.

I’d never suggest that a retail exhibit of Tenspace’s caliber is superior because it is located in Columbus, Ohio. But what I will say is that we live in a digital-first society now. Drake’s Certified Lover Boy album release featured billboards in places all over the world. They each made their way to Twitter, Reddit, and Instagram. Physical billboards became digital fodder. Such retail opportunities should no longer be looked at merely through the lens of geography. Part of the reason why the social shareability of Tenspace is such a sure bet is precisely because the project isn’t based in a place like Los Angeles or New York, where art and retail are so common that they become background noise.

The actual space

For the retailers with the courage to think outside of the box, opportunities to breakthrough can be found far outside the cities and strategies of the status quo. Of them, Tenspace has raced to the top of those options. Friedman and her team did an extraordinary job of meeting media and brands at its point of linear commerce, and she did so in a way that has to be seen for one’s self. There are no comparisons. And as for Rudis, the wrestling brand for hardened athletes and the warrior minded, it has begun to show that it has the crossover appeal required by any sporting brand who may want to change the world.

Last week, Jeni Britton Bauer was hosted at Tenspace for a virtual and in-person hybrid talk with a number of executives in the 2PM ecosystem, including Loop founder Jonathan Poma, Kat Cole, Nugget co-founder Ryan Cocca, Tenspace founder Rachel Friedman, Kelly Vaughn, myself, and a few dozen others. She left with a Rudis “Ali” jacket and a new appreciation for the wrestling brand and its retail partner. A wrestling brand turned a DTC ice cream pioneer into a fan. Her appreciation for the product was later noted before her Instagram following of 150,000.

Cities like Columbus can seem secondary to the coastal retail ecosystem, it’s time to reassess the opportunities beyond the borders of America’s top metropolitan areas. To avoid doing so is limiting. It’s early days for the level of execution seen within the walls of Tenspace so the first actors will still earn the greatest return on investment. Don’t worry, your brand will play in Peoria.

By Web Smith | Editor: Hilary Milnes | Art: Alex Remy and Christina Williams

Memo: The Newly Rich

In 2020, OpenSea, the world’s biggest NFT marketplace, recorded $21 million in transaction volume. On August 8, 2021 alone, it transacted $79 million. Countless articles have been written to highlight what’s now known as the “digital flex”. Market forces are converging in ways that will impact consumerism for years to come. The global supply chain is crumbling, our online time has peaked, and the American consumer is bifurcating at the fastest pace in history. There is a coming wave of the newly rich, bolstered by the NFT trade. What happens when H.E.N.R.Y. becomes rich?

The aphorism “The rich get richer and the poor get poorer” is incomplete. The phrase, attributed to 19th century author Percy Bysshe Shelley, was inspired by a much older text. We hear about the rich growing their pools of wealth. We hear about inflation eating into the wages of the poor. The inspiration behind the Shelley quote was about the wealth creation tools, known by the rich, but applied to the rest. From OpenSea trading volume to Metamask wallet adoption, the NFT craze has been likened to every historical asset bubble by skeptics, from Dutch Tulipomania to POGs. There is a point of distinction; this era of discretionary investments may be different than the others because it is a movement built on collectivism.

The “Parable of the Talents” has roots in the principles of community-based investing. The story centers around a dwelling owner who left his home for a time. He assessed each servant’s abilities and rewarded each with talents (a form of currency). The three servants were awarded a total of eight talents. The two servants who put those talents to work (by depositing them in the market) doubled the value of the property in the owner’s absence. As the entire community grew in value, the servants were repaid in proportion to the investment returned. The one servant who hid his share of talents was punished when the owner returned. He chose not to invest.

The third servant grew poorer, relative to the two others, as a byproduct of inaction. This inaction is also a symptom of many in the American middle class who’ve been unable to invest. Today’s investment culture has diffused a class of Americans that were historically passed over for such opportunities. There are countless stories of normal workers choosing to invest in digital assets after re-investing meager gains into cryptocurrency art projects. One tweet from May 2021 stands out:

Paid off my parents mortgage for Mother’s Day. Paid off my student loans. Five years in crypto and it’s starting to come together – all thanks to ETH. [2]

The average wealth per adult is $79,952. Weighed down by student debt, lower wages, and a rising CPI, millennials under 35 have been too straddled to pursue the investment strategies that older generations have benefitted from. For some, the NFT trade has been their personal parable. These two tweets were less than a month apart.

Sean Williams 🌍 on Twitter: “Within one year I’m paying this off in full. With art money. Mark this tweet. pic.twitter.com/bYLAtH8I0I / Twitter”

Within one year I’m paying this off in full. With art money. Mark this tweet. pic.twitter.com/bYLAtH8I0I

Sean Williams 🌍 on Twitter: “I JUST PAID OFF MY STUDENT LOANS IN FULL WITH ART MONEY pic.twitter.com/k07P2c8xhY / Twitter”

I JUST PAID OFF MY STUDENT LOANS IN FULL WITH ART MONEY pic.twitter.com/k07P2c8xhY

This isn’t the rich getting richer and certainly not the poor getting poorer. This is consumer bifurcation in action; the middle is rising faster than ever. The 1% has spilled over; becoming a millionaire is table stakes.

According to a recent Credit Suisse Wealth Report, 56.1 million millionaires exist worldwide with the total wealth growing 7.4% over the previous year. As of 2020, 39.1% of those millionaires live in America. When the same data publishes for 2021, this number will surely climb. To enter the top 1%, you now must have a net worth exceeding $1 million. Between 2019 and today, the United States gained three times the millionaires that the next country added (Germany). One new source for that wealth? The NFT trade. For a primer, read the next paragraph from February’s Art, Science, and Economics Meet:

A non-fungible token is a class of crypto assets that are unique, indivisible, and scarce. The NFT originated on Ethereum, a blockchain first introduced in 2013 by then-19-year old Vitalik Buterin. Ethereum pioneered expanding the idea of blockchain to include more than the financial transactions that Bitcoin – a fungible blockchain, as it can be exchanged for a central value – is known for. No two NFTs are alike. A person or a store of value owns the entire token – it is unique to them. Buterin’s ideas included use cases like digital collectibles, artwork, and in-game assets. [2PM]

To understand the impact of this class of digital assets, look at the daily transactional volume of its top marketplace.

OpenSea has become the platform synonymous with the growth of the NFT trade. It recorded a transaction volume of $8 million for all of January of 2021. According to Forbes, a lot can happen in six months’ time:

OpenSea, the world’s biggest NFT marketplace, expects to see $1 billion in transaction volume this month, up from $300 million in July and $8 million in January, said Devin Finzer, co-founder of the platform. [1]

In Gilded Age 2.0, I explained consumer bifurcation in the context of 1920s-era wealth: “There is a polarization of American wealth and it’s progressing at a dizzying pace.” An understatement, in hindsight. We’ve never experienced a time like now. There are more millionaires minted each day than ever before. The age of the “digital flex” is upon us, but what begins as digital rarely remains so. In the coming months, the digital flex will take on additional meaning. The Twitter AVIs and the many digital representations of newfound wealth are a product of a moment in time influenced by heightened community online and away from pandemic restriction. But this pattern is following the same cycle of adoption found in other eCommerce categories. DraftKings Inc. announced that it will be launching an NFT marketplace. Shopify now allows for the sale of NFTs, Rakuten has a marketplace in the plans, and Alibaba Group has launched a competing marketplace.

But if we have seen anything in the digital industries it is that the greatest impact can be physical. Amazon is contracting more retail real estate than any retailer on record. Malls are being transformed by the eCommerce industry, from returns processing to the youth of brands that line its aging corridors. FedEx and UPS have been revitalized by the sector. And grocery stores have adopted online retail as a channel at such a pace that stores themselves are beginning to change in an effort to accomodate logistics needs. There is skepticism to consider. Aaron Brown, a crypto investor and Bloomberg Opinion writer, recently noted:

These were people too slow to capitalize the first time around. Since all of them seem driven by cynical calculation for money rather than any vision of NFTs, I suspect things will soon collapse.

That does not appear to be the case, at least not any time soon. With rampant inflation, wage stagnation, rising student debts, and NIMBYism preventing the wealth-generating benefits of home ownership for many, digital goods have become the new gold rush. The duration of the NFT craze matters less than its impact.

By air and by sea, thousands of would-be gold miners traveled to California in pursuit of wealth. They’d come to be known as 49ers. In March of 1848, 800 non-natives made the trip to California. By the end of 1848, that number ballooned to 20,000. And by 1849, that number reached 100,000. The gold rush was one of America’s earliest examples of the frontier thesisHistorian Frederick Jackson Turner penned an essay in 1893 that explained that the economic strength and vitality of America was tied to moving towards the frontier.

With a crippled supply chain, impaired logistics nodes, and the unpredictability of physical retail restrictions, Frederick Turner’s essay rings true once again. We actually need these mechanisms to continue over the next few years. The viability of the consumer economy will rely upon this new wave of wealth creation, even if it is shorter-lived than hoped. But when the physical retail ecosystem returns to capacity, the flex will no longer be digital for the newly rich. Fortune noted, “Rolexes and Lamborghinis are so yesterday; NFTs are the new digital flex.”

The status of online community will maintain the movement, but just as Bored Ape Yacht Club meetups have solidified digital communities by fostering IRL interaction, the new wealth gained by this class of beneficiaries will soon enough impact luxury goods markets. The Visa acquisition of Cryptopunk 7610 made international news. The Hundreds’ Bored Ape Yacht Club collaboration was sold out in minutes. Imagine what opportunities could come of these powerful online communities and the digital goods that represent them.

For over a decade, millennials have been facing an affordability crisis marked by astronomical student-loan debt, soaring living costs, and the battered job market and stagnant wages left behind by the Great Recession. [2]

What began as often inconsequential bets on cryptocurrencies paved the way for $500, $1,000, and $5,000 bitcoin or ETH purchases became .55 ETH NFT art buys that have yielded enormous returns on investments. The volume of trade suggest that while the window of purchase optionality is closed for many, hundreds if not thousands of new millionaires were minted. The least wealthy generation in modern history may have found its solution to the wealth creation gap. Soon this newfound wealth will reflect in physical goods and assets.

The new rich may even be able to buy that dream home with their talents.

By Web Smith | Editor: Hilary Milnes | Art: Alex Remy

Memo: H.E.N.R.Y. and Tiffany Blue

Nearly eleven years ago, the then-41 year old musician rapped, “My favorite hue is Jay Z blue.” A lot can change over a decade: tastes, ownership of Tiffany & Co, or even the public awareness of a rare painting by famed artist Basquiat. At the center of LVMH’s controversial approach to realigning the brand with the core of influence (hip hop) is the role of Tiffany’s robin egg blue and a rare painting. Rachel Tashjian wrote on the petty controversy for GQ Magazine:

By employing the most famous couple in the world, and securing a painting by the most famous, or at least coolest, contemporary painter, Arnault is bidding to make Tiffany blue as lusted-after as Hermès orange—a global symbol of exclusivity and desire (and the rare French crown jewel not in the LVMH umbrella). [1]

Beyoncé Knowles Carter and her husband, Shawn “Jay Z” Carter are no strangers to Jean-Michel Basquiat. In fact, they own one of his vaunted paintings. A prized possession while the late artist roamed the streets of New York, today his works play a larger-than-life role in the idea of black artistry, success, and commercialization. Before his untimely passing, the artist was often angered by his lack of recognition in his own city – one that claims him today as one of its prized engineers of culture. But there is a specific culture that holds his influence even closer. There is a direct line between Basquiat, hip-hop culture, and the influence of the Carter family. It’s this pedigree, one of the most influential in all of consumerism, that the Arnault family tapped into for their reinvention of the Tiffany brand. Its suitability can be argued but its effectiveness cannot.

A never-before-seen Basquiat flooded Twitter feeds and, apparently, LinkedIn discussions on Monday morning. The reason for the release: a new Tiffany campaign starring Jay-Z and Beyoncé, who’s donning Balmain and the Tiffany Stone, posed next to the painting. The Basquiat’s backdrop is Tiffany’s robin egg blue.

The campaign sparked debate over whether or not the deceased artist would have supported his work being used in a luxury ad spot and in general generated buzz for the iconic brand, which was bought by LVMH last year and has been undergoing a rebranding to appeal to younger audiences. To do so, the company has leaned into hip-hop, hiring ambassadors like ASAP Rocky and tapping Nas to narrate ad spots already. The Bey and Jay campaign will last a year and mark a major new campaign for the brand.

Alexandre Arnault, the son of LVMH boss Bernard Arnault, was given the keys to Tiffany in January, becoming executive vice president of the company. At 29, his influence is critical in bridging the gap between the Tiffany of the Audrey Hepburn generation to the upcoming luxury consumer. There are some questions raised. Beyoncé and Jay-Z are among the biggest musicians in the world; they are not Gen Z-engineered TikTok stars but they do seem to own the keys to aspiration. And the reveal of a previously unknown Basquiat speaks to old money, not a new definition of luxury. But Gen Z is not necessarily the target, it’s the HENRY. As 2PM wrote in 2019, the HENRYs (high earners not rich yet) are an important demographic for brands to appeal to:

They gain from the association by maintaining relationships with valuable long-term consumers who may likely grow up-market. This directly and indirectly improves the lifetime value of the brand.

Evidenced by Tiffany’s campaign, which makes some strategic choices in switching up the jewelry brand’s approach without going too far outside of its comfort zone, the goal is not just to reach young people. It’s to reach “up and comers” with the means to become customers, if not now then very soon. Arnault wants Tiffany blue to be the envy of one of retail’s most critical consumer segments. But first, LVMH wanted us to know that it is Jay Z’s favorite blue. The Carter family has an otherworldly influence on the consumerism of the haves and the will haves. And this is what Tiffany & Co’s new management hopes to leverage.

By Web Smith | Editor: Hilary Milnes | Art by Christina Williams