Memo: GoPuff and Basically

When a retailer launches a private label, it means they’ve achieved a critical mass. According to Placer.ai data, Gopuff’s launch of “Basically,” is right on time.

A lot can be said about the state of the retail industry, and the modern consumer, by looking at the companies that are expanding their store footprint most aggressively. Recent data from Placer.ai reported the top ten retailers to watch in 2022 based on their expansion plans. The list, which features fast food chains, Dollar Store spinoffs, and a store-in-a-store partnership, confirms that today’s customers are drawn to physical stores when there’s a reason to visit them, and the companies that best deliver are those that are most aware of current consumer trends: DTC, bifurcation, instantaneous delivery, and convenience.

La más destacada de la lista es Gopuff, que ha convertido algunos de sus centros de micromecenazgo en puntos de venta para clientes tras construir un negocio basado en la entrega ultrarrápida. Se espera que Gopuff salga a bolsa este año, después de que Reuters informara de que ha contratado a bancos para que le ayuden a hacerlo, con una valoración cercana a los 15.000 millones de dólares. Las ubicaciones físicas podrían hacer que Gopuff fuera aún más rápida al llevar a los clientes al punto de entrega, lo que reduciría el tiempo que tardan los trabajadores en llevar los artículos a los clientes a casa. Las tiendas no son las típicas tiendas de conveniencia, sino centros de pedidos, donde los clientes utilizan quioscos digitales para hacer pedidos que luego se despachan desde el almacén. Para facilitar esta estrategia omnicanal, GoPuff ha adquirido 161 tiendas BevMo y 23 Liquor Barns.

The Gopuff model does what retailers like Target are trying to retrofit their stores to accomplish: functions seamlessly as order fulfillment centers by serving both in-person and online customers simultaneously and sustainably. One look at instantaneous delivery data shows that Gopuff is not optimizing for sub-15 minute delivery:

By building its retail business off the back of its delivery business, Gopuff is poised to meet customers exactly where they want to shop: either online, at home, with instantaneous delivery, or in person when they’re out already and it’s easier, or they want to avoid additional fees.

Getting customers to build a Gopuff habit both via delivery and physical retail will place the nine year old company in a league of its own. With the launch of Basically, – Gopuff’s private label – and the in-store model that only DoorDash’s Dashmart comes close to in function, and Gopuff could present a case for why it may lead the convenience delivery market in the years to come. According to YipitData, as of now, DoorDash leads with 45% to Gopuff’s 23%. Instacart and Uber have earned 16% and 15% of the market.

This could – and should be – a wake up call to grocery and convenience store chains that have slowly turned to delivery. From Grocery Dive:

Gopuff is hardly the first online retailer to move into physical stores, joining a long list that includes large companies like Amazon and niche players like Warby Parker. This underscores the importance of bricks as well as clicks to companies’ retail strategies, even as the pandemic has boosted online shopping. But a strictly digital ordering model for in-store shoppers is unique among grocery and convenience stores, and could prove to be a useful test of shoppers’ expectations for convenience and store experience.

Gopuff’s physical retail strategy isn’t the only one to watch.

DTC brands are the new mall brand. Placer.ai also lists Warby Parker and Allbirds, both of which IPO’ed last year. More stores are integral to both DTC brands’ plans as they’re massive money makers, with customers who shop both in store and online spending more than customers who only shop online. In last week’s member brief on Glossier, Skims, and Savage x Fenty, I explained:

Malls need them, and they’ve effectively built passionate customer followings supported both by savvy marketing and products that people want to buy.

That also applies to Allbirds and Warby who are representative of the future of mall retail: they have enough of a following online that customers seek them out, and they are both pushing to build enough of a national retail footprint to allow existing consumers to buy more impulsively (a benefit of owned retail). They are also benefiting from cheaper customer acquisition costs as new consumers are introduced to them through more efficient channels.

Beauty is a sales driver, but only for certain retailers. Ulta and Sephora have amassed an in-store beauty monopoly to the detriment of department stores. Retailers that have won their business have gained from their statuses as retail destinations for beauty fans. Placer.ai found that Kohl’s stores with Sephora locations inside drew more foot traffic than those without Sephoras. And Target is already expanding its partnership with Ulta after a successful start. What’s more interesting is what’s happening online in this space, much to the dismay of Glossier:

Notice the shift from brand eCommerce to marketplace eCommerce as a preference in beauty. As companies like Sephora, Ulta, and Walmart have grown their eCommerce presences, Glossier has avoided partnerships with them (both in-store and digital). Walmart recruited nearly 100 beauty brands over the trailing 12 months, Ulta has partnered with Target, and Sephora is within Kohl’s.

Retailers are following customer bifurcation. Two brands on Placer.ai’s list, Arhaus and pOpshelf, reflect the continued trend of consumer bifurcation. Furniture brand Arhaus is targeting high-income households, particularly those in suburban areas, as an alternative to RH, with 70 stores and showrooms so far. pOpshelf, meanwhile, is the Dollar General spinoff designed to appeal to wealthier, younger, suburban shoppers who turn the nose to the Dollar General but appreciate the treasure-hunt shopping experience known at stores like TJ Maxx.

The bottom line? Rightsizing is still underway as overly stretched retailers with weaker online presences and less relevant brand names shrink their footprint. Waiting in the wings is a new class of retailers that more closely mirror today’s consumer, with digital innovation in stores and omnichannel cachet becoming top competitive advantages.

The internet has reshaped class and how the affluent shop. What the Placer.ai data shows is just how great the influence of eCommerce on retail real estate seems to be.

Por Web Smith | Editado por Hilary Milnes con arte de Alex Remy y Christina Williams 

Member Brief: DTC, Funding, and Scale

The mechanics of achieving scale with a venture-backed, direct-to-consumer business is a difficult proposition. Take three different stories from the last few days: Glossier is in the process of right-sizing after $274 million raised, Savage x Fenty announced a $120 million fundraise, and Skims just closed $240 million. Three businesses, three stages of the life cycle, one goal: scale.

Este informe está destinado exclusivamente a Miembros ejecutivos, para facilitarle la afiliación, puede hacer clic a continuación y acceder a cientos de informes, a nuestra lista DTC Power List y a otras herramientas que le ayudarán a tomar decisiones de alto nivel.

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No. 271: A Modern Luxury Update

There is a famous scene in The Social Network where Justin Timberlake’s portrayal of Sean Parker tells Jesse Eisenberg’s Zuckerberg contemporary the story of the Victoria’s Secret rebirth. In the script, it was Sean Parker that explained the genius of Les Wexner and his ability to change with the times after acquiring the $6 million / year business for a fraction of its real value, only to turn it into a $500 million dollar brand just four years later. The brand grew from four to nearly 100 stores in that short amount of time. It was a historic turnaround for a brand that was more niche than it was main street at the time.

The fundamentals of the brick and mortar lingerie business changed because Wexner emphasized the appeal of the brand to female consumers. He set aside the money-losing model of selling lingerie to men and replaced it with one that focused on female customers. But more importantly, he recognized that it should have been that way all along. It was an authentic move that evolved Victoria’s Secret (and its parent company: L Brands) into the $10 billion dollar company that it is today. But the brand is overdue for another shift. And it’s worth considering the recent hires and acquisitions by Wal-Mart to turn L Brands‘ most valuable ship around.

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Now led by CEO Jan Singer (former CEO of Spanx and Global VP at Nike), Victoria’s Secret cites the lingerie icon’s struggles on corporate restructuring, ending the famous catalog, and exiting the swimwear category. These are contributing factors, in addition to increasing pressure from eCommerce-first retailers. Business of Fashion:

The growing competition is promoting more variety in models and products. Now in its fifth year, online retailer ThirdLove has shoppers answer a series of intimate questions about their breasts — which of these nine illustrations matches your breast shape? — while reassuring consumers that every woman’s body is unique. The company has raised $13.6 million from investors and expects to double its sales this year. Companies like Adore Me, True&Co. and Everlane are taking a similar approach.

Their chief challenger, Adore Me (21) was founded in 2010 with the express intent to challenge Victoria’s Secret by giving consumers an online-first, inclusive alternative to the lingerie titan. The latest Inc. 5000 list has Adore Me’s growing 1,400% from 2014 and 2016 with revenues exceeding $100 million. Now, Adore Me is looking to expand offline and the timing couldn’t be worse for the L Brands subsidiary. GlobalData Retail Managing Director Neil Saunders:

Niche players may only have a small share compared to Victoria’s Secret, but their innovative approaches mean they are nibbling away at its market share.

In addition to intimates brands expanding into VS’ territory, there are adjacent pressures from the athleisure market, an evolving beauty market, and the rejection of lingerie by consumers looking for comfort, function, and individuality. Rather than continue competing against the likes of Adore Me (21), THINX, Inc. (31), and Third Love (51), or Savage x Fenty, Victoria’s Secret could re-invest in the brand, messaging, and end-to-end processes by following Wal-Mart’s lead.

Making a strategic acquisition to evolve Victoria’s Secret’s prized retail real estate could be just what the forty-year old retail property needs. The brand has a history of retail innovation. In addition to Wexner’s early decision to rebrand the shopping experience, Victoria’s Secret was one of the first brand’s to invest in early eCommerce (1999). In a recent retail roundtable, it was proposed that L Brands execute a Lore-like acquisition to oversee the brand’s eCommerce and omni-channel experience.

In addition, an interesting pivot was discussed. Victoria’s Secret could house brands and content across beauty, women’s athleisure, and intimates. The express goal would be to rebuild Victoria’s Secret as the premiere women’s-only destination – a house of brands, with their VS namesake positioned as the most premium offering within the store.

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Lean Luxe Founder, Paul Munford

In a conference call with Lean Luxe’s Paul Munford, he added, “Not every brand deserves to exist forever.” He also added that L Brands‘ recent track record has been less than favorable, making the idea of a pivot like this highly unlikely. Specifically, he cited the $710 million dollar La Senza acquisition (2006) that did not achieve the intended effect. According to Munford, there was no indication that the retail group could operate with the same speed and precision that Wal-Mart has since Marc Lore became their eCommerce CEO. Munford added, “With Lore coming in at Wal-Mart, there wasn’t a negative track record of Walmart acquiring brands and dropping the ball. Walmart just started from scratch. So comparatively, Victoria’s Secret’s task seems harder.” 

Though Munford and I disagreed on the approach that the vaunted L Brands subsidiary should take, we did agree that VS is a brand that is long overdue for a modern luxury update. One of the first names that arose when discussing who’d be a great number two to Jan Singer was Emily Weiss, founder of Glossier.

Por Web Smith | About 2PM