Data: Black Friday Down

Updated. The writing was on the wall when holiday decorations hit sales floors in October. Thanks to persisting supply chain concerns, the holiday season began earlier than ever, which is impacting the bellwether statistics that retail industrialists rely on for forecasted investments. For the first time in history, online retail saw a reversal in year-over-year growth trends. On November 26, online shoppers spent $100 million less than they did on Black Friday 2020. Total sales fell $8.9 billion compared to last year according to Adobe Analytics. Adobe’s Lead Analyst Vivek Pandya:

Shoppers are being strategic in their gift shopping, buying much earlier in the season and being flexible about when they shop to make sure they get the best deals.

By some, the downward trend has been characterized as a contraction in eCommerce spend, but it will be remembered as a confirmation of a much larger shift in pandemic-era retail. In July’s Digital Supply Chain, I wrote about one of the changes that we’d see this fall.

This Black Friday season will see a narrative around short supply of physical goods and an emphasis on brand retailers offering NFT-based products that appeal to their most enthused consumers. Nike will sell digital shoes, Balenciaga will sell avatars for your child’s favorite multi-player game, and legacy companies will emulate the brilliance of the Bored Ape Yacht Club whose NFT sales provide access to a real-life community.

There were other contributing factors to retail’s declining Black Friday performance, and they were not exclusive to online retail. According to CNBC’s Lauren Thomas, Black Friday shopping in stores fell 28.3% from 2019’s levels. And Thanksgiving Day visits were down 90.4% from 2019 levels according to Sensormatic. It should be no surprise that the culprit behind the “down year” is actually a number of factors. The Adobe data indicates an 124% increase in out-of-stock levels. Consumers starting earlier may have taken the sting out of the November shopping event. In October 2021, I explained in No Stock For Chrismukkah:

This means Black Friday will look different. In previous holiday seasons, pricing incentives were the sales hook. This year, retailers won’t need to offer flash sales or free shipping: availability is the hook. Plainly put, if a quality product is available to ship before the holiday season, it will likely be purchased. This is what Lowe’s is signaling with their premature focus on Christmas. If they waited until the normal beginning of holiday cheer, there may not be the stock to support the spike in demand.

It’s not for a lack of trying. According to a Gallup poll, Americans intend to spend record amounts for Christmas; product availability is the problem. This forecasted spend is actually higher than pre-pandemic levels and 2020.

The other problem may be no problem at all. With spend spread over a greater period of time, even with supply chain concerns persisting, this holiday season may still set a new record in gross merchandising volume (GMV) between October and December 24. According to Adobe’s data, shoppers spent $3 billion or more 22 times so far this holiday season. Last year by this date, the GMV exceeded $3 billion just five times. There’s also conversion rates to consider:

The Black Friday conversion rates across the Adobe Sales Cloud spiked to extraordinary averages across desktop and mobile devices on Black Friday – a sign that there may still be an unmet need that Cyber Monday and beyond will account for. An elongated holiday season, fewer deals, and a supply chain under pressure are all contributing factors to America’s first Black Friday without a sales record. According to Adobe Analytics, shoppers spent $10.7 billion on Cyber Monday. This falls to 1.4% less than 2020’s record breaking Cyber Monday spend. When you consider the stay-at-home conditions of 2020, this figure is more of an accomplishment than it may seem to analysts. CNBC reports that November spend (through Cyber Monday) in the United States is up 11.9%, totaling $109.8 billion online.

Additionally, out-of-stock messages increased 8% over the week, signifying the culmination of a tumultuous season for supply chain workers and the retailers that rely on them. These out-of-stock messages are up 169% vs. 2020 figures and 258% higher than 2019.

The reality of these figures is nuanced; it could mean that demand could remain pretty strong and this year’s remaining sales volume will average out to finish higher than previous Q4 sales figures. There’s also the small chance that we’re just more grateful for what we already have.

By 2PM

Member Brief: StarDAO

 

This member brief is unlocked for all readers. To join 2PM, you can click here. 

Web3’s influence on retail is just beginning. Like Nike’s investments into digital goods and services, Starbucks is in position to become the consumer packaged goods leader in the next generation of the web.

Starbucks began as a coffee roaster, but today it’s just as much of a financial services company. Let’s look at Starbucks’ history of product innovation.

During the second wave of American coffee culture, Starbucks rose to prominence by borrowing the blueprint of its predecessor, Peet’s Coffee & Tea. Before Peet’s, espresso was purely an Italian product. Bolstering the availability of international beans, roasting styles, and drink preparations defined the second wave. To expand its product offerings and distribution, Starbucks acquired manufacturers, brands, and intellectual property (the Frappuccino trademark was acquired) over the course of 50 years and 32,660 stores. With the groundwork laid by Peet’s, the Starbucks supply chain and menu democratized the world’s coffee products, which were once exclusive to specific cultures. Today, coffee is on its third wave, which accounts for companies started after 2000. But there is no third wave without Starbucks and they just may make the biggest contribution to this latest wave yet.

The first wave of American coffee culture was probably the 19th-century surge that put Folgers on every table, and the second was the proliferation, starting in the 1960s at Peet’s and moving smartly through the Starbucks grande decaf latte, of espresso drinks and regionally labeled coffee. We are now in the third wave of coffee connoisseurship, where beans are sourced from farms instead of countries, roasting is about bringing out rather than incinerating the unique characteristics of each bean, and the flavor is clean and hard and pure.

Today, companies like Cometeer have stolen the spotlight. Former computer scientist Matt Roberts co-founded Cometeer in 2015 along with Doug Hoon and Karl Winkler, who each possess extensive backgrounds in engineering and product development. The brand went on to raise an initial $50 million and today, backed by a strong direct-to-consumer and subscription strategy, the brand is reported to be on track for high eight figures in annual revenue. The brand sells high quality, specialty coffees available in frozen pods. The genius of the company is its built-in loyalty: Cometeer is a monthly subscription product. But thanks to Web3 technologies, Starbucks’ notable loyalty strategy can improve in ways unforeseen just a few years ago.

Web3 and Loyalty

It’s no surprise that heritage companies like Nike and Starbucks are taking the leap into Web3. For now, Web3 conversations are concentrated on Web2 platforms. Much like Web2 platforms propel Web3 technologies (ConstitutionDAO / Twitter / Discord, anyone?), some analysts believe that Starbucks is the perfect candidate for a decentralized autonomous organization (DAO) to govern its robust loyalty program. The foundation already exists. In the last year, Starbucks’ 90-day active member count grew 28% totaling 24.8 million users. Additionally, Starbucks is currently ranked third in mobile order ahead. And spectacularly, Starbucks mobile users have prepaid balances that account for just over $1.4 billion in funds that amount to loans to Starbucks.

Consumers love Starbucks so much that they’re willing to make a deposit to redeem coffee at an unknown future date and time. Starbucks is essentially gaining access to an interest-free line of credit, one that equates to roughly 4% of the company’s total liabilities. [2]

Starbucks will be one of the first major retailers to tokenize its loyalty program. In a published thread on Web3, consumer investor Magdalena Kala explains as much:

Imagine earning Starbucks tokens as an early customer in Seattle and seeing their value appreciate over time as the brand expands nationally and internationally Or imagine getting actual equity allocation pre-IPO due to high token ownership. Those are all customer benefits, so why should brands care about tokenization? More governance, more ownership, and more value appreciation all shift the customer mindset from a regular rewarded customer to aligned shareholder, governor, and creator.

In a tokenized loyalty program, getting rewarded through company upside and having meaningful say in product direction is preferred over receiving free products or discounts. This encourages a more impactful customer behavior. [Original Thread]

What Kala is summarizing is the shift from traditional loyalty programs to ones that provide a “shareholder mentality enabled by tokenization.” We are likely to see this from a brand like Starbucks before a younger, more agile brand. Starbucks has an enormous, built-in community. There are few major retailers that could achieve what Starbucks can with its existing infrastructure. A loyalty DAO would mean new product ideas, governance over potential marketing tactics, and rewards based not only in short-term gain but long-term upside. The Starbucks loyalty program, with the help of the mobile app that totals 28.4 million quarterly users, could precede a fundamental shift in how Starbucks uses one of its most valuable assets. If Starbucks does tokenize its loyalty program, corporate governance would be tiered: traditional C-suite, stock-based premium shareholders, and the loyalty DAO.

The benefits

This week, a DAO attempted to raise $20 million to acquire one of the last remaining copies of the Constitution. The collection of internet friends, crypto enthusiasts, and history buffs surpassed $43 million in collected funds.

Like many viral crowdfunding campaigns over the previous decade, the trigger for oversubscription was a combination of a desirable product and the enthusiasm for participation. In the case of the ConstitutionDAO, the eagerness can also be attributable to fractional ownership of something monumental and the ability to govern its existence. Magdalena Kala had additional thoughts on this topic. While great in theory, Kala sees obstacles in the way for companies as large as Starbucks:

It’s a huge mindset shift and hard to do for companies with large teams, set cultures, or a vested interest in the status quo. Plus, execution is hard given our current regulatory environment which makes this particularly hard for publicly traded companies. But we may see some more adventurous young private DTC brands experiment. Even likelier, a new crop of brands will incorporate tokenization from day one.

CPG is an interesting use case but in my opinion, luxury brand use cases are even more interesting, esp when comes to “democratized exclusivity. That is the use of tokens to gate exclusive releases etc.

She is correct to be skeptical. There are three major barriers: technical execution, storytelling and onboarding, and regulatory limits. Smart contract developers are in short supply, a potential hindrance to technical execution. And then there is messaging. Will the average coffee consumer care about governance, involvement in brand guidance, or the added benefits that are associated with either. Kala adds:

We need tokenization-in-the-box startups (or at least great agencies specializing in this) to enable this product for interested founders.

Starbucks may be known as a second-wave coffee retailer but over its considerable time influencing America’s collective passion for coffee, Starbucks became one of the most impressive financial services companies. Few are better prepared for the leap from Web2 to Web3. On October comments to analysts, CEO Kevin Johnson agreed:

Through blockchain or other innovative technologies, we are exploring how to tokenize Stars and create the ability for other merchants to connect their rewards program to Starbucks Rewards. This will enable customers to exchange value across brands, engage in more personalized experiences, enhance digital services and exchange other loyalty points for Stars at Starbucks.

Johnson is speaking in the theoretical here. The idea of using Web3 to build the next phase of community will be one of the most storied developments for traditional retailers and Web2 companies alike. Starbucks has the DNA for this type of shift: the company is built atop of a passionate and loyal community. Now, imagine if they had the opportunity to govern, develop, or contribute in ways that only Web3 can facilitate.

Before, loyalty was paid in discounts. In the future, it may be paid with appreciation.

Por Web Smith | Editor: Hilary Milnes | Arte: Christina Williams e Alex Remy

Memo: CryptoKicks

A popularização de carteiras de criptomoedas, NFTs e mercados como o OpenSea abriu a porta para um maior interesse no metaverso. Um NFT existe no blockchain, representando de forma exclusiva um ativo digital ou real. É comum ver um usuário de mídia social exibindo orgulhosamente seu NFT como sua identidade preferida em vez de sua própria imagem. A Nike está apostando que isso se estenderá à forma como você deseja se representar on-line por meio de suas próprias roupas e acessórios. Popularizada durante a pandemia, a convergência do mundo físico e do mundo digital está sendo liderada tanto pelo comércio quanto pela comunidade. A Nike tomou nota:

Imagine seu gêmeo digital usando tênis Nike e um agasalho de treino para uma reunião da equipe da Microsoft ou para as salas virtuais do Facebook - quero dizer, do Meta - enquanto você fica no seu sofá de pijama e meias felpudas. Esse é o futuro que a Nike está imaginando para si mesma. Em 27 de outubro, a Nike registrou mais de meia dúzia de marcas registradas no Escritório de Marcas e Patentes dos EUA (USPTO), incluindo as do logotipo swoosh e do slogan "Just Do It", que revelam planos de fabricar e vender calçados e roupas virtuais. [1]

Dois pensamentos não relacionados me fizeram pensar sobre o possível futuro da Nike na Web3:

  • Uma potencial DAO (Organização Autônoma Descentralizada) construída em torno de sua comunidade digital com uma tokenização que permite que a comunidade experimente o lado positivo das buscas da Nike na Web3 de uma forma que as ações tradicionais podem demorar a refletir.
  • Uma presença digital ativa, nos mesmos moldes das comunidades CryptoPunks ou Bored Ape Yacht Club. Ela seria liderada por executivos da Nike e atletas patrocinados, onde as interações se assemelham ao uso do Twitter por Jack Dorsey para construir sua legitimidade.

De acordo com Cathy Hackl, CEO do Futures Intelligence Group, mais marcas e ativos seguirão o exemplo da Nike:

Acho que algo como o que a Nike está fazendo envia uma grande mensagem ao mercado de que isso não é especulação, é realmente para onde estamos indo. E, eventualmente, você terá que contratar esses líderes que podem ter a visão e que podem liderar a empresa de uma forma informada.

A Nike, que está no caminho certo para obter US$ 50 bilhões em vendas este ano, entrou com sete pedidos de registro de marca que mostram a intenção de criar e vender produtos virtuais, incluindo "calçados, roupas, acessórios para a cabeça, óculos, bolsas, bolsas esportivas, mochilas, equipamentos esportivos, arte, brinquedos e acessórios para uso on-line e em mundos virtuais on-line". Com seu logotipo swoosh e o slogan "Just Do It" também fazendo parte das marcas registradas, a Nike está se adiantando ao fato de sua própria marca ser usada e cooptada por terceiros no metaverso. Mas também está planejando participar diretamente: a empresa também está planejando contratar designers de materiais virtuais. O momento não poderia ser melhor:

A Nike está na vanguarda de uma tendência de varejo que se tornará a norma para outras marcas capazes. Conforme relatado pela 2PM em julho:

Toda marca deve ter uma cadeia de suprimentos digital ou um conjunto de componentes que, quando construídos adequadamente, equipam uma empresa de varejo com uma classe importante de produtos finais: conteúdo, dados primários, produtos digitais e comunidade.

Há poucas marcas mais bem posicionadas do que a Nike. Ser pioneira no marketing de produtos dentro do metaverso requer paciência, investimento e capital social que poucas outras marcas possuem. Ela tem uma vasta rede de atletas famosos contratados para ajudar a impulsionar o apelo. Os clientes da Nike são leais e engajados o suficiente para que usar os tênis Nike em espaços virtuais seja algo óbvio. No processo, uma nova forma de comunidade e produtos mais acessíveis - embora digitais - podem começar a resolver os problemas da Nike com seu aplicativo SNKRS. O vice-presidente global de SNKRS da Nike comentou recentemente com a revista Complex sobre essa questão:

Estamos correndo o risco de perder nosso consumidor mais obcecado por tênis. O calor e o hype estão "matando a cultura" e os consumidores estão migrando para a New Balance e para marcas menores e independentes.

Atualmente, muitos desses clientes ficam de fora de alguns dos lançamentos mais cobiçados da Nike, ou apenas sonham em garantir um raro par de tênis Nike para si mesmos. O metaverso pode ser uma solução para isso, criando mais demanda, impulsionando mais compras e tornando uma compra inatingível alcançável de uma nova maneira para mais pessoas. A Nike não está apenas garantindo o controle sobre sua marca digital à medida que os espaços da Web3 proliferam; ela também está criando fluxos de receita e marketing totalmente novos.

A adoção dos princípios da Web3 será gradual, mas a Nike já começou a estabelecer as bases, desenvolvendo seu negócio direto ao consumidor e investindo em seus próprios aplicativos, marcas registradas e propriedades intelectuais, ao mesmo tempo em que reduz sua dependência dos canais tradicionais de varejo. A Web3 e o DTC são parceiros naturais, e a Nike será um dos primeiros grandes varejistas a iterar em torno dos princípios da Web3. Não se trata apenas de um novo fluxo de receita: trata-se de comunidade e status.

Quem você é nos espaços digitais se tornará tão importante quanto quem você é na vida real, da mesma forma que os seguidores do Instagram se tornaram um símbolo de status. A Nike pegou o jeito porque a empresa parece entender que quem você é é influenciado pelo que você veste.

Neste momento, não há como evitar os NFTs. Todo varejista com valor de marca se esforçará para criar sua pegada digital para a versão da Internet da Web3. O metaverso não é mais um conceito distante e futurista, e onde a Nike vai, outros a seguem.

Por Web Smith | Editor: Hilary Milnes | Arte: Christina Williams