Issue No. 219: On TheSkimm

Opinion: The Skimm treats its readers like they’ve never read an article, looked at a map, or accidentally seen a CNN segment in their dentists’ waiting rooms. Its patronizing tone assumes that female news consumers tune out anything of import if it’s not processed through verbal eye-rolls. The very existence of such a service, especially one marketed specifically to women, is insulting.
As a fan of The Skimm’s business, I can understand how a lack of intellectualism can seem demeaning to an educated audience. But I also applaud the two founders for accomplishing two things with their unique style of content: a) keeping a very busy professional class semi-informed b) helping to make a general populace curious for real, intellectual depth. 
See more of the issue here.

Issue No. 197: Urbanization Outfitters.

A last word: seven thoughts on DNVB’s

We discuss the macroeconomics of eCommerce quite a bit. At least once a week, we will discuss digitally-native vertical brands (DNVB’s) ranging from consumer packaged goods startups to athletic apparel and high fashion upstarts.

Here’s a great definition of what constitutes a DNVB by Andy Dunn, CEO of Bonobos.

In a recent discussion with Hendrik Laubscher on the longterm viability of vertical brands, he made some interesting points on influences that will determine brand durability.

  1. How do DNVB’s succeed in an economy that places premiums on horizontal eCommerce (Walmart, Amazon, Target)? They enter new spaces and establish consumer loyalty. The consumer relationship can be just as important as the product itself.
  2. There is no middle of the eCommerce market in any vertical. Either you’re great or you’re gone. Amazon destroys “middle” by using their financial muscle to drive said business into the ground.
  3. So how are the DNVB’s doing as a whole? A lot of the supposed winners are cash hungry, burning platforms of doom. I am not going to name anyone but ask yourself one question — why are certain brands constantly in publications such as Recode, TechCrunch, or Fortune? Fashion public relations is often a cost-center disguised as a profit-center.
  4. Consumer Packaged Goods startups (Harry’s, Walker and Co., Dollar Shave Club) have a lot of upside as publicly-traded incumbents are in need of millennials for continued growth. There is a premium on CPG-specific DNVB’s for this reason.
  5. For DNVB’s to survive they must be both vertical and specific. What do they possess? (1) A limited selection of products with marketing and operations optimized for longterm margin growth and (2) an authentic story. TracksmithTuft and Needle, and M.Gemi have stayed true to their roots, are cash efficient, and are run by driven entrepreneurs. They have solved customer retention woes by using tech, clever brand-differentiation, and the sourcing of excellent products.
  6. The sudden growth of the vitamin and supplement category has long term growth prospects. As health becomes a global driver of decisions these MLCs are able to access educated customers with a new breed of products that are cost effective and have repeat purchase implications.
  7. For DNVB’s to be sustainable — LTV, retention costs, and unit economics need to be the priority on day one. The brands that succeed have to operate like they’ve raised little to no money at all.

See more of the issue here.

Issue No. 188: Will Snap Pop? A lot of coverage here.

Last Word: Will Snap Succeed? Ben Thompson addresses:

Snap’s bet is that Facebook, with all of the baggage of putting your best self forward, will never be truly able to step into this brave new future. No, capturing that future won’t be as simple as re-making the connections you already have — new users will need to be won, feature by feature and innovation by innovation — but that is exactly what Snap insists it does better than anyone else.

So will Snap succeed?

The trouble for the company is that some of the conditions necessary for its success are out of its hands: on a macro level, the timing of The Great Unbundling, an important aspect of advertising moving away from TV, is as uncertain as ever. On a competitive level I suspect Snap is more surprised than anyone at how effectively Facebook has leveraged Instagram to foreclose Snapchat’s growth.

I do, though, have faith in Snap itself: Spiegel and team are the most innovative in tech, brilliantly laddering up to new opportunities, and creating new markets. The products will be great; we’ve known for 30 years, though, that that is not always enough.

See more of the issue here.

Issue No. 100: 💯

Last Word: Will the Acquisition Work?

In America, we don’t quite understand just how good we have it. We have our own cars and the autonomy to go along with it. Brick and mortar store fronts are still doing well enough to exist and American eCommerce has positioned itself as a relative luxury and not yet a necessity.

Just 110 years ago, a motor car was a luxury, a buggy was a necessity. in India and China, eCommerce has begun to emerge as option one for all retail.

Via Ben Thompson,

I wrote in Cars and the Future that there were three different changes occurring in the car market: the shift to electric, the shift to self-driving cars, and the shift in business model from owned-and-operated vehicles to transportation-as-a-service.

China’s consumers (who depend on vast systems of public transit) need eCommerce for goods and services whereas our cities’ smaller populations and high percentage of independent transportation allow us to lean on our traditional commerce systems. How we travel will influence how we shop. Though we have the shining star that is – where China goes, we follow. The stats are alarming: 85.7% of China is mobile-first. America is ~ 74%. This is significant because it is indicative of a wave of change, where mobile will be our primary device and our desktop computers will be reduced to our clerical tasks. China is projecting our own adoption curve.

In China, $.15 of every $1 spent on retail is through eCommerce, In the United States – that number is $.07 of every $1. China’s analysts expect their number to hit $.40 per every dollar spent by 2020.

So what does this mean for and Wal-Mart, a relationship that many of us pan and even more of us could care little about?  Eventually, America will outpace China’s emphasis on eCommerce innovation (spearheaded by Alibaba’s massive growth). I will always bet on us. But we are early, very early. For those of us who see eCommerce eventually accounting for 80% of all retail activity, that means that we are 90% away from the finish line.

Instagram recently cloned Snapchat’s format to slow their junior competitor’s threatening growth. I don’t see the M&A as a Wal-Mart play on eCommerce innovation, rather – I see it as way for Wal-Mart to convert it’s existing shoppers and prevent further migration to Wal-Mart’s bricks and mortar, as we know it today, won’t be around. And their CEO, Doug McMillon is finally convinced of that. Will the acquisition work? Maybe not but it’s Wal-Mart’s best chance to reinvigorate what it has long neglected.

See more of the issue here.

Issue No. 73: But can you build a billion dollar eCommerce company?

Last Word: The (new) Lean Game of eCommerce

You’re looking at the top three investors in eCommerce. What you won’t see? Very many lean-operated eCommerce startups. When you read up on eCommerce trends on platforms like CB Insights, it will alarm you. “Smart money VC’s are backing away from eCommerce investment.” Or, “Investment in the eCommerce sector is the lowest since 2014.”

While there may be some truth in this, what I am seeing is a little bit different. The types of large scale eCommerce brands that need $100M – $250M of venture financing to achieve an exit are faltering. Why? The unit economics aren’t there. And while we are in a perceived IPO lull (except for Twilio’s recent magic), no one is going to acquire a company or take public a company with very little chance at profitability. I’m looking at you,

“But Amazon wasn’t profitable for a while,” you may be thinking. There isn’t another Founder / CEO in the world like Bezos. There won’t be another for a while and most would say that his re-investment strategy was deliberate. Profitability was an option, all along. Where there is hope and excitement in this sector? There are several startups in the eCommerce space that have grown intelligently, with gross positive margins, a path to profitability and less than $20M in overall venture financing.

Trunk Club was acquired for $350 million on ~ $20M in total financing. They were profitable and they had $8M of that $20M in the bank. No, this is not a unicorn exit. There won’t be many in eCommerce over the next five years. But there will be $150-$400M exits. In a bit of ironic contrast, I don’t see a positive outcome for Bonobos, a brand that has a cofounder in common with the other. Bonobos has raised at least $127M since it’s inception.

So eCommerce isn’t dead. Not even close. There will be a host of 50-60x returns on Series A VC financings to come. There is an increasing premium on frugality and path to profitability. There just won’t be many $1B+ acquisitions or IPO’s. If you ever hear a venture capitalist ask if you can build a $1B eCommerce company, it would be a fab time to end that conversation.

Bearish: eCommerce Startups that have raised $100M+ in venture financing
Bullish: eCommerce startups that are bootstrapping or have raised < $20M.

See more of the issue here.

Issue No. 42: Two top brand ads and Google Home v. Alexa



On the same day as the launch of Google Home (above), Stealth startup “Payments AI” gave us a glimpse of contextualized, voice commerce demo on Amazon’s Alexa. In a demo featuring the purchase of a Walker & Co product from, Brian Roemmele handled the purchase process from start to finish without ever touching a wallet, a laptop, or a mobile device.

Additionally, Target’s user rating system was communicated throughout the process, allowing context usually only seen on high end sites hosted on Shopify Plus or any Magento Enterprise platform.

Part 1 of the buying process // Part 2 of the buying process

Artificial intelligence built on smart wallets will monitor and understand user behavior and necessities. With the onset of User Payments Interface (UPI) in eCommerce-advanced India, our current understanding of push/pull features will change. Yes, India is on the cutting edge of eCommerce in many ways.

With AI-based smart wallets, we may see new forms of tokenization, product purchasing alerts, and even voice-based calls for consumer restraint while purchasing products. Remember, banking account-enabled platforms like Alexa and Google Home will know more about your bank account than perhaps, you’d like “your assistant” to understand.

See more of the issue here.