Issue No. 253: Seven city-dwellers who should root for Amazon


Amazon’s HQ2 campaign is a Rorschach test for your personal politics. But as with anything in politics, there will always be an upside to accompany the downside and vice versa. Here’s what a recent policy article in CNN had to say about the Disturbing part of Amazon’s HQ2 Campaign:

But, there’s one part of Amazon’s HQ2 competition that is deeply disturbing — pitting city against city in a wasteful and economically unproductive bidding war for tax and other incentives. As one of the world’s most valuable companies, Amazon does not need — and should not be going after — taxpayer dollars that could be better used on schools, parks, transit, housing or other much needed public goods.

Perhaps there is truth in this. But in accepting that one of these cities will be home to 50,000 new jobs at an average salary of ~ $100,000, there are tremendous positives to consider. Here are the seven people that you know who will love the HQ2 in their city:

The urban homeowner | Face it, Amazon is likely to move to an area where the housing market is affordable-yet-appreciating. This person’s home will appreciate with the influx of upper-middle class homeowners and the investments into their city to support thousands of white collar professionals.

The residential developer | We all know a person who spends their days buying abandoned multi-units at Sheriff’s auctions and turning them into $2,000 per month rentals. If this friend can find the cash flow to do it, her business will expand quite a bit.

The city’s income tax department head | This one is self explanatory. Salaries in excess of $100,000 are very important to growing cities, as these citizens are less likely to receive tax returns. An influx of this demo means more money to spend on infrastructure.

The area’s MLS team owner | Big three sports rarely have economic crises. But for a Major League Soccer club, adding hundreds if not thousands of new season ticket holders and general fans could make their investment more viable.

The elite independent school administrator | With urbanization comes a stark reality, most urban schooling systems are failing. And charter schools in most of the top 20 cities aren’t much better off. Given the demographic of a well-off millennial, the ones with kids will likely invest in private school education.

The local state school college graduate | Congratulations to this young person for increasing their odds of finding that great, technical job right out of school.

The branding agency senior manager | What most don’t know about Amazon is that they are one of the largest advertising businesses in America. By some estimates, Jeff Bezo’s ad business is larger than that of Twitter’s and Snapchat’s. Expect Amazon to poach talent from local agencies as they continue their takeover of the digital advertising market.

Amazon’s campaign for a new home city is a risky bet for the policy-maker who determines the incentive package. But if Amazon delivers the goods, as promised, one local government will be set for the next 5-7 years. It just so happens that delivering is what Bezos does best.

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Issue No. 252: 10 to Observe in Content and Commerce


She who controls supply and demand will rule the internet. Publishers are recognizing that they must become whole ecosystems to thrive and commerce is a key component (again).

The ‘content and commerce’ movement was supposedly dead when Ben Lerer (Thrillist) and Jason Ross (JackThreads) chose to part ways. With this failure (hint: it really wasn’t a failure), it emboldened many in publishing to proclaim that commerce didn’t work.

Across newsrooms, from coast to coast, many publishing executives ignored investing in eCommerce between 2014-2017. Affiliate marketing teams were prioritized over ad sales teams and as a result, well-written articles went from literary showcases to collages of products to purchase.  As ad sales continue to dwindle and affiliate sales remain on shaky ground, many of the healthiest digital publishers had a paradigm shift of sorts:

  • How do we gain independence from platforms like Facebook?
  • How do we hedge against falling ad sales and a weakening affiliate market?
  • How do we foster community within our readership?

For many non-subscription and subscription digitals alike, merchandising has been used to address each of these questions. By building community, publications become a destination. Digiday covered this phenomenon, “The story behind that New Yorker tote bag.”

The must-have signifier of urbane sophistication in 2017 wasn’t Yeezys or torn jeans. It was a tote bag that The New Yorker gives to new subscribers.

The bag itself isn’t new — it’s been a gift the glossy has given out since 2014 — but thanks to Donald Trump and an iconic design, the bag became a hit. The magazine’s marketing department has distributed over 500,000 of them to new subscribers and existing ones, who soon started asking for bags of their own.

Continue reading “Issue No. 252: 10 to Observe in Content and Commerce”

Issue No. 241: Hodinkee Launches A Store

Since its launch in 2008, Hodinkee has been something of an industry trailblazer: initially conceived as a blog covering the watch industry with a mix of news and in-depth features, it launched at a time when“the entire watch industry seemed almost afraid of the internet,” says Pulvirent. Today, investors include John Mayer, Ashton Kutcher and Google Ventures. In 2012, it added an e-commerce platform in order to amplify commercial opportunities, and the site now collaborates on limited edition pieces with brands such as Vacheron Constantin and TAG Heuer. Hodinkee reported year-on-year growth of 60 percent last year, with 75 percent year-to-date growth for 2017.

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Issue No. 239: The United States of Amazon

A Last Word: The United States of Amazon


Acquisitions continue to accelerate across the retail landscape. It’s clear that whether the acquisition is made by Amazon or by a competitor, the business decision is driven by a new competitive landscape that is heavily-influenced by the Seattle behemoth.

Amazon isn’t just thriving along a new frontier, it has become the frontier and with so many “theaters of war” that it would take a 17 page white paper to explain each strategy. The closest comparison has far exceeded the Microsoft example. It’s now closer to Standard Oilwhose monopoly was broken up over 100 years ago. In a digital era that is still relatively unregulated, it will be harder for the federal government to stymie Bezos progress. And most consumers would protest, as Amazon has elevated lower costs and ease of purchase as retail necessities.

In issue no. 239, consider how each of the areas highlighted have been or will be affected by Amazon, Inc. The company is a power player in: warehousing, aviation, publishing, eCommerce, film, shoes, grocery, cloud storage, logistics, fashion, manufacturing, and now advertising.

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Issue No. 234: A sign of things to come.

New Media: Quality, Specialization, Community

Each section of the newspaper is being unbundled into highly-specific, subscription-driven verticals behind paywalls and it’s the next evolution of local media.

We don’t need 5, 10 pieces a day, we don’t need 20 pieces a day in a city, if we can get 3 stories that you can’t get anywhere else in a city, we see unbelievable subscriber yield. That’s the pitch, do great work, be surrounded by the best talent in the market, and great things will happen. We’ll handle the rest, we know how to acquire users beyond your Twitter followers, we know how to find them on Facebook, acquire them, retain them, and we’ll handle the production, we’ll handle the platform, and you just do great work. Frankly, to most folks, that’s refreshing. Some outlets still do great work, but especially at the local level they’re really sliding around figuring out how to make it work for their organization. – Alex Mather, Cofounder of The Athletic

In a recent interview with Ben Thompson (Stratechery), Mather discusses his business model for The Athletic. Even if you aren’t a sports fan, you should still pay attention to what they are building. This is a loose comparison but consider the growing number of subscription-driven media groups and how they’ve disrupted national or local papers. The Information (unbundled “tech”), Stratechery (unbundled “business”), Skift (unbundled “travel”), and TheSkimm (unbundled “lifestyle”) are each making waves. I am adding The Athletic to the tracking list of media groups who’ve embraced the the subscriber sales funnel as a core competency. The Athletic is your local sports section done right or at least that’s the mission.

According to The Athletic, 8,000 – 12,000 subscriptions achieves break even in each metropolitan area covered (Chicago, Toronto, Detroit, Cleveland, and the Bay Area). To get there, their tech stack enables “a paywall, insider access, more advanced analytics, and a mobile experience to differentiate.” As media evolves, optimizing for eCommerce efficacy will become a core competency.

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Issue No. 231: Commoditization is the enemy.

A last word: what does a DNVB mean anyway?

After issue number 230’s feature on Pixlee’s DNVB round up, I received no less than twenty-seven emails from readers seeking clarification on the list.

For one, I would have made a few additions and deletions to the list. But it’s also important that we narrow down the meaning of what the industry means by DNVB. In issue number 228, I highlight differing distribution strategies.

Under the startup umbrella, there are retailers and vertical brands. The difference between the two depends upon the company’s level of exposure. By all accounts, Andy Dunn is the godfather of the vertical commerce business and in May 2016, he wrote the penultimate piece on the online retail business.

Two paras stood out:

The digitally-native vertical brand is way more customer intimate than it’s competition. The data is better because every transaction and interaction is captured. You don’t have to combine data across businesses, because it’s all one business. You are not blind to your wholesale business, because you don’t have a big wholesale business. It’s one CRM. It’s one store, where everybody knows your name.

While born digitally, the DNVB need not end up digital-only. This means the brand can extend offline. Usually its offline incarnation is through its own experiential physical retail, or highly selective partnerships. In nearly all cases of partnerships, the brand controls its external distribution versus being controlled by it. Any offline retail is not about warehousing product, it’s about marketing the brand and delivering great one to one customer service. It may be pop-ups. It may be permanent locations. It may be installs at existing retailers.
There are numerous arguments for being a retailer, the first being a retailer’s hundreds or thousands of touch points. Many of the finest brands on earth fall under this category. But as I mentioned in 228, DNVB’s are data-driven with eCommerce as the core competency. These strategies cannot be more different; one strategist employs a data scientist and the other strategist employs of VP of Sales.

This is the opinion of Web Smith.


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Issue No. 228: Life finds a way


Of course not (for now). But for VC-funded D2C brands, there are divergent paths being walked in plain sight.

Path one: The Shave

Tristan Walker, owner of Walker and Company,  is much savvier than the hardcore tech press gives him credit for. And I think he is building a billion dollar company (sorry Richie). One thing that he understands is that to build a D2C brand in this decade: scarcity and data are key components of the strategy.

Target currently sells Harry’s and Bevel, two early DNVB’s that are wholly considered D2C despite what appears to be a diminished sense of scarcity. I’ll go out on a limb here and say that the customer data that Target provides will more than justify the slimmer margins.  The data that Target provides may also make up for that just-average brand impression that can only be perfectly cultivated by an online-only customer service process or brand-owned storefront (thinkMinistry of Supply, Allbirds, or early-Bonobos).

The con: risk of under-scaling

The pro: data, brand mystique, and the tech valuation multiple.

Walker is currently cloning this strategy for his new brand (Form Beauty) by launching the brand’s retail presence in Sephora. By emphasizing data collection, he will own consumer tendencies, email, and product association habits that will influence the brand for years to come.

This is all consequential as narrowing the sales channels and maintaining a focus on data science will ultimately increase the valuation of the company over time.

Path two: The Pants

There is another approach for D2C brands and it is more common in fashion retail than CPG retail. A successful eCommerce mentor of mine used to emphasize the following: “an eCommerce company has no salespeople.” But by de-emphasizing the longterm potential of data-driven eCommerce ops, D2C brands are able to generate working capital by selling into any channel that fits the character of the brand. The model emphasizes wholesaling products with the hope of driving consumers to the web store for their following purchases.

The con: little to no consumer purchase data to direct that follow up purchase, risk of over-scaling, slimmer margins, retail valuation multiple.

The pro: consumers can touch the products, scale, cash flow, ground troops (store owners), the longterm build to becoming a luxury brand needs this approach.

You will see this with brands like Herschel, Shinola, and Greats. Ralph Lifshitz pioneered this approach nearly 50 years ago. In Columbus, Ohio: you can experience Shinola in Nordstrom, The Ohio State bookstore, Peabody Papers, and the Columbus Museum of Art. This keeps the brand at the top of the mind, even when you may not be looking to buy.

Two vastly different yet effective approaches to retail can only mean that retail isn’t dead, per se. There will always be urban menswear and women’s wear shops, museums, country clubs, etc. But long gone is the game when big box malls and strip mall developments were enough to keep a brand alive.
This is the opinion of Web Smith.
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