Issue No. 275: YouTube goes commerce

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Pictured: YouTube sensation “Lucas the Spider”

YouTube creators have been frustrated with the platform’s ad operations, as of late. YouTube legend and videographer Casey Niestat has nearly 10 million YouTube subscribers, the embattled Pewdiepie has 64 million, the famed MKBHD has 6.5 million, and Logan Paul has nearly 18 million (and an eight figure online store). In addition to the proceeds driven by advertising to an audience of those respective magnitudes, creators have been increasingly reliant upon merchandising for a steady stream of revenue. In a flash, a YouTube creator showed the world just how powerful an online retail operation can be for creators.

Joshua Slice is a former Disney employee and, currently, the creator and animator of the Lucas the Spider YouTube phenomenon. With a relatively smaller community of 2.4 million YouTube subscribers, the first 18 days of his embedded store achieved an astounding open. The creator of Lucas the Spider, launched a Kickstarter-esque campaign on Teespring (in addition to a full store). The plushie product sold around 60,000 units, netting Joshua $1 million in profit in just 18 days. This 60,000 unit tally was one of twenty available SKUs.

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Teespring’s integration provides in-line eCommerce for creators

In June 5’s Member Brief No. 16: Patreon’s Signal, our research led me to the following conclusion:

We believe that Patreon’s acquisition of Kit signals a potential uptick in M&A and partnership activity throughout the creator space. Kickstarter acquired Drip in March of 2016 and will likely pursue a merchandising solution for its stable of creators to mirror Patreon. YouTube is positioning its platform to compete with Patreon, Instagram, and Shopify, as well.

According to Tech Crunch’s June 5, 2018 article:

The deal also could help Patreon stay ahead of YouTube and Facebook, which are encroaching on its subscription patronage model. Patreon now has 2 million patrons backing 100,000 creators. It paid out $350 million over its first five years through 2017, and expects to send creators another $300 million in 2018, while taking a 5 percent cut.

Twenty days later and revisiting the Member Brief seems a bit prescient. With the newly announced partnership between YouTube and Teespring, Patreon’s most recent move is already behind the curve. The acquisition of Kit didn’t move Patreon any closer to shipping merchandise for its over 100,000 partners.

Patreon is well-positioned to be the leader in one-stop-shops of monetization for content creators. Kit can be a transformative partner for them, intensifying YouTube and other creator networks’ need to bolster their revenue operations. Commerce will become an increasingly important platform tool in a race to stay competitive for top creators. Activity over the next six to twelve months will determine which creator networks seek out the services of the aforementioned merchandising logistics companies: through partnership, by way of a joint venture, or through an out-right acquisition.

Member Brief No. 16: Patreon’s Signal

Prior to this eCommerce rollout, YouTube recently launched the same type of membership service that Patreon offers its creators. What does this mean for creator-based platforms? Patreon’s M&A signaled a period of consolidation and will continue to lead to the siloing of services for top creators. According to Byron Jones of the Music Network, “During the tests, Teespring reported an 82% success rate for YouTube users and an average 25% rise in item sales for each.”

Track the growing merch database

The initial numbers are gaudy and Teespring’s PR has been persistent. Their recent success has sent ripples across the industry. And to be fair, it was an enormous win for them because newer YouTube creators will now be incentivized to remain loyal to YouTube’s offerings.  It’s more than likely that some of YouTube’s creators will consider shifting from other storefronts to YouTube’s Teespring offering. It’s even possible that creators like Logan Paul (who has a sophisticated eCommerce operation in place) will consider testing inline retail on their YouTube channels.

But this partnership is clearly a shot across the bow for Instagram and Patreon. While Instagram is all-in on Shopify’s seamless integration and growing into YouTube’s space, Patreon is still in need of a merchandising partner and an exclusive creative partner that can help them in the short term. Consolidation will continue.

Read more of the issue here.

By Web Smith and Meghan Terwilliger | About 2PM

Member Brief No. 18: The Puma Report

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Brands. If you’ve built a great product, you’ll need an audience. And if you’ve built a captive audience, you’ll need a great product. Draft night has come and gone. This year, a brand was the night’s biggest story. Puma was last relevant in the basketball world when NBA legend and current Knicks commentator Walt “Clyde” Frazier played in the 1970’s. Founded by the younger brother of Adidas’ Adolf Dassler, Rudolf’s Puma brand is historically viewed as the little brother to Adidas.

Read up on how they’ve executed on big brother’s lessons.

Read more by signing in. Not a member yet? Learn more here.

Issue No. 273: Modern Luxe Doesn’t Bend

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Pictured: Outdoor Voices, from our Open Letter to DNVB CEOs

In November of 2016, Lean Luxe’s Paul Munford penned somewhat of a scripture to upstart modern luxury brands: promotion-heavy retailers will not last. There are few takeaways from “The Downward Spiral” that are worth mentioning as recent economic reports suggest that the retail apocalypse is coming to an end, a great sign for aspirational DNVBs that are looking to expand into physical retail.

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We are in a time of unprecedented retail brand launches, collaborations, acquisitions, and re-imaginations – much of which is online-first. This begs the question, what will separate the winners from the commodities? There are early and permanent decisions that determine a brand’s trajectory. For every Mizzen + Main or Ministry of Supply, there is a State and Liberty. For every Outdoor Voices, there is a Bandier. And for every Away, there is a Raden. Each decision matters. And no decision matters more than pricing and a brand’s promotional tendencies.

Here are the top ten takeaways from some of Munford’s best work:

  • No maneuver in retail appears to be as easy to roll out, yet no strategy is as detrimental to a retailer’s long term prospects as the heavy discount. It is a palliative pill: wonderful for the consumer in the short run, but ultimately bad for both business and shoppers over time. It commoditizes the brand, forcing companies to differentiate on price. 
  • The second problem, also related to scale, is systemic to the industry itself: The need to constantly add more and more products at regular intervals, flooding the marketplace with goods that are newer, but rarely better.
  • The lure of the discount, then, becomes too hard to resist. It provides a short term boost to the bottom line and the illusion of growth, but at the expense of brand reputation and sustainable profit — two vital arteries for a business’s overall health.
  • Modern luxury companies have figured out the formula, and it’s remarkably simple: create less merchandise than will sell (and predict, if possible, the sell-through rate, with pre-orders), keep demand high. Embrace the waiting list, as Everlane, Glossier, Caraa, and Alala, among others, often do. 
  • Never discount; preserve the standing of the brand. These tactics certainly do not work, however, or at least for very long, if product standards are below par.
  • Hermes, for instance, is notorious for never slashing prices. Its products carry a prestige because of that, and there is always a demand, no matter how frivolous the item. And they certainly are not above testing the limits of consumer devotion: It has even gone so far as to repackage its cutting floor leather scraps to sell them as high-priced gift boxes.
  • That opposition to discounting would come from founders within the emerging modern luxury industry is no coincidence. For one, it displays the trademark sense of calm confidence in the product that this group is quickly becoming known for. 
  • As for Mr. Preysman, the full price mantra feeds into his mission to constantly refine the product, to make it better, and push it ever closer to perfection according to the standards of the brand.
  • Surprisingly, rejecting the discount is also quite consumer-centric. The eternally-wise Ben Franklin said it best, of course, when he offered this observation: “The bitterness of poor quality remains long after the sweetness of low price is forgotten.”
  • It takes superb maturity and a great deal of resilience to fight the urge for the temporary discount boost at the expense of preserving a long term reputation. 

Maturity, patience, grit, and perhaps temporary poverty are keys to developing the types of brands that grow to compete with age old legends and fierce (but hopefully friendly) rivals. In 2013, Brooks Brothers commented on Mizzen + Main’s influence on the shirting industry for the New York Times:

While Brooks Brothers experimented with “performance” shirts akin to Mizzen & Main’s, [Brooks Brothers’ spokesman] Mr. Blee said that customers preferred the general wearability of conventional all-cotton. The stretch fibers felt synthetic to them. Although a range of Brooks Brothers oxford shirts have moisture-wicking properties, he said, “We are known as a natural-fiber house: 100 percent cotton, 100 percent cashmere.

Just five years later, Brooks Brothers is launching a competitor to compete in a menswear world that is being re-defined by technical fabrics and other innovations.

Mizzen+Main on Twitter

we’re old enough to remember when Brooks Brothers laughed at performance menswear: https://t.co/5hBzcUHAEx https://t.co/xCN29dVk81

I remember the joy of that article hitting the newsstands on December 18, 2013. Not because of the notoriety that it would provide but because it had been over a year and half and we really needed the sales. We stood firm on our price while we built allegiances and Kevin worked feverishly to improve the product. And the company lasted. What Lavelle and team has done today is nothing short of spectacular. And it has allowed the brand to stand, eye to eye, in the same clubs and on the same courses as the company that invented the polo shirt (sorry, Ralph).

To achieve growth and longevity, branding cannot be viewed as a soft skill. Price cannot be viewed as an arbitrary number to manipulate. The five forces must always be considered. And patience must be paramount because great brands start slowly. In the age of modern luxury DNVB’s this is as important as the products themselves.

Read more: An Open Letter to DNVB CEOs (Issue No. 254)

Read the rest of Issue No. 273 here.

By Web Smith and Meghan Terwilliger | About 2PM