Issue No. 273: Modern Luxe Doesn’t Bend

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:

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

Issue No. 270: For DNVBs, brand matters.

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A look at Raden’s shuttering (DNVB No. 119) and Away’s persistence (DNVB No. 40). With the news of Raden shuttering and their founder’s commentary on the online luggage industry’s outlook, 2PM has a deep dive into what may have influenced Raden’s shuttering (it wasn’t just regulation). And Away cofounder and CEO Steph Korey provides commentary on what will shape Away’s bright future.

Founder of Raden, Josh Udashkin had this to say to Conde Nast Traveler about the future of the smart luggage industry: 

I hate to say this, but I think [the future] is nonexistent. All these companies rely on word of mouth, but buying this product now gets you hassled. I don’t see how you can continue selling it.

We disagree. Millennial consumers are practical, savvy, and even slightly territorial. These consumers seek brands that appeal to their lifestyles, their timing, their values, and their personal preferences. The narrative matters because their lifestyle matters.

The key to building a strong DNVB can be attributed to perceived quality, price value, and ease of purchase.

Convenience Change + Price Change + Perception of Quality Change > 0 

Convenience: ease of purchase, superior customer service, ease of return, and quality warranty.

Price: is the price comparable and or cheaper than the premium incumbent brand prices.

Perception of quality: how is the brand perceived? Is there an affinity for the product?

Whereas, if the DNVB’s sum “change” is greater than zero, the DNVB may be a better option than the incumbent. It’s through this lens that DNVBs and CPG brands have been able to position their products against stodgier, traditional brands. One of the keys to building an online retail presence is emphasizing both components of a winning formula: product and narrative.  That narrative communicates quality, community, and brand equity around the product. For DNVBs with $5M or less in total funding, you can argue that the narrative is as important as the product itself.

Issue No. 254: An Open Letter to DNVB CEOs

DNVB executive teams build two products from scratch, supply and demand:

  1. The product: the shirt, or the luggage, the pants, the shades, the coats, or whatever it is that people know you for.
  2. The brand: the aura of that product, the name recognition, the association, the behind-the-scenes partners, the spokeswomen, the ambassadors, the inevitability of success.

Both Raden and Away were founded in the early months of 2015. Raden raised a seed investment from Lerer Hippeau, First Round Capital, and Gin Lane – the famed and de facto kingmaker of DNVBs. Away raised a star studded seed round that included Andy Dunn, the now-Walmart executive who coined the DNVB acronym.

When Udashkin was interviewed by Loose Threads in 2015, Udashkin indicated that product was the entirety of his focus. He went on to add that the product’s narrative wasn’t something that Raden was going to emphasize.

After spending almost a year in the prototype phase, working out of San Francisco, Los Angeles, Montreal, and Taiwan, Raden emerged as a product company that rejected the imagery and celebrity of lifestyle brands.

Udashkin went on to say: “How can you have a lifestyle on day one around your product unless you’re faking it? I think that works in the short term, but over time the customer gets smarter. If you don’t keep working on your product, eventually you lose.”

Cofounders Steph Korey and Jen Rubio took a nearly opposite approach to building their competing brand. In a July 2017 segment in Inc Magazine called “How I did it”, here is what was said about the duo:

Steph Korey and Jen Rubio had a problem. Their planned launch of Away, a new luggage brand, was fast approaching–and none of their suitcases would be ready to sell in time. Luckily, the two had a social media trick packed in their bags. They turned a proven retailing tactic, the preorder, and an idea for a book into a campaign that went viral on Instagram and beyond.

Burt Helm, Inc. Magazine

This thinking permeates through their entire product position. Whereas Raden’s Instagram focused solely on the products being sold, Away’s Instagram account features as much lifestyle and usability as it does the products that Away sells.

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While Away focused on the destination and brand affinity (to include a print magazine called “Here”), the relationship that Raden maintained with customers was altogether different than the one that Away hopes to continue. The difference between the two approaches greatly affected each brand’s product offering: Raden’s was narrow, Away’s is wide. Here’s a pivotal point in today’s featured article by Fast Company:

He walks me through the math. The target market for a direct-to-consumer suitcase brand is relatively narrow. This is not a mass purchase. Your audience is people with enough disposable income to spend between $200 and $400 on a carry-on, but also be digitally savvy enough to be willing to buy the case online, rather than in a department store.

Once the startup has convinced someone within their target market to buy a carry-on, the relationship is basically over. With some persuasion, the brand can try to sell them a piece of checked luggage or perhaps another small travel accessory. But the lifestyle value of each customer is relatively small, compared to other categories. A direct-to-consumer luxury shoe brand like M.Gemi can sell a woman a new pair of $300 shoes twice a year for the rest of her life. Everlane can sell a customer wardrobe updates every month.

Elizabeth Segran, Fast Company

Here Udashkin suggests that he did the right thing by focusing on product superiority alone (just one of the three components to the DNVB formula). But because he saw no value in building a brand and narrative around Raden, there were fewer alternative products that he could offer to his existing customers. This, in addition to his luggage’s immovable battery and the startup’s shorter runway influenced his position that the luggage maker had no choice but to cease operations. He also suggested that there was no market for these types of products in the long run, a far-reaching assertion.

In an email to 2PM, Away CEO Steph Korey explained Away’s position: 

A brand’s success isn’t determined by the amount of money it raises, or by any other one thing, but by the right combination of a lot of little things.

For us, it’s been the combination of having a customer-obsessed approach to everything we do (taking the time to listen to our customers, deeply understand what they’re telling us, and then quickly acting on it), being conscientious about the way we introduce them to the brand in the first place (ensuring what we’re marketing will be interesting to who we’re marketing it to, and simultaneously creating a narrative that’s authentic to who we are as a brand no matter the channel or intended audience), and not limiting ourselves to any one product or plan for the future (expanding from one suitcase to dozens of travel goods since launch, and setting our sights on fixing everything that’s currently wrong with the travel experience).

One of the early lessons in DNVB branding is one that cannot be explained by analytics and logic, alone. It’s too subjective. Phil Knight’s once-fledgling shoe operation sold shoes but Nike was never a shoe company: it was a company that enabled champions. Tesla sells cars but Tesla is a company for futurists. Apple sells computers but it’s a company for creators.

For aspirational products, consumers choose brands that fit their lifestyle, belief system, and goals. From the very beginning, Away achieved something that very few DNVB’s understand early on. Building the product is only half of the battle. This means that no matter what arduous regulations they may encounter, they will maintain a canvas to build products that are relevant to their community of passionate, millennial travelers. It’s likely that as traditional sales continue, you’ll see a growing number of SKUs, styles, and add-ons that are beloved by millennial travelers and commuters. Yes, Steph Korey and Jen Rubio sell luggage, but Away is a travel company. And Away will go where she wants.

Updates: On June 26, Away announced the Away x Dwayne Wade collaboration. On June 28, Away announced a $50M round of investment, one of the largest rounds by female founders in history. According to their Comms Director Cassi Gritzmacher:

With this latest round of funding, Away plans to further establish itself worldwide by extending to new markets; continue to expand its product line to create the one perfect version of everything you need to travel seamlessly; expand its physical retail footprint (opening 6 new stores by the end of 2018 in addition to its current New York, Los Angeles, San Francisco, and Austin locations); build on its existing social impact efforts (through its partnership with Peace Direct and through new initiatives); and create 249 new jobs over the next five years, transitioning the team into a 56,000-square-foot new Global Headquarters in its hometown of New York City.

Read more of the issue here.

By Web Smith and Meghan Terwilliger | About 2PM 

Issue No. 263: The End of Conglomeration?


Monopoly is not a suitable term for what Amazon is in the process of accomplishing. A monopoly is defined as the exclusive possession or control of the supply or trade in a commodity or service. There is no term for a corporation becoming the supply or the trade.

I am not anti-Amazon but it’s becoming easier to see how this current administration could bend precedent to break up a web-based conglomerate.

Amazon is the titan of twenty-first century commerce. In addition to being a retailer, it is now a marketing platform, a delivery and logistics network, a payment service, a credit lender, an auction house, a major book publisher, a producer of television and films, a fashion designer, a hardware manufacturer, and a leading host of cloud server space. 

Yale Law Journal: Lina M. Kahn, Amazon’s Anti-Trust Paradox

Amazon is trading at near all-time highs, with a market cap in excess of $700B. Historically, Wall Street investors and consumers have been tremendous fans of Amazon, Main Street businesses have not. This is an important distinction.

Until the 1970’s and 80’s, anti-trust litigation has focused on structuralism: a focus on relationships of contrast between elements in a conceptual system that reflect patterns underlying a superficial diversity. 

After Reagan’s Anti-Trust Explosion of 1982, things began to shift from structuralism and toward consumer sentiment. That year, AT&T and IBM faced anti-trust litigation that forced changes in each respective company by 1984. As you know, Amazon Web Services (AWS) and Prime Memberships have helped the public company to minimize losses. Thus far, Amazon has been immune to these pressures. Due to the successes of AWS and Prime subscriptions, the direct-to-consumer side of the business has operated as a loss leader. As Kahn points out. this loss leading metric has blinded regulators to the hazards of Amazon’s business strategy.

[My] analysis reveals that the current framework in antitrust—specifically its equating competition with “consumer welfare,” typically measured through short-term effects on price and output—fails to capture the architecture of market power in the twenty-first century marketplace. In other words, the potential harms to competition posed by Amazon’s dominance are not cognizable if we assess competition primarily through price and output. Focusing on these metrics instead blinds us to the potential hazards.

Yale Law Journal: Lina M. Kahn, Amazon’s Anti-Trust Paradox

The 1982 anti-trust guidelines introduced by Reagan and his administration set a meaningful departure from ninety years of legal precedent; these guidelines were re-emphasized in 1968. The actions of the Reagan administration in 1982 reflected a new focus. Lina Kahn went on to say: “The law against vertical mergers is merely a law against the creation of efficiency.” With the election of President Reagan, this view of vertical integration became national policy. This has been known as the Chicago School approach.

The Chicago School approach to antitrust, which gained mainstream prominence and credibility in the 1970s and 1980s, rejected the structuralist view. In the words of Richard Posner, the essence of the Chicago School position is that “the proper lens for viewing antitrust problems is price theory.”

To pursue an Amazon anti-trust case, President Trump will have to reverse the revered national policy of the Reagan Justice Department. It can be implied that the Reagan administration’s shift from structuralism and towards price theory was meant to emphasize middle-class consumerism. But no one could have foreseen Amazon’s role in building a modern monopoly over America’s consumer web. Frankly, their version of a monopoly is altogether different. Here is an illustration for you:

Web Smith on Twitter

Thought more on $AMZN’s anti-trust concerns. Here’s a (short) history of U.S. monopolies being broken: 1. Standard Oil owned oil. 2. U.S. Steel owned steel. 3. American Tobacco owned it. 4. AT&T owned communications. Amazon owns just 4% of retail. And 43% of eCommerce.

The 4% / 43% figure doesn’t begin to tell the story. No one could have predicted how effective an internet-based conglomeration could be. Or the impact that Amazon’s sales could have on commercial real estate woes. Or how Amazon lobbies for potentially detrimental state / local tax benefits. Around the country, real estate brokers are in a panic as warehouse / office park leasing have fallen off a cliff. In addition, Amazon’s HQ2 campaign is leading to a growing criticism from those who believe that Amazon may have too many tax and cost benefits and at the peril of middle-class workers and retail entrepreneurs.

Trump’s deep-seated antipathy toward Amazon surfaces when discussing tax policy and antitrust cases. The president would love to clip CEO Jeff Bezos’ wings. But he doesn’t have a plan to make that happen.

Jonathan Swan, Axios

Amazon built its business around the belief that as long as consumer prices were low, anti-trust laws wouldn’t apply. Lina Kahn went on to say: “Due to a change in legal thinking and practice in the 1970s and 1980s, antitrust law now assesses competition largely with an eye to the short-term interests of consumers, not producers or the health of the market as a whole; antitrust doctrine views low consumer prices, alone, to be evidence of sound competition.”

The health of the retail sector has been on decline for quite sometime. Retail business owners, real estate brokers, lenders, and commercial developers didn’t foresee how much of an effect Amazon and eCommerce would have on their adjacent sectors. Where there was originally confusion and apathy, there is now a shared disdain for the Seattle eCommerce giant. Main Street business owners, politicians and pundits have taken notice. And this is the audience to whom President Trump speaks.

Under the current interpretation of antitrust laws, Amazon seems to be getting a free pass. So I should say that antitrust laws in, their current state, don’t prohibit conglomeration. They don’t prohibit a single company from being involved in all these different lines of business. But what they are supposed to prevent is a company that enjoys a dominant footprint in one area of the market, using that footprint to leverage its way into other markets, and so I think that’s the area where Amazon potentially should be facing scrutiny.

From Korva Coleman’s interview of Lina M. Kahn, NPR

In 1890, the father of the Sherman Act, Mr. John Sherman (R-OH) stood on the floor of the Senate and declared the following:

If we will not endure a king as a political power, we should not endure a king over the production, transportation, and sale of any of the necessities of life. If we would not submit to an emperor, we should not submit to an autocrat of trade, with power to prevent competition and to fix the price of any commodity.”

When the gentleman from Ohio made this statement, he couldn’t envision a future where one man presided over a corporation responsible for a great deal of production, transportation, and the sale of any necessities of life. Sherman also couldn’t envision the internet, a virtual destination void of political governance or etiquette. Amazon’s strategy continues to be the forging of an anti-trust proof conglomeration – loved by consumers and feared by both incumbents and challengers.

Anti-trust law is overdue for change. The language no longer matches the time. And while Amazon may not be the most deserving of this scrutiny, they are the most likely target.

The laws will change to address the modern day concerns of retailers, logistics networks, newspaper publishers, ad firms, shipping companies, grocers, auction houses, book publishers, movie studios, software companies, hardware manufacturers, credit lenders, payment services, and internet service providers. In our modern American economy, any business that touches the internet has been affected by Amazon.

Bezos is aiming to possess the entire board upon which a monopoly can be formed  — the consumer internet. And populist politicians may eventually conclude that no corporation should be able to own the consumer internet. But for now, Amazon as every advantage.

Read more of the issue here.

By Web Smith | | @2PMinc