Members: Juneteenth and American Dreams

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The discussion between us was slow and every answer labored. It was difficult to tactfully explain the concept of an “unnecessary wait.”

There’s always a wait.

Modern Retail editor Cale Weissman wanted to understand the Black perspective of those of us in eCommerce. I didn’t have many answers for him. I worked to moderate my responses, struggling to mask volumes of persisting frustrations within the digital industries. At one point, Weissman asked for a list of venture-backed founders in the direct-to-consumer space. There was, of course, the obvious answer. Tristan Walker rolls off the tongue. But I didn’t have a novel response in that moment and I was ashamed of that. There are so few Black professionals in this space. For the vast majority of prospective executives, founders, or investors, they’re still waiting.

A portmanteau of “June” and “nineteenth”, you’ll see Juneteenth celebrations from Target, Nike, Glossier, Deciem, Ford Motors, Adobe, Allstate, Altria, Best Buy, Google, JPMorgan, Lyft, Mastercard, Postmates, Tesla, SpaceX, RXBar, Spotify, Twitter, Square, Workday, Uber, and countless others. Most of it will be in vain and some of the efforts will be widely panned.

Dino-Ray “96,000” Ramos on Twitter: “.@Snapchat released a statement about their #Juneteenth filter… pic.twitter.com/KWPZnlWG3n / Twitter”

@Snapchat released a statement about their #Juneteenth filter… pic.twitter.com/KWPZnlWG3n

You’ll observe brands, people, and media commentators missing the point. You’ll see gimmicks, carefully crafted statements, and an oversimplification of a complex period in American history. Imagine our great grandchildren over-simplifying the present day.

For some of us, Juneteenth was only sort of a celebration. Imagine wanting something for your entire life and then waiting two and a half more years for that something. It’s a bittersweet celebration. For those of us who descended from those strong-minded South Texans, today is the annual reminder of their physical, mental, and emotional resilience. It’s a reminder of our inherited endurance, will, and resourcefulness. There’s always a wait. So, Juneteenth: a celebration, sure. A national holiday? Of course. But within the confines of the classrooms, offices, or neighborhoods of our American cities, Juneteenth should be a day to reflect on the waits that remain.

Grandchild of Slaves and Grandma to Me

Dorothy Smith’s grandson’s first essay remained on her bookshelf. It was an elementary school recount of Jack Roosevelt Robinson’s embattled life, the first man to cross the color barrier in Major League Baseball. I remember the essay because in 1992, it was my first time using a color printer for a school project. I recall the pride of using an image of his baseball card as the hook for a project that made me emotional, even as a nine-year-old. The eight-page report was double-spaced with size 18 font. For some reason, she was proud of that essay and it remained in her home until her passing in April of 2014. She’d critique the cadence and the word choices. She’d implore me to slow down when I read it aloud; I stuttered heavily back then. I credit our conversations for helping to heal that ailment.

Between 1992 and 2014, she’d go on to help me with a number of essays. As she got older and less capable, she’d listen to me narrate the stories that I wrote. But earlier in my life, she’d actually help me write them. A highly educated woman, she was my hero. By the end of this essay, she might be yours. One of those essays was a seventh grade report on Juneteenth’s impact on my own family. I’ll never forget her input:

The message of freedom didn’t make it all the way down here and, so, they had to wait a little bit longer. There was always a wait. There’s always a wait.

President Abraham Lincoln drafted Proclamation 95 in September 22, 1862. Imagine hearing word of this proclamation and then waiting for it to save you. It was effective, five months later, as of January 1, 1863. Imagine counting down those days to freedom. For some, the count was far longer. For that lot, their freedom was hidden by economic and political disdain for the federal order. It would be an additional two years before my relatives heard the news.

Every advocate of slavery naturally desires to see blasted, and crushed, the liberty promised the black man by the new constitution.

Those were the words of Abraham Lincoln in 1864 to Union General Stephen Hurlbut, an ally on paper but a critic in private. Even after the order, a number of states avoided the action required to fulfill the president’s wishes. According to Dorothy Smith, the population of Texas was aware of their ordered freedom long before they received it. For them, it was a painful wait. I’ll never forget the emphasis on “there’s always a wait.” These were the words of Dorothy Smith: child of laborers and sharecroppers. She was an entrepreneur, a retailer, a real estate agent, and mother to six college graduates. Dorothy was the grandchild of Texas slaves and my grandmother.

Her grandparents were born in 1858 and 1853. Dave and Sallie Draper Hill were born enslaved in Panola, a small town on the border of Texas and Louisiana. They were of the last American slaves freed by that Galveston, Texas order on June 19th, 1865. They’d later marry in 1881. According to the 1900 census, they’d go on to have 12 children. My great-grandmother was born in 1895. She’d later become an independent farmer, raising cattle, pigs, chickens. She grew and sold vegetables and she tended to a fruit tree orchard on her property. Her daughter would marry James Smith in 1944 and remain married to the Army Air Corps veteran until their passing – one year apart.

I always contemplate what earlier generations of my family would have done with real opportunity. It always seemed as though they were capable, potent, and waiting. It was Dorothy who we credit with taking matters into her own hands. She was defiant in her capitalism, her pursuit of education, her politics, her advocacy, and the opportunities afforded to her six children. She resented the idea of Juneteenth, in ways. It represented neglect and deception, a stalling of opportunity. It was the embodiment of an unnecessary wait for the opportunity to live a full life.

She stopped waiting.

The Sudden Retailer

With her meager savings, she launched two businesses that operated in tandem. Both companies were within the same strip mall and they’d feed each other business for decades. A licensed barber and realtor, “Melody” became her calling card. By the mid-1950’s, the barbershop generated substantial cash flow, allowing her to hire staff and procure basic wholesale partnerships. Her storefront would double as a beauty supply retailer, amplifying her earnings by catering to an audience with few places else to shop. This should sound like a familiar strategy. Her clientele was working class and upwardly mobile, a trend that would continue throughout the Civil Rights era.

Many would eventually buy homes in the area Northeast area of downtown Houston. Melody Realty would be one of their guides. The Fifth Ward was an area where Black Americans could buy homes without political or social persecution. Regardless of one’s wealth, the city’s affluent remained deed restricted – first legally and then by proxy. The middle-class son of a Texas Instruments engineer and flight attendant, I’d later be born in that same downtrodden area in 1983. Thirty years later, the city’s deed policies remained. There’s always a wait.

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Pictured: Dorothy, right, with her son.

Dorothy would later become one of the preferred real estate agent of her area. In this way, her storefront operated as a funnel. Her Melody brand of business blended short-term cash flows with longer-term windfalls. It changed the trajectory of our family. James, an Army Air Corps veteran, and Dorothy would send six children to colleges across the United States throughout the 1960s and 1970s. All would graduate and five would go on to have children. By the time that we were born, the idea of college was an afterthought. It was just another task for us. And so was entrepreneurship.

Dorothy would enforce a strict policy for each of her children. My father and his siblings would be required to earn their barber’s license while in high school. This sense of economic independence would propel a number of those children to impactful lives in business, religion, and medicine. Today, Melody Realty continues to operate in the Houston area, a testament to her work.

Conclusion: Ending The Wait

By the time I was born, she’d complete classes at Rice University. She was omnipresent in our lives and she stressed the importance of sacrifice. Dorothy Smith’s life had a profound impact on my own. In our home, she’s taken the form of a superhero. Imagine being born into a world that penned you for one thing and then choosing to achieve something more. She’d send six kids to school before the United States provided her the right to vote. My father was 13 when the Voting Rights Act passed. There’s always a wait.

Dorothy was uncomfortable with Juneteenth because it was symbolic of the proverbial weight of an unnecessary wait. This same concept can be applied across generations, including our own. Dorothy would argue that she was nothing special. Imagine what her parents could have done with the freedoms that Dorothy possessed. I can envision Dorothy Smith atop of our industry, if she was born during my lifetime.

The story of upward mobility in America is one of waiting. In the 1800s, it was for freedom. It the early 1900s, it was waiting for the dignity of citizenship. In the late 1900s, it was the wait for legal equality. And today, it’s the wait for equity in treatment and opportunity. We’re still in the proverbial period of waiting.

Today, we are celebrating the overcoming of adversity. It’s not intended to be a pleasant memory. I’d have preferred to celebrate no Juneteenth at all. I am sure that Sallie and Dave Hill would have agreed. When you’re deserving of opportunity, every single moment without it will feel like a decade. Now, imagine how two years of waiting may feel. The daughter of field laborers, she birthed a generation of Black professionals. Her life was a force function that bent time. There should have been more Dorothy’s in the 1950s and 1960s. There should be more of her children. We have to recognize that an unnecessary wait is just as fraught as no opportunity at all.

The hope is that, today and every day forward, we work to bend time. The leadership of the industries that define American exceptionalism should reflect America. We should provide opportunity, fill executive suites, hire the best people, invest in resilient entrepreneurs, mentor, lead, build, uplift, and provide the freedoms that some Americans take for granted.

There are more Dorothy’s than we know and some of them are waiting. The 45 second pause between Weissman’s question and my answer likely made him as uncomfortable as it made me. In a better version of our world, I would have answered his question with ease. It’s critical that we identify our own unnecessary waits. Once we do, it’s our responsibility to end those waits with opportunity. It’s the one small change that can alter the course of generations.

Essay: Dorothy’s Grandson | Editor: Hilary Milnes | Art: Alex Remy | About

Member Brief: When In Home

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For decades, media monetized by way of display advertising, native advertising, branded media, affiliate marketing, and eventually direct commerce. Like a technological progression, the funnel widened and shortened over the years. The definition of media broadened with time. Today, click through rate (CTR) means less to a publisher than the revenue that one visitor accounts for. Accounting for revenue per customer means that customer acquisition cost (CAC) is as much a media metric as it is a commerce one. A publisher now assesses her readership with a measure of lifetime value (LTV); this is especially the case for subscription-based operations. A “like” or other forms of engagement used to matter. Today, the measurement of conversion rate and transaction value are prioritized. Media is a competition for audience ownership; it’s a 360 degree battle for your attention.

This member brief is designed exclusively for Executive Members, to make membership easy, you can click below and gain access to hundreds of reports, our DTC Power List, and other tools to help you make high level decisions.

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Memo: Gen Z Arbitrage

For those with Android-based smartphones in 2010, you may recall a fear of missing out. For iPhone owners who had access to a fledgling startup called Instagram, they made sure to remind you that your phone was incapable of using the software. Nothing matched the aesthetic or network effects of the photo-sharing platform for the rich kids. The fear of missing out moved many to leave Android for iOS. For those who couldn’t, Apple’s products lived – rent free – in their minds until they too had the opportunity to own their very own iPhone. This was Apple’s strategy and there’s a chance that it wouldn’t have been executed without John Doerr’s vision for Steve Jobs and his app store.

In 2008, Kleiner Perkins Chairman and partner John Doerr recognized the transformative influence that the iPhone’s launch would provide for the mobile software industry. As the story would go, Steve Jobs privately discussed the prospects of the iPhone’s fledgling app store with Doerr. Jobs originally viewed the marketplace as a private entity, one that would remain under the complete control of Apple’s management. Doerr had different plans. He believed that by outsourcing the development and marketing of apps to third party teams of software engineers, Apple would build an effective moat around their mobile operating system.

Eventually, Jobs obliged. He agreed with the ecosystem lock-in potential of tens of thousands of software engineers building products for Apple’s new mobile operating system. Managed by Kleiner’s Matt Murphy (now with Menlo ventures), the $100 million iFund launched in 2008 and was later doubled to $200 million. Kleiner’s commitment to the burgeoning mobile software industry directly and indirectly impacted consumerism forever. Numerous venture firms identified the massive opportunities that mobile applications would provide and billions in venture capital followed suit.

Leading iPhone apps in the Apple App Store in the United States | Source: Priori Data

Just as Kleiner’s pioneering iFund once inspired an arbitrage that even Steve Jobs couldn’t have anticipated, the iPhone is once again at the center of an equally critical opportunity. As of March of 2019, the iPhone had an installed base of around 193 million in America. An astounding number given that the United States population is estimated to be around 372 million. By 2021, 45.4% all Americans are projected iPhone users.

China already is outpacing the U.S. and much of the developed world in mobile payments, and a new digital currency that authorities say would be like cash and accepted everywhere would put China miles ahead in the currency space. [1]

Apple’s app store helped to solidify the iPhone as perhaps the most pivotal consumer product of the early 21st century. One that powered transportation, communication, advertising, and global commerce. But nearly 12 years later, America’s commerce adoption still lags behind other global powers. Consider China, a country that achieved 73.6% digital shopper penetration in 2018. Mobile payments continue to drive the vast majority of online retail activity in the Asian country.

The rise of mobile payments in China

As a result, over 35% of all retail sales in China are done through online retail channels. In the United States, online retail adoption hovers at 12%. Mobile payments are commonplace throughout China across age, geography, and economic status. The ability to buy and sell goods online is so commonplace that Generation Z is the leading market for online luxury shopping in China. This has been bolstered by explosive growth in mobile payments over the past five years, a transaction volume that reached $45.1 trillion in 2018. According to the People’s Bank of China, this figure grew 28x in five years. It was largely driven by a cultural shift that saw China’s youth (Generation Z) empowered to transact for goods and services across China’s online retail and media ecosystem. According to Chinese media, proximity payment platforms Alipay and WeChat account for nearly 90% of the transactions. In America, there are 61.9 million proximity payment users, transacting just 113.79 billion in retail sales according to Statista’s 2019 data.

The Retail Arbitrage Ahead

Generation Z is the largest, youngest, most ethnically-diverse generation in American history. With over 82 million members, this cohort comprises over 27% of the US population.

While China’s Generation Z is more active in the purchase of consumer goods than their American counterparts, a snapshot of Gen Z’s current buying power would likely surprise you. TransUnion studied the credit market for buyers between the ages of 18 and 23 between Q2 2018 – Q2 2019. In that year, this consumer cohort accounted for 319,000 mortgages, 746,000 personal loans, 7.75 million credit cards, and 4.37 million auto loans.

Penetration rate of online luxury shopping in China | OC&C

Nearly 27% of Americans (and growing) fall within the birth years of Generation Z, a demographic that is of critical importance to legacy retailers and DTC brands, alike. In China, a country often measured as a leading indicator for American commerce trends, Generation Z leads in luxury retail adoption. In America, Generation Z is awaiting the opportunity to buy with the frequency of Millennials and Generation X. The data suggests that their consumer activity will trump that of previous generations. While Millennials prefer DTC brands by a margin of just 4% over traditional retailers, Generation Z prefers these online-born brands to their legacy counterparts by over 40-45%.

Gen Z, the group born between the mid-1990s and 2010, is already known for its financial literacy. More mature and pragmatic than its older millennial forbearers, the cohort is savvy with both finances and technology, survival skills that members gained after watching siblings and parents suffer through the 2008 recession. [2]

These are the brands that they’ve grown up with on social channels used over their iPhones: Snapchat, TikTok, WhatsApp, Instagram and others. The DTC arbitrage in 2020 and beyond will be closely tied to mobile payments. The growing adoption of CashApp, Venmo, and teenage banking programs like Current may begin to help Americans close the gap between the US v. China mobile payment adoption rates. At the center of this activity is Apple Pay, the tool with the most potential to influence Gen Z’s retail habits.

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Online retail / DTC arbitrage:2008: Shopify over custom builds2012: Warby’s PR playbook2014: Facebook advertising2016: Key affiliate partnerships 2018: Selling the first $3-5M w/o ads

Generation Z is as technologically dependent as Generation X is physically independent. Whereas all day bicycle excursions and unannounced sleepovers were a fixture in the 70’s and 80’s, that is much less so today. The meeting places and opportunities are increasingly presented in the form of digital layers. In that way, millennial parents have had to come to terms with moderating a new era of independence. Fewer drivers licenses and cars, more subscriptions and teen banking accounts.

Alexis is a middle school-aged girl in the American Midwest. An A student, athlete, and all-around great kid, she tends to earn extra privileges from time to time. Equipped with her Apple Pay-enabled iPhone, her love of TikTok and Instagram, her fascination with Glossier and Athleta, and a bit of granted independence – she’s transacted $113.41 with Glossier and Athleta’s cart in the first three quarters of 2019. The limiting factor has been her access to funds, a constraint that Apple will likely account for by offering a peer-to-peer subscription product. Apple Pay provides an independence that Americans are still dueling with. But that’s evolving. Parents are trusting of their children maintaining cash balances on their mobile phones, especially if they can easily monitor spend and availability.

If you ask the founders of Warby Parker how the team scaled so quickly, they may mention the low costs of Facebook and Instagram ads at the time. They may cite the savvy public relations work that led to that magnanimous GQ article. This moment was responsible for the  initial sell-through of their first run of prescription glasses.

70% of Gen Z has made in-app mobile payments in the last year. More than any other generation. [3]

From time to time, there are technological and economic advantages that lift the brands that are prepared for the moment. For direct to consumer brands, a category of brands that Gen Z prefers over traditional retail, there is an opportunity to shorten the marketing funnel by appealing to a generation of consumers that have been written off by the incumbents in retail. Traditional brands are marketing to the parents of America’s youth rather than directly communicating to a demographic that could benefit them. The data suggests that as Apple Pay’s adoption rates continue to improve, Gen Z will become the primary consumers of the goods that have, so far, been marketed to Millennials and Gen X members.

Year 2020

We underestimate the significance of the Apple card being used as a function of the Family Share, a program that allows Apple users to share access to digital products and assets with their families. The moment that ‘Gen Z’ is capable of spending (while accountable to their parents) is the moment that 27% of American consumers, with a preference for DTC brands, floods the market. This is the potential arbitrage that awaits for this era of retail.

And in this way, this small shift in corporate strategy resembles the magnitude of moment that John Doerr was responsible for. Either Apple will build a native function that allows guardians to ‘subscribe’ and account for potential monthly allotments to their dependents. Or a third-party solution will be engineered by an outside developer. Of all the mobile payment solutions available to consumers, it is Apple that sits at the trusted intersection of family and finance.

The Apple card is a platform that few have recognized. It’s also another lock-in opportunity, perhaps the first of the Tim Cook era. With few exits, low multiples, and increasing customer acquisition costs – the weakening viability of the DTC ecosystem has been difficult for operators and investors alike. By accelerating Gen Z’s path to becoming independent consumers, Apple stands to benefit during a time where the Cupertino-designed hardware is as commoditized as ever.

And like Silicon Valley benefited from Apple’s democratization of the app store in 2008, this era of consumer brands will stand to benefit from democratization of consumerism within the home. Our Gen Z daughters want Balm Dotcom.

Read the No. 330 curation here.

Research and Report by Web Smith | Edited by Tracey Wallace | About 2PM