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

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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. 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:
(1)

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.

(2)
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. 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.

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