Zombie Brands and Chris Pine's Shorts
Welcome to Friday, everybody. We made it.
📰1/ Headline Roundup: Helping you look 1% smarter in Zoom meetings.
🔒Retailers Locked Up Their Products - and Broke Shopping in America
Have you ever decided to get toothpaste or deodorant, found it was locked up to prevent theft, and decided not to take the time to look for a store associate? In an attempt to reduce theft in stores, retailers have made significant investments over the last decade to make it harder to steal. The case gets made here that the collateral impact of the strategy to reduce shrinkage is reduced traffic - more people will realize and buy it somewhere easier, including digital purveyors like an Amazon or Instacart.
🏷️Summer sales events like Prime Day are shaking up the back-to-school season
Back-to-School season, depending on your region, tended to be a pretty concentrated shopping moment. With discount events like Target's Circle Week and Amazon's Prime Day, purchase patterns are getting pulled forward, although it's not clear yet if it's driving any meaningful increase in sales for brands that historically see a bump for Back-to-School. Good news, though: At this rate, it'll be any year and we'll see Christmas Trees on sale in mid July.
🥛Danone Backs Guidance as Shoppers Welcome Easing Price Hikes
Quarterly earnings release from Danone have arrived. Key headlines are that they're slowing the pace of their price increases, said increases are pacing to their peer Nestle, and they still expect like-for-like sales growth of 3-5% in 2024.
🪙How ‘spaving’ became the latest inflation spending infatuation
Even as inflation has gradually receded in many countries, it still hangs out over the shoulders of consumers round the world. Terms like "shrinkflation" (same price, same quality, but less in the package) and "skimpflation" (same price, same quantity, but lower quality inputs) may be adding a new friend to: "spaving", meaning getting something now or in the future as a part of your purchase. Think a Buy-One-Get-One 50% Off, a Prime membership that gets you free shipping for a year, or a gift card to use on your next purchase. It's early, but there's been a small pop in the Google Trends data for the term. Will be curious to see if it grows.
💵 2/ Cheap Strategy: An off-the-cuff strategy recommendation to give you ideas on how to flex your own strategic thinking.
Topic for today:
Modern Retail recently did a deep dive on ”zombie brands”, D2C companies that have fallen on hard times. It’s worth reading, and you’ll likely see lots of buzzy names (Outdoor Voices, Felix Gray, Allbirds, Dollar Shave Club) that are at far lower valuations than their peaks.
What are some of the key takeaways?
- An anonymous CPG startup founder describes the consumer landscape this year as “a lot of people are seemingly hanging on for dear life.”
- Apparel seems to be hit particularly hard, while beauty brands have been steadier - perhaps the repeat rate is better.
- Founders who poured years of their lives into building these brands often struggle with the harsh reality of a low valuation or stagnant growth.
- Acquisitions have picked up, as turnaround firm The Hedgehog Company believes “we’re at peak zombie in DTC land” and that they’re “on track to see twice as many brands in the first five months of the year as we did this time last year.”
Where might we see this go in the future?
- Big buying small: The article talks a lot about acquisitions for the purpose of turnaround, but it doesn’t speak a lot about DTC brands permanently getting bought. If valuations are way off their peak, might we see big, blue-chip CPG’s accelerate their acquisition of marked-down companies that used to make them nervous? Could Gap buy Outdoor Voices to bolster their place in athletic wear, could Luxotica go after Felix Gray, would Wayfair ever want to buy the assets and IP from Burke?
- Social Commerce as a Second Wind: Will there be a DTC brand that can find a second wind with social commerce platforms like TikTok Shop? It’d be fascinating to see, it’s a totally different growth model - the 2010’s seemed to be so much about venture capital funding being used to get growth at any cost. Will the 2020’s be a window where one or more of those brands finds a way to reach people differently, and turns their fortunes around as a result?
- Justice League, Assemble: With interest rates and consumer sentiment where they are, it likely hasn’t been the most advantageous time for DTC startups. But hear me out: Interest rates look to be coming down, meaning the cost of capital gets easier to bear. If enough founders exit their first big company for less than they‘d hoped, they walk away with a chip on their shoulder, and want to use what they’ve learned to build something better the second time around, will we see the best and brightest from across this DTC landscape link up and form new brands together in tailwind categories like beauty?
As you already know, I have no clue, but it’ll be fascinating to see.
🍫 3/ An Andes Mint Before You Go: Like getting a minty chocolate with your bill at a Tex-Mex restaurant.
Let’s take a hard right turn: I think Chris Pine's wardrobe is worth smiling about. This man clearly knows how to dress, he's done all the Hollywood red carpet stuff for ages. But the video shows he clearly knows when to just do whatever he wants. Professor X does a lovely job at conveying what you already can feel in the photos - this is a person being themselves, and I really like that.
A favor to ask you: If you've made it this far, would you mind forwarding this to anyone you think might enjoy it? Trying to build this little corner of the internet up and would be super grateful. Have a good weekend,
