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The Weekly Consensus

Ideas, observations, and news on the consumer products and retail industries
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The Weekly Consensus – May 22, 2017 (Volume 9, Number 21)

The Big Story
Big Blowhard Brand
Doug Stebbins

There is a big difference between a label and a brand.  Virtually every product has label.  But just because a product has a colorful logo does not mean it is brand.  A brand has meaning to the consumer.  A strong, established brand is able to create a specific perception in customers’ minds concerning a product’s qualities and attributes. Creating a brand can be time-consuming and expensive, and the results are unpredictable.  Many products try to accelerate the brand development process by aligning with a celebrity and hoping that the attributes of the celebrity rub off on the product in the minds of consumers.  But, what happens when the process is reversed, and a brand is developed to create a celebrity?  That is exactly what is happening with Big Baller Brand.

As the website says “Big Baller Brand is a Lifestyle Apparel company founded on core family values, and inspired by the 3 Ball brothers from Chino Hills, California.  Lonzo, LiAngelo, and LaMelo Ball are basketball players with Championship pedigree”.  Keep in mind that the average age of the three Ball sons is 17 and combined they have scored the same number of points in the NBA as I have.  You may be wondering how these three brothers, two of which are still in high school, got their own brand.  The answer is twofold:  YouTube, and their father, LaVar (LaVar is apparently the source of the “Championship pedigree” noted above).

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The Weekly Consensus – May 15, 2017 (Volume 9, Number 20)

The Big Story
Terrible, Horrible, No Good, Very Bad
Marshall Schleifman

In Judith Viorst’s 1972 children’s book Alexander and the Terrible, Horrible, No Good, Very Bad Day, from the moment Alexander wakes up, things just do not go his way.  Poor fortune visits him at every turn throughout the day.  It feels fitting that Viorst’s protagonist shares his name with former New York metropolitan department store chain Alexander’s, whose story ended terribly, horribly, no good, very bad in a 1990s bankruptcy.  And based on first quarter results reported last week across the department store group, terrible, horrible, no good, very bad trends appear to continue to haunt the subsector, and are rapidly accelerating.

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The Weekly Consensus – May 8, 2017 (Volume 8, Number 19)

The Big Story
The Venus® Brand
Michael A. O’Hara

Jerry Seinfeld once observed that sports fans are more loyal to teams than to athletes, pointing out that as beloved players leave their cities we stop rooting for the person but still root for the “laundry.”  This may be why I hated Magic Johnson when I was a teenager, even though he was a once-in-a-lifetime talent in my favorite sport who was also articulate, funny, gracious, and remarkably unselfish.  His tragic flaw:  he played for the Los Angeles Lakers.  As an adult, I love Magic, and have learned to appreciate transcendent players, even if they aren’t lucky enough to play for Boston teams.

But not everyone is as open minded as me about other cities’ sports stars.  (Feel free to send me an email congratulating me on my high-mindedness.)  This suggests that transcendent athletes in individual sports may be able to build brands that exceed those of team sport athletes.   Many (most?) people outside of Cleveland root against Lebron James.  But, as we learned at last Wednesday’s 7th annual Next Great Consumer Brands, everyone loves Venus Williams.

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The Weekly Consensus – May 1, 2017 (Volume 9, Number 18)

The Big Story
The 7th Annual Next Great Consumer Brands

As the seventh-annual Next Great Consumer Brands event culminates this week at the Nasdaq MarketSite in Times Square, we are pleased to welcome another exceptional collection of high-potential consumer and retail brands.

Away

Launched in February 2016, Away is a travel brand founded by Steph Korey and Jen Rubio (both formerly of Warby Parker). Away creates special objects that are at home on the road—that carry you forward, making your trip easier, and in a small way, your life better. It started with luggage.

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The Weekly Consensus – April 24, 2017 (Volume 9, Number 17)

The Big Story
Three Reasons Why We Like PetSmart’s Chewy.com Acquisition
Maeghan Thompson

PetSmart announced last week that it is buying Chewy.com, an online retailer of over 30,000 pet related products.  According to Recode.net, the purchase price is $3.35 billion, making it the largest e-commerce acquisition ever.  That statistic may be eye-popping enough to make you sit up, roll over, and play dead, but it makes sense to us for three reasons.

First, Chewy.com is very successful.  Non-pet owners might not be familiar with the website, but it has grown to become the online leader in pet foot and litter sales in a relatively short period of time.  The company, which was founded in 2011, achieved sales of $900 million in 2016, and projected to reach over $1.5 billion this year.  According to 1010Data.com, Chewy commands 57% of online pet food and littler sales, ahead of Amazon’s 33% and PetSmart’s 2%.  An emphasis on customer service and love of pets has helped Chewy.com to distinguish itself from competitors and bond with its customers. The website’s customer service agents are available 24 hours a day via phone and text, and sent handwritten holiday greeting cards to 2 million customers last year.  The company keeps profiles of each customer and their pets, and enters newly registered customers into a drawing for a free oil painting of their pet – 700 paintings are awarded and delivered per week, according to Bloomberg.

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The Weekly Consensus – April 17, 2017 (Volume 9, Number 16)

The Big Story
Trading Spaces
Betsy White

One of the more attention-grabbing retail news items last week was JC Penney’s announcement that the company would delay the closing of 138 stores due to a surge in business after the closures were announced. The reality however, was only a short delay in the start of liquidation sales. The stores will still close, just slightly later than originally contemplated, ostensibly because the company determined it would make more money (or lose less) if the liquidation sales start in May instead of April.

Reading almost daily about another retail chain closing some or all of its stores leads one to ponder what can be done with all of this retail space being vacated at lightning speed.  While painful for landlords, retailers, and often the consumer in the short term, there is a huge opportunity for property owners, along with new tenants, to remake the brick and mortar landscape.

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The Weekly Consensus – April 10, 2017 (Volume 9, Number 15)

The Big Story
RetailWire BrainTrust Throwdown: Is It Inevitable That Tech Companies Will Dominate Retail?
Rick Moss, RetailWire

Commerce is the engine that has driven the global prominence of the U.S. economy. Still, the e-commerce revolution that caught on in the late 1990s is so fundamentally different, that the prior 400 years of traditional retail can be viewed as a prelude to the empowered, connected consumer age in which we exist. We’re in the midst of a hi-tech revolution with no limits in sight.

We asked two of our BrainTrust panelists, Ken Lonyai and Ryan Mathews, to argue for and against the following premise:

The new model for retail, as exemplified by Amazon, is built on mastery of data, AI and IT services. Legacy retail companies can’t possibly make a transition to this type of data-first company. Therefore, possibly within the next decade, big retail will be entirely dominated by tech companies.

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The Weekly Consensus – April 3, 2017 (Volume 9, Number 14)

The Big Story
J.Crew: A Harbinger and Lesson?
Paul Alexander, CFA

While preppy retailer J.Crew has long been known for its colorful and playful catalogs, the most recent pages of the company’s history have unfolded not on an inviting, sandy beach, but in court. Last week, the company’s debtholders moved to block J.Crew’s recent efforts to transfer a large portion of its intellectual property into a subsidiary beyond the reach of lenders. Wilmington Savings Fund Society argued that J.Crew’s plan to move 72 percent of its trademarks, worth $250 million, should be stopped because the IP belongs to the company’s lenders as per a 2011 loan agreement. Wilmington further referred to the retailer as “insolvent,” and said J.Crew’s owners are trying to “improperly advance [their] self-interest over the interest of J.Crew and its creditors.” In its own defense, a J.Crew spokesperson argued that its proposed IP transaction “fully complied with governing loan agreements,” reiterating a stance the company took in an early February court filing, where it contended, according to the Wall Street Journal, that J.Crew continues to work “on strategic opportunities that will benefit all of its stakeholders, including lenders.”

The struggle between J.Crew and its lenders raises three key points. First, we may see more legal battles in the coming weeks and months as a wave of bankruptcies sweeps through retail. Numerous news outlets reported last week that Payless Inc. was preparing to file bankruptcy imminently, and could close as many 400 to 500 of its over 4,000 stores. Payless would be the latest in spate of recent retail bankruptcies, including RadioShack, BCBG, The Limited Stores, HHGregg, and Gander Mountain Sports, and more appear to be on the way. For instance, Sears Holdings Inc. warned two weeks ago in its annual report that “substantial doubt exists related to the company’s ability to continue as a going concern.”

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The Weekly Consensus – March 27, 2017 (Volume 9, Number 13)

The Big Story
You Don’t Have to Fake It to Make It:
Why Brands Need to Avoid Fake News
Rob Bailey, Managing Director Consumer Marketing, KCSA

Fake news is a type of hoax or deliberate spread of misinformation, be it via the traditional news media or via social media, with the intent to mislead in order to gain financially or politically. It often employs eye-catching headlines or entirely fabricated news-stories in order to increase readership and, in the case of internet-based stories, online sharing. (Source: Wikipedia)

A recent study by Stanford University professor Matthew Gentzkow and his NYU counterpart Hunt Allcott revealed that only 8% of 1,200 US respondents believed false news stories were accurate. So, why are consumers, and the marketers that want to grab their attention, so smitten with fake news websites? The answer is simple: consumers find them interesting and entertaining, and marketers are enamored with the sheer volume of consumers these fake news sites enable them to reach.

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The Weekly Consensus – March 20, 2017 (Volume 9, Number 12)

The Big Story
Trump Bump/Slump
By: Douglas Stebbins

There is nothing the stock market despises more than uncertainty.  It seems that the market would rather accept a less than optimal certainty rather than try to evaluate the range of outcomes of some looming unknown.  Who can forget, when on election night, the Dow futures at one point dropped more than 900 points – not because of Trump’s specific policies, but rather the market’s reaction to the unexpected Trump victory.  The drop was short-lived, and the day after the election the stock market ended up over 1% as Wall Street had begun to contemplate what a Trump presidency might mean to the stock prices.

Since Election Day, the markets have embraced Trump’s pro-business message and pro-business cabinet assignments.  Whether it is discussions (or tweets) of stimulus or taxes or regulation, it is generally understood that Trump will lean pro-business.  The result has been a nice stock market bump in the four months since the election, with the S&P 500 up over 11% and the Dow Jones average up over 14%.

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