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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 – Volume 11, Number 23 (June 17, 2019)

The Big Story

CGBS Presenter Profile: Master & Dynamic

Michael A. O’Hara

We are excitedly counting down the months and weeks until the Consensus Great Brands Show (September 25th, at the New York Times TimesCenter in Manhattan, http://greatbrandsshow.com/). In past years, we haven’t announced any of the participating brands until shortly before the event, but this year, we plan to use this space each week to profile a different company that will be taking the stage in September. As we strive to assemble the most compelling slate of participating companies yet in the history of this event, we hope our weekly previews underscore our growing anticipation for this year’s show and give you a head start on learning about these dynamic brands and entrepreneurs.

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The Weekly Consensus – June 10, 2019 (Volume 11, Number 22)

The Big Story
CGBS Presenter Profile: TB12   
Douglas Stebbins

With summer upon us, we are beginning to count down the months and weeks until the Consensus Great Brands Show (September 25th, at the New York Times TimesCenter in Manhattan, http://greatbrandsshow.com/). In past years, we haven’t announced any of the participating brands until shortly before the event, but this year, we plan to use this space each week to profile a different company that will be taking the stage in September. As we strive to assemble the most compelling slate of participating companies yet in the history of this event, we hope our weekly previews underscore our growing excitement for this year’s show and give you a head start on learning about these dynamic brands and entrepreneurs.

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The Weekly Consensus – June 3, 2019 (Volume 11, Number 21)

The Big Story
CGBS Presenter Profile: Function of Beauty
Paul Alexander, CFA

With summer upon us, we are beginning to count down the months and weeks until the Consensus Great Brands Show (September 25th, at the New York Times TimesCenter in Manhattan, http://greatbrandsshow.com/). In past years, we haven’t announced any of the participating brands until shortly before the event, but this year, we plan to use this space each week to profile a different company that will be taking the stage in September. As we strive to assemble the most compelling slate of participating companies yet in the history of this event, we hope our weekly previews underscore our growing excitement for this year’s show and give you a head start on learning about these dynamic brands and entrepreneurs.

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Function of Beauty

While still undergraduate students at MIT in the mid-2000 aughts, friends Zahir Dossa and Josh Maciejewski began talking about starting a business together. Roughly ten years later, they landed on an industry to tackle and a business model. In 2015, they were joined by cosmetics chemist Hien Nguyen and founded Function of Beauty, a hyper-customizable personal care company offering individually formulated shampoos and conditioners.

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The Weekly Consensus – May 20, 2019 (Volume 11, Number 20)

The Big Story
The Walmart-Amazon Arms Race Rages On
Peter Costa

Walmart announced on May 14th that it will provide next-day delivery on certain ecommerce orders. The announcement bolsters Walmart’s proposition as an alternative to Amazon’s Prime program, which, Amazon recently announced, will make next day delivery standard for members in the near future. Both announcements make it clear that the long running arms race between the two retail giants shows no signs of cooling down. In fact, it appears to be escalating.

Walmart, the world’s largest brick and mortar retailer, has made many moves in recent years to build its ecommerce business. The company’s 2016 acquisition of Jet.com and its roll up of a number of other websites (including Moosejaw, ModCloth, and Shoebuy.com) represented the opening of an ecommerce portfolio/platform for the company, but Walmart has made a number of other moves to grow ecommerce sales at its core brands as well. For instance, the company’s warehouse club, Sam’s Club, grew ecommerce revenue by 27% in 2018 by launching free shipping for top-tier members. Walmart also closed a number of stores in 2018, with plans to convert several of them into ecommerce distribution centers.  Their company continues to invest in BOPIS (buy online, pick up in store), and ecommerce initiatives make up a sizable (though undisclosed) portion of its ongoing capital expenditures.

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The Weekly Consensus – May 13, 2019 Volume 11, Number 19

The Big Story
If the Shoe Fits, Wear It
Mark Lenz

While Nike waits, like the rest of us, to hear how new tariffs might affect their business with China, the company has been working heads-down on ways to improve customer experience.  This includes developing a mobile app that strives to help you buy sneakers that really fit.  Last week, Nike announced the upcoming launch of Nike Fit, a new scanning technology through the Nike app designed to help customers find their accurate fit in the brand’s shoe offerings.  Industry research indicates that as many as 2/3 of sneaker buyers are buying and wearing the wrong-sized shoes.  No wonder we cannot perform like Lebron James or Serena Williams on the court.

Nike spent the past year developing its proposed solution using AI and other advanced technologies.  Invertex Ltd., a 3-D scanning specialization firm Nike purchased last year, developed the tool to make it happen.  So. Here is one question that I can think of while waiting for this new tool to be rolled out this summer.  What if you cannot see your feet anymore?  Nike thought of that and it will not be a problem. Nike will be rolling out the technology in its retail stores so an associate who can see your feet will take the measurements for you.

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The Weekly Consensus – May 6, 2019 (Volume 11, Number 18)

The Big Story
RetailWire Discussion: Should (Can) Rivals Meet the Free One-Day Delivery Bar Being Set by Amazon?
George Anderson, Editor-in-chief, RetailWire

Amazon.com has long maintained that its Prime membership program is “the best deal in retail.” On April 25th, the e-tail giant announced plans to make the program even better by lowering the amount of time it takes to deliver products from two days to one.

Brian Olsavsky, Amazon’s senior vice president and chief financial officer, told analysts on its first quarter earnings call that the e-tail giant was well into the process of “evolving” the company’s free two-day standard option on Prime eligible purchases to one-day while continuing “to offer same day and Prime Now selection in an accelerated basis.”

Amazon, according to Mr. Olsavsky, “has expanded our one-day eligible selection and also expanded the number of zip codes eligible for one-day shipping.” The company plans to invest $800 million in incremental spending during the second quarter to further ramp up one-day shipping for Prime members. Consumer Intelligence Research Partners (CIRP) estimates that Amazon currently has 103 million Prime members in the U.S.

Amazon rivals will be under pressure to keep pace with the e-tail giant as it raises consumer expectations around delivery times.

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The Weekly Consensus – April 29, 2019 (Volume 11, Number 17)

The Big Story
May I Help You?
Douglas Stebbins

 

Amazon is the undisputed champion of ecommerce, but that does not mean that it can answer all of retail’s challenges on its own.  Case in point, last week, Amazon announced that it was going to leverage Kohl’s nationwide reach and experienced store staff to help improve its ecommerce customer experience.

Ecommerce was built upon the promise of consumer convenience.  Web-based retail was designed to allow you to shop for anything, at any time, from anywhere.  Not surprisingly, ecommerce companies have focused on perfecting the purchasing and delivery portion of the equation.  As an example, Amazon just announced that it will spend $800 million in the current quarter to upgrade its fulfillment systems and processes to allow it to make one-day shipping the default for Amazon Prime customers, a delivery speed that was unimaginable just a few years ago.

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The Weekly Consensus – April 22, 2019 (Volume 11, Number 16)

The Big Story
Lyfting the Veil on African E-commerce
Marshall Schleifman

Last month on March 28th, a week after denim stalwart Levi Strauss & Co. completed its initial public offering to return to the stock market after going private in 1985, ridesharing giant Lyft priced its IPO at $72 per share, the top of a revised range that was first quoted as $62 to $68.  On its first day of trading, Lyft’s stock popped as much as 23% before settling up 9% for the day, giving this former unicorn a market capitalization of $22.2 billion.  Lyft’s successful IPO provided an “all clear” signal to market observers, especially the venture capitalists who control other scaled-but-not-yet-profitable tech leaders, that public investors are ready for and receptive to these companies.  In the three weeks since Lyft’s IPO, technology-enabled businesses such as Zoom Video Communications and Pinterest have gone public.  Expected on the horizon are Slack, Postmates, Airbnb, Palantir, Uber and others.

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The Weekly Consensus – April 15, 2019 (Volume 11, Number 15)

The Big Story
Instagram and Snapchat Battle for Consumers
Michael A. O’Hara

On April 4, Snap Inc., operator of Snapchat, launched the Snap Audience Network.  This new service will allow developers of any app looking for advertising revenue to host the same ads displayed on Snapchat.  Snapchat will take a commission on the revenue earned, with the rest going to the app owner.

According to Recode, however, the new Snapchat service comes nearly five years after Facebook launched a similar service.  And while this late entry to app advertising could still be potentially meaningful to Snap – Lifewire estimates that Apple currently offers approximately 2.2 million apps for download and Statista puts the number of apps available in the Google Play Store at approximately 3.0 million – Facebook’s lead over Snap is growing rapidly, thanks to its ownership of Snapchat’s archrival: Instagram.

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The Weekly Consensus – April 8, 2019 (Volume 11, Number 14)

The Big Story
Sears Home & Life: Good, but Enough?
Paul Alexander, CFA

Sears announced last week that it will open three new stores under the banner “Sears Home & Life” this May. After years of largely defensive strategies, such as downsizings, store closures, asset sales, and filing for bankruptcy protection in October, the decision to open new stores represents one of the only proactive, offensive measures that Sears has taken in recent memory. The question is, given the headwinds and failed strategies that have put the company in its difficult current position, what will these new stores look like, and do they have any hope of blazing a new, better future for the company?

Any company facing as many challenges as Sears needs to rethink its playbook if it is to attempt a comeback. The plan for the new Sears stores appears to appreciate that; Home & Life stores will be 10,000 to 15,000 square feet, mere postage stamp-sized boxes compared to the typical legacy Sears stores, which were about 150,000 square feet per unit. Within their smaller footprint, the new stores will focus on some of Sears’s strongest categories, namely tools, appliances, and other hard goods. Other strategic moves will be to focus on Sears’s best private brands, including the expansion of the DieHard automotive brand into lawn/garden and camping equipment, and offering more Kenmore products on Amazon’s Dash reorder platform.

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