Affairs

From the Slack: “There’s no such thing as a ‘middle’ in e-commerce anymore.”

CAPE TOWN — Subscriber Hendrik Laubscher, based in Cape Town, South Africa, recently shared some strong insights in Lean Luxe: Connect, our Slack channel. His thoughts were the highlight in an animated internal discussion about the fall of JackThreads. His message, edited for clarity:

“There is no middle of the e-commerce market in any vertical. If that exists at the moment, Amazon will use their financial muscle to drive the business into the ground.

Web Smith [co-founder of Mizzen+Main, currently e-commerce director at Gear Patrol] made a very good point recently that a lot of the supposed winners in e-commerce today are cash-hungry, burning, platforms of doom. I’m not going to name [any brands], but ask yourself one question: Why are certain brands constantly in publications such as Recode, TechCrunch, Fortune, etc.?

One thing that hasn’t been mentioned: The approach to winning long term. If I look at the e-commerce businesses that are public, most of them are horizontal monsters that sell anything to large user bases. I, however, am not yet sold that an MLC [modern luxury company] needs to be a horizontal business.

Some things to think about:

  1. CPG businesses (Harry’s, Walker & Co., DSC) have a lot of upside as incumbents, but they’re in need of [young consumers] to be sustainable long term. The counter argument is a company like Honest who seems to have thought that a celebrity founder [Jessica Alba] and lots of cash would help them long term.
  2. For MLCs to survive, I think we’re going to see vertical-specific winners. Why? A limited selection of product that has been optimized for margin growth, that has a story, and that executes well is going to be a very big deal. Warby Parker, Bonobos, and M.Gemi have stayed true to their roots, and are cash efficient and are run by driven entrepreneurs. I’ve yet to see any evidence of these businesses having customer churn and think they have solved customer retention using technology and excellent product to do it.
  3. The sudden growth of the vitamin and supplement category also has strong 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 that [naturally] have repeat purchase implications.

I’ve mentioned repeatedly that I have big concerns about discounting practices by current legacy retailers. Discounting is not a strategy. Rather, it’s the public confirmation that seasonal planning was done wrong, and that customer demand was miscalculated.

For MLCs to be sustainable, LTV, retention costs, and unit economics need to be done from day one.”

Reporting Queue

Previous story

Ledbury's Paul Trible: "We're indifferent to this whole activewear thing."

Next story

What’s holding the Rapha deal back?