THE DEATH OF PUREPLAY RETAIL -...
Transcript of THE DEATH OF PUREPLAY RETAIL -...
THE DEATH OF PUREPLAY RETAILMEMBER BRIEFING | NYC | JANUARY 12, 2016
2
BENCHMARKING DIGITAL PERFORMANCE
BENCHMARKING
EDUCATION
RESEARCH
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Q1 RESEARCH
January February March
Intelligence Report:
AMAZON
Digital IQ Index®:
SPORTSWEAR
Intelligence Report:
MOBILE
Intelligence Report:
DEATH OF PUREPLAY RETAIL
Digital IQ Index®:
BEVERAGES: BRAZIL
Digital IQ Index®:
AUTO
Digital IQ Index®:
OTC HEALTHCARE
Intelligence Report:
DATA & TARGETING
AUTOFEBRUARY 4 / 8:15AM-12:30PM
THE NEW SCHOOL
63 FIFTH AVENUE, NYC 10003
INTRODUCTION
DEATH OF PUREPLAY RETAIL 2016
6
November 2015, N=1,006
By Demographic
Channel Where U.S. Internet Users Planned to Shop on Black Friday
ONLINE SHOPPING SURGES
Source: “Holiday Shopping Survey 2015,” conducted by Ipsos, November 6, 2015
YOUNGAges 18 - 34
AFFLUENTHHI = $50K+
Online Only30%
Online & In-Store
26%
In-Store Only22%
Don't Plan to Shop21%
Online Only24%
Online & In-Store
17%
In-Store Only18%
Don't Plan to Shop41%
7
2014
Share of Online Sales: Top-50 U.S. E-Commerce Retailers
…BUT NOT THE FULL STORY
Source: Internet Retailer, L2 Analysis
Amazon35.4%
Other E-Commerce Pureplays8.0%
9.2%
Walmart5.4%
Other Omnichannel
Retailers 41.7%
8
July 2015
Cities in Which Last Mile Services Have Deployed
E-COMMERCE HUBS…
9
Q4 2014
Based on Retail Square Feet Under Construction
Top Markets for Retail Development
…ARE ALSO RETAIL GROWTH HUBS
Boston
New York
Washington, DC
Miami-Dade CountyHouston
Dallas
Los Angeles
Chicago
Source: “Doubling Down on the Rebirth of the American Shopping Mall,” CNBC, June 7, 2015
Cities in Which Last Mile Services Have Deployed
10
December 2015
Manhattan: New or Future Mall Locations
HIGH-END RETAIL IS THRIVING
March 2015Brookfield Place
Expected 2016WTC Mall
Expected 2019Hudson Yards
Sales are up $45 per square foot year-on-year at high-end (A++) malls.*
*Source: Fortune, March 2015
11
U.S., 2014 E-Commerce Pureplay Retailer
Fastest Growing E-Commerce Players Among Top-500
PUREPLAY GROWING FAST, BUT…
Brand E-Commerce SalesE-Commerce Sales
Growth
1 Blue Apron $65,020,000 550.2%
2 Men's Wearhouse $215,525,000 251.4%
3 Dollar Shave Club $65,000,000 242.1%
4 eSalon $30,030,000 200.3%
5 Shinola $59,800,000 199.0%
6 The Honest Company $149,200,000 198.4%
7 Pier 1 Imports $200,200,000 193.8%
8 Saatva $27,000,000 170.0%
9 Warby Parker $100,000,000 150.0%
10 etailz, Inc $60,000,000 122.2%
Source: Internet Retailer
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PROFITABILITY IS LIMITED
“At this time, the e-retailer is running about break even.”
-Internet Retailer, October 2015
“It is not clear if the company is profitable.”
-Re/code, May 2015
“…Dollar Shave Club is not yet profitable.”
-The Wall Street Journal, June 2015
“Honest has dipped in and out of profitability; it is not yet consistently profitable.”
-Re/code, March 2015
Source: Internet Retailer
13
2014
P&G: Grooming Category Performance
CHANNEL VS. CATEGORY EFFECTS
Global Blades & Razors
Market Share
Premium Grooming
Market Share
70% 88%
P&G Razor Division Operating Margins = 32%
Sources: The Motley Fool, Forbes
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The 4XFusion ProGlide
RIPE FOR DISRUPTION
Number of Cartridges 4 4
Blades per Cartridge 5 4
Price $18.47 $6 + Free Shipping
15
Q1 2015 – Q3 2015 Millions of Dollars, 2015
Amazon YoY Sales Growth Amazon Operating Income
AMAZON: POWERED BY AWS
Source: SEC Filings; “Amazon’s $160 billion business you’ve never heard of,” CNN Money, November 4, 2015
49%
81%78%
13%17%
20%
Q1 2015 Q2 2015 Q3 2015
Amazon Web Services Amazon Retail
38%
62%
Q1 2015
Amazon Web Services Amazon Retail
36%
64%
Q2 2015
52%
48%
Q3 2015
$706M
$1,705M
$993M
16
49%
16%
73%
22%
Prime Non-Prime
Spent $200+ Over the Last 90 Days
Shop on Amazon 2+ Times per Month
n=647 Prime Members, 970 Non-Prime Members
Self-Reported Spend and Usage of Amazon.com
PRIME DRIVES LOYALTY…
Sources: RBC Capital Markets Proprietary Survey, Macquarie Research
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Q1 2014 – Q3 2015
Millions of Dollars
Amazon Shipping Expenses
BUT SHIPPING IS UNSUSTAINABLE
$849 $889 $1,048$1,701
$1,299 $1,399 $1,494
-$1,829 -$1,812 -$2,020
-$3,049
-$2,039 -$2,340-$2,720
Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015
Shipping Fee Revenues Shipping Costs
-$980 -$923 -$972 -$1,348 -$740 -$941 -$1,226
Source: SEC Filings
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Q1 2013 – Q2 2015
Millions of Dollars
Amazon Quarterly Net Income
VISION TRUMPS PROFITS
$79$92
-$57
$214
-$437
-$126
$108
$239
-$41-$7
$82
Q3 2015Q2 2015Q1 2015Q4 2014Q3 2014Q2 2014Q1 2014Q4 2013Q3 2013Q2 2013Q1 2013
Source: SEC Filings
Amazon did not turn its first profit until Q4 2001 — seven years after its founding — and has ducked in and out of profitability ever since.
19
1997–2014, in USD Billions ◼︎ Amazon ◼︎ Walmart
Annual Net Income: Amazon vs. Walmart
IN A CORNER
Source: Quartz.com; Data from FactSet
20
October 14, 2015
Walmart Stock Price Following Annual Investor Day Earnings Call
…NOT AFFORDED TO ALL RETAILERS
Source: Quartz.com; Data from FactSet
Walmart lost $20 billion in market value in 20 minutes – the entire market value of
Macy’s – after it forecasted depressed earnings per share until 2019 due to increases in
employee wages and investments in e-commerce.
21
◼ American Eagle Outfitters ◼ Abercrombie&Fitch
December 10, 2010–December 9, 2015
5-Year Stock Returns
THE OMNICHANNEL LONG GAME
Source: Google Finance, American Eagle Filings
No longer separates
E-commerce reporting
Hires CDO;
Opens Tech Center in SF
Introduces Ship from Store
in 255 locations
Opens State of Art FC
Reduces
promotions
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◼ American Eagle Outfitters ◼ Abercrombie&Fitch
December 10, 2010–December 9, 2015
5-Year Stock Returns
THE OMNICHANNEL LONG GAME
Source: Google Finance, American Eagle Filings
Announces E-commerce Growth
(including online orders in store)
grew just 2% year on year
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CONNECTIVE TISSUE
Reserve Items In-
Store Only via App
Personalized “My
AEO” Offers Inbox
AERewards Card
Links to PassbookPush Notifications
for Timely Offers
Halfway through 2015, American Eagle returned to
positive sales growth (+11%)
Source: L2 Inc.
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2013 – 2015, Retail vs. E-Commerce vs. Amazon
U.S. Share of Total Retail Sales Growth
WHERE’S THE GROWTH?
14% 15%24%
28% 27%23%
59% 58% 53%
2013 2014 2015E
Amazon Sales Growth E-Commerce Growth Excluding Amazon Retail Sales Growth
Source: Company Data, U.S. Department of Commerce, Macquarie Research, December 2015
25
For Venture Capital-Backed Evolved Retailers
Stated Purpose for Most Recent Evolved Retailer Funding Rounds
THE NEW VC PITCH
Used for Store
Expansion69%
Used for Other
Expenses31%
Source: Press Reports *Note: For VC-backed evolved retailers
STUDY PREVIEW
DEATH OF PUERPLAY RETAIL 2016
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L2 Intelligence Report: Death of Pureplay Retail 2016
STUDY PREVIEW
L2 Intelligence Report: Death of Pureplay Retail 2016
Report to be released on January 12, 2016
Contrasts digital and retail KPIs for pureplay, evolved
pureplay and omnichannel retailers to illustrate how
companies can benefit from operating and investing
across channels.
RETURN ON INVESTMENTCONSUMER EXPERIENCE
CUSTOMER ACQUISITION THE LAST MILE
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BRAND LIST
Online-only retailers that may
have experimented with a popup
shop, but have not opened
a permanent retail location
Companies that began as
online-only but have opened
a permanent retail location
in the last five years
Retailers that have effectively
linked their in-store and online
businesses to leverage their
status as omnichannel retailers
CUSTOMER ACQUISITION
DEATH OF PUREPLAY RETAIL 2016
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August 2015, N=24 Pureplay Retailers, 19 Evolved Pureplay Retailers, 20 Omnichannel Leaders
By Operating Model
Desktop Paid Search Traffic as a Percentage of Overall Search
TRAFFIC MUST BE BOUGHT
Source: Similar Web, August 2015
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Evolved Pureplay Retailers Pureplay Retailers
October 2015, N=24 Pureplay Retailers, 19 Evolved Pureplay Retailers
Monthly Desktop Paid Search Metrics, By Business Model
PUREPLAYS SPEND MORE
Source: SEMrush 2015; L2 Intelligence Report: Death of Pureplay Retail, January 2016.
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October 2015, N=23 Pureplay Retailers*
Number of Paid Keywords vs. Cost Per Site Visitor via Paid Search
AND CAST A WIDER NET
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
0 100,000 200,000 300,000 400,000
Cost Per Website Visitor via Paid Search
Monthly Keywords Purchased
Source: SEMrush 2015; L2 Intelligence Report: Death of Pureplay Retail, January 2016. *Note: Excluding The Clymb (no paid keywords)
Top Traffic-Driving Key Words
“Lingerie”
“Red Dresses”
“Dr Martens”
“Wedding Dresses”
“iPhone 6 Cases”
“Dog Collars”
“Jewelry”
“Bar Stools”
“Shopping”
“Maternity Clothes”
“Lingerie”
“Umbrella”
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October 2015, N=23 Pureplay Retailers, 19 Evolved Pureplay Retailers
Number of Paid Keywords vs. Cost Per Site Visitor via Paid Search
FURTHER DOWN THE FUNNEL
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
0 100,000 200,000 300,000 400,000
Cost Per Website Visitor via Paid Search
Monthly Keywords Purchased
Pureplay Retailer Evolved Pureplay Retailer
Source: SEMrush 2015; L2 Intelligence Report: Death of Pureplay Retail, January 2016.
To
p T
raff
ic-D
rivin
g K
ey W
ord
s
“Custom Dress Shirts”
“Sea Island Cotton”
“Thomas Mason”
“Mattresses”
“Mattress”
“Bed in a Box”
“Dollar Shave Club”
“Razor”
“Blades”
“Ipsy”
“Oribe”
“Monthly Subscription Box”
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October 2015, N=23 Pureplay Retailers, 19 Evolved Pureplay Retailers, 20 Omnichannel Leaders
Number of Paid Keywords vs. Cost Per Site Visitor via Paid Search
ULTIMATELY, SCALE WINS
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
0 1,000,000 2,000,000 3,000,000
Cost Per Website Visitor via Paid Search
Monthly Keywords Purchased
Pureplay Retailer Evolved Pureplay Retailer Omnichannel Leader
Source: SEMrush 2015; L2 Intelligence Report: Death of Pureplay Retail, January 2016.
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October 2015, N=1,231 Keywords
N=23 Pureplay Retailers and 16 Evolved Pureplay Retailers
Average Organic Search Position on Google,* By Category
“WALK IN TRAFFIC” DOESN’T EXIST
*Note: For keywords for which the brand is present in Google Search resultsSource: “The First Page of Google, by the Numbers,” Protofuse, April 30, 2014; Advanced Web Ranker
Pa
ge
36
N=24 Pureplay Retailers, 18 Evolved Pureplay Retailers
August 24, 2015 – October 24, 2015
Average Email Volume Per Week
COMPENSATING WITH EMAIL
Source: L2 Intelligence Report: Death of Pureplay Retail, January 2016.
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Changes to Organic Search Traffic as Evolved Pureplays Open Stores
STORES CAN DRIVE ORGANIC TRAFFIC
Source: SEMrush 2015
Date of First Popup Date of First Store Opening
38
N=19 Evolved Pureplay Retailers, September 2015
Number of Stores v. Average Monthly Searches for Brand Name
AND INCREASED BRAND AWARENESS
Source: Google Keyword Planner; L2 Intelligence Report: Death of Pureplay Retail, January 2016
39Source: L2 Intelligence Report: Death of Pureplay Retail, January 2016
October 2015, N=19 Evolved Pureplay Retailers
Years Before First Store v. Stores Opened Per Year
NEW PLAYERS HAVE CAUGHT ON
THE LAST MILE
DEATH OF PUREPLAY RETAIL 2016
41
October 2015, N=6 Pureplay Retailers, 7 Evolved Pureplay Retailers
Average Threshold for Free Shipping
PRESSURE
*Excluding retailers without free shipping threshold.Source: L2 Intelligence Report: Death of Pureplay Retail, January 2016.
42
October 2015, N=23 Pureplay Retailers, 19 Evolved Pureplay Retailers
Percent of Retailers
Expedited Delivery Options Offered, By Business Model
PUREPLAYS PRIORITIZE SPEED
87% of pureplay retailers offer expedited shipping options,compared with just two thirds of evolved pureplays.
Source: L2 Intelligence Report: Death of Pureplay Retail, January 2016.
Pureplay Retailer Evolved Pureplay Retailer
43
Shipping Subscription Programs
REASONABLE EXPECTATIONS?
Retailer
Revenues $89 billion $486 billion $440 million
Shipping
Program$99 / year $50 / year $50 / year
44
October 2015, N=19 Evolved Pureplay Retailers, 20 Omnichannel Leaders
% of Retailers
Buy Online, Return In-Store, By Business Model
INVENTORY CAPABILITIES STILL LAG
Source: L2 Intelligence Report: Death of Pureplay Retail, January 2016.
45
Net Sales Given Omnichannel Capabilities
THE POTENTIAL?
Source: ICSC, October 2014
46
2015
Pureplay Retailer U.S. Fulfillment Centers
FURTHER POSSIBILITIES FOR SCALE
4
333
2
2
2
2
2
1
1
1
1
1
1111
1
Ashford
Gilt
Net-A-Porter
Overstock.com
Zulily
Bare Necessities
Beyond the Rack
Jomashop
OnlineShoes.com
ASOSBluefly
eBags
Everlane
JackThreads
Karmaloop
ModCloth
Rue La La
Shoebuy.com
YOOX
Source: Internet Retailer, Press Reports
Even the most well-resourced pureplay retailers have only 3 or 4 U.S. fulfillment centers…
47
2015
Evolved Retailer U.S. Potential Points of Distribution
FURTHER POSSIBILITIES FOR SCALE
1
1
1
3
3
3
2
2
1
4
1
1
3
1
1
1
1
1
2
4
20
21
AYR
Baublebar
Birchbox
Gilt
Net-A-Porter
Overstock.com
Blue Nile
Harry's
Nasty Gal
Ashford
Rent the Runway
Bonobos
Warby Parker
Evolved Retailer Fulfillment Centers Evolved Retailer Stores Pureplay Retailer Fulfillment Centers
…versus the potential points of distribution for evolved pureplay retailers with stores.
Source: Internet Retailer, Press Reports
*Note: Fulfillment Center data is from 2012 for Warby Parker, 2013 for Nasty Gal, and 2014 for Birchbox, BaubleBar, and Harry’s
48
July 2015 2012 2013 2014 2015 Macy’s SFS Locations Amazon Distribution Centers
SHIP-FROM-STORE IS WINNING
Source: “Macy’s battle for the ‘last mile’ leads to Amazon,” NYPost.com, July 2015; “Amazon Global Fulfillment Center Network,” MWPVL, October 2015
68 FC’s
292 SFS Locations
500 SFS Locations
775 SFS Locations
Macy’s Ship from Store Locations vs. Amazon’s U.S. FC’s
886 SFS Locations
49
June 2013 – December 2013
Amazon.com and BestBuy.com Average Parcel Delivery Speeds
Store Warehousing vs. Centralized Fulfillment Centers
SHIP-FROM-STORE IS WINNING
BestBuy.com Amazon.com
Source: StellaService
CUSTOMER EXPERIENCE
DEATH OF PUREPLAY RETAIL 2016
51
June 2014
According to Digital Shoppers, Worldwide
Importance of Select Channels When Making a Purchase
INFLUENCE RUNS BOTH WAYS
72%
67%
53%
48%
42%
36%
31%
Traditional Store Experience
Site
In-Store Technology
Mobile App / Mobile Web
Social Media
Call Center
Robust digital investments are important to driving online sales…
Source: “Digital Shopper Relevancy Report 2014,” Capgemini, September 2014
◼ Digital Channels
52
June 2014
According to Digital Shoppers, Worldwide
Importance of Select Channels When Making a Purchase
INFLUENCE RUNS BOTH WAYS
Source: “Digital Shopper Relevancy Report 2014,” Capgemini, September 2014
◼ Digital Channels
72%
67%
53%
48%
42%
36%
31%
Traditional Store Experience
Site
In-Store Technology
Mobile App / Mobile Web
Social Media
Call Center
..but digital shoppers consider in-store experience the most influential channel.
53
October 2015, N=19 Evolved Pureplay Retailers, 20 Omnichannel Leaders
% of Retailers
In-Store Event & Appointment Promotion, By Business Model
NEXT-GEN SERVICE
Source: L2 Intelligence Report: Death of Pureplay Retail, January 2016.
Omnichannel Leaders Evolved Pureplay Retailers
54
Indochino: Online Appointment Booking for Bespoke Suits
BESPOKE APPOINTMENT SERVICES
“Anytime we open a store in a city,
we see awareness and sales in
that city grow four times
compared to what it was
previously, as online-only.”
— Drew Green
Indochino CEO
55
Rent the Runway: In-Store Fit Consultations
INCREASED CONSUMER CONFIDENCE
“A lot of the in-store
customers are members on
our site who haven’t
transacted yet. They’re
intrigued but they haven’t
gotten over the hump of
being concerned over fit or
getting the item on time.”
— Jennifer Hyman
RTR Co-Founder & CEO
Source: “Bonobos, Rent the runway Navigate Clicks-to-Bricks Evolution,” Apparel, November 1, 2014
56
Trunk Club: New Retail Concept
UNIQUE SELLING ENVIRONMENTS
Trunk Club “Clubhouses”
• Bars and coffee areas
• On-site tailoring, personal stylists, and
courier delivery
• Chicago clubhouse includes 5,000
square-foot roof deck
• Trunk Club Custom is exclusively
available in-store
57
Casper: Novel Mattress Showrooms
DIFFERENTIATION VIA RETAIL
Casper Showrooms
• Apartment-style showrooms where customers
can nap
• DC “Snooze Bar” features waffles & coffee by
day and cocktails at night
• Casper Nap Tours visited seven cities in 2015
NYC Showroom
Los Angeles Showroom
DC Popup Snooze Bar
Casper Nap Tour in NYC
58
Percentage of Non-Entry Level Team Hired from Select Retail Organization
Top Companies Represented in Evolved Retailer Management Teams
DRAFTING RETAIL DREAM TEAMS
Douglas Simpson
VP of Retail
Previously VP of Operations,Juicy Couture
Andrew Lande-Shannon
Design Director, Offline Retail
Previously VP of Stores, Joe Fresh
Philippe Pinatel
President and COO
Previously SVP and GM,Sephora Canada
Benjamin Fay
VP of Retail Development and
Customer Experience
Previously EVP of Store Design, JCPenney
Birchbox Senior Retail Hires
RETURN ON INVESTMENT
DEATH OF PUREPLAY RETAIL
60
Jet.com’s Business Model
CHALLENGE = REACHING SCALE
• Spending $5 million per
week on advertising
• $100 to acquire each
customer
• Operating at a loss until
$20 billion in sales with
15 million paying
customers
“…There’s really only one big e-commerce company in the U.S. It requires a lot of
capital to get to scale — you don’t have great prices, you don’t get to scale.”— Jet.com Founder Mike Lore
Source: “Behind the Numbers of Jet.com’s Audacious Plan to Attack Amazon,” Wall Street Journal, July 20, 2015
61
June 2011 – March 2015
Millions of Dollars
Fab.com Valuation & Total Capital Funding Raised
BOOM AND BUST
$0
$200
$400
$600
$800
$1,000
Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14
Funding Raised Valuation
Acquired by PCH for $15 million with
~30 employees remaining
Source: Crunchbase, Press Reports
$1 billion valuation with ~700 employees
Fab spent as much as $14M per month during its high-growth period,
in part to drive customer acquisition
62
September 2013 – August 2015
Average Monthly Searches for Keyword “Fab”
BOOM AND BUST
Source: Google Keyword Planner
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15
Consumer searches for the retailer decreased by 50%
between November 2013 and May 2014
63
August 2013 – August 2015
Thousands of Unique Monthly Visitors Q1 2014 – Q2 2015
Site Traffic to Zulily.com Zulily YoY Sales Growth
BARELY ABOVE WATER
Source: Compete, Company Quarterly Reports, Press
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
Au
g-1
3
Oct-
13
Dec-1
3
Fe
b-1
4
Ap
r-1
4
Ju
n-1
4
Au
g-1
4
Oct-
14
De
c-1
4
Fe
b-1
5
Ap
r-1
5
Ju
n-1
5
Au
g-1
5
87%
97%
72%
52%
29%
4%
Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
64
November 15, 2013 – September 30, 2015
Zulily Stock Price
BARELY ABOVE WATER
Source: Google Finance
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
$80.00
11/15/13 2/15/14 5/15/14 8/15/14 11/15/14 2/15/15 5/15/15 8/15/15
QVC Acquisition Announced
In August, QVC acquired Zulily for $18.75 per share,
below the company’s IPO price of $22
Analysts cited low customer retention and the lack of new fulfillment center
efficiencies (11.6 day order-to-ship speed) in their decreased valuations.
65
2008 – 2014
Gilt Groupe YoY E-Commerce Sales Growth
IN LIMBO
“…Look at TJMAXX, it continues to grow quarter-after-quarter, year-after-year,
decade-after-decade. The idea that flash is tapped out doesn't make sense.
It's just an online execution of what has worked offline.”
— Gilt Board Member and Former CEO Susan LyneSource: Internet Retailer
“Four years ago Gilt Groupe was the hottest startup in New York — Here’s what happened,” Business Insider, February 21, 2015
580%
147%
-7%
21% 28% 12%
2009 2010 2011 2012 2013 2014
66
2008 – 2015
Millions of Dollars
Gilt Valuation
IN LIMBO
$0
$200
$400
$600
$800
$1,000
$1,200
2/1/08 2/1/09 2/1/10 2/1/11 2/1/12 2/1/13 2/1/14 2/1/15
Source: VC Experts, 2015
67
TURNING TO BRICK & MORTAR…
Gilt hired a dedicated personal shopper
for its September launch of “Gilt By
Appointment” at its Manhattan HQ.
69
Warby Parker & Bonobos Store Profitability
STORES ARE PROFITABLE
“Warby Parker’s eight brick-and-
mortar stores are now collectively
turning a profit, says Dave Gilboa,
the company’s co-founder.”
“Dunn said that the guideshops, in
aggregate, were profitable last
year, and are losing money this year
on account of the recent expansion.”
Sources: “Warby Parker Adds Storefronts to Its Sales Strategy,” Wall Street Journal, November 17, 2014“After 8 years and $128 million raised, the clock is ticking for men’s retailer Bonobos,” Business Insider, October 6, 2015
November 17, 2014 October 6, 2015
70
$4,568
$3,000
$2,953
$1,192
$1,061
November 2014
Annual Store Sales Per Square Foot
HIGHLY PRODUCTIVE
Source: “Warby Parker Adds Storefronts to Its Sales Strategy,” Wall Street Journal, November 17, 2014
$981
“We quickly realized that while we were seeing all the benefits we expected from branding and
marketing – the ‘halo’ effect of having a store open – stores could be a meaningful driver of
sales and profitability, which was really unexpected” –Dave Gilbao, Warby Parker Co-Founder
71
Bonobos: Impact of Opening Guideshops
REDUCED MARKETING COSTS
Source: “After 8 years and $128 million raised, the clock is ticking for men’s retailer Bonobos,” Business Insider, October 6, 2015
Bonobos Guideshop KPIs
• 80% conversion rate
• AOV of $300 (vs. $180 online)
• Higher proportion of new customer acquisition
Since opening guideshops, Bonobos has cut online marketing spend from over 25%
to under 4% of net sales, while reportedly leading their category in organic site traffic
72
$0
$10
$20
$30
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$60
$70
$0
$20
$40
$60
$80
$100
$120
$140
$160
1/1/02 1/1/04 1/1/06 1/1/08 1/1/10 1/1/12 1/1/14
ModCloth Funding Birchbox Funding ModCloth Sales Birchbox Sales
Millions of Dollars
Annual Sales and Venture Capital Funding
HOW TO HIT 100 MILLIONC
ap
ital F
un
din
gAn
nu
al
Sa
les
Birchbox achieved $100 million in annual sales much more quickly
with much less funding than pureplay ModCloth
Source: Crunchbase; Internet Retailer; “Exclusive: Birchbox banks $60 million,” Fortune, April 21, 2014
10 Years until $100M Revenue
$63.74M in VC Funding
4 Years until $100M Revenue
$11.9M in VC Funding
73
$0
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$20
$30
$40
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1/1/02 1/1/04 1/1/06 1/1/08 1/1/10 1/1/12 1/1/14
ModCloth Funding Birchbox Funding ModCloth Sales Birchbox Sales
Millions of Dollars
Annual Sales and Venture Capital Funding
WHAT WAS THE DIFFERENCE?C
ap
ital F
un
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From August 2013 to July 2014, Birchbox opened a popup shop,
announced funding for a new store, and opened a flagship
Opens popup
Announces $60M funding
for permanent store
Opens Flagship
Source: Crunchbase; Internet Retailer; “Exclusive: Birchbox banks $60 million,” Fortune, April 21, 2014
74
ModCloth: Brick-and-Mortar Initiatives
MODCLOTH TURNS TO BRICKS
Hires former Chief Strategy Officer at Urban Outfitters
Opens its first pop-up shop in two years in LA
Launches a “Fit Shop” in San Francisco
“…as we look to 2016, we can start to think about
when and where to launch our first permanent fit shop.”
— Matthew Kaness, CEO & Board Director
January 2015 April 2015 June 2015
CONCLUSIONS
DEATH OF PUREPLAY RETAIL 2016
76
CONCLUSIONS
E-COMMERCE CONSOLIDATION: WINNER TAKES ALL
SIREN SONG OF PUREPLAY RETAIL
THE MYTH OF ORGANIC REACH ONLINE
VC SUBSIDIES: WHEN DOES THE MUSIC END?
TWO FOR ONE: ONLINE TRAFFIC + OFFLINE PROFITS