Outdoor Retailer ("OR") Winter Market Recap
I attended Outdoor Retailer (“OR”) Winter Market in Denver late last week, and while a light snow provided some seasonal cheer and ambiance, the show itself was “meh.” While understanding the rationale for an inaugural November OR show –namely allowing larger retailers (and influential members of the OIA) to get an earlier view of what brands and vendors have coming earlier in the selling season, this was a significantly smaller show than the traditional winter and summer ORs. The footprint of the show itself was limited to the upper floor of the Colorado Convention Center and a reasonable, diligence pace allowed me to canvas the entire show in a matter of hours. Given a limited number of exhibitors, lower attendance and lack of booth floor and booth traffic, there was an element of “snORe” in this OR. Thursday and Friday morning had, relatively speaking, the most activity, but by Friday afternoon and certainly by Saturday, the crowds had really diminished (except for the “Life is Good” show late Friday – fantastic turnout!). A significant number of exhibitors expressed disappointment in show activity and the rationale behind a show in the first place (particularly with OR’s Snow Show coming up in late January – two months from now). It will be interesting to see if this show is viewed as viable and sustainable, and/or if significant changes are implemented next year.
Going Native: Is Consumer Backlash Impacting Walmart’s Newly Acquired Digitally Native Brands?
As many informed consumers and investors are probably aware by now, Walmart Inc. and its subsidiary Jet.com have been on a tear acquiring specialty ecommerce marketplaces and digitally native consumer brands in recent years. Walmart has stated that it is trying to broaden its consumer base, targeting younger, more affluent consumers that increasingly buy everything from sundries to $300 dresses online. Furthermore, in acquiring digitally native brands such as Bonobos, an e-commerce-driven apparel company headquartered in New York City that designs and sells men’s clothing, Walmart is investing in brands that could eventually migrate to larger format stores and/or 3rd party ecommerce marketplaces. Bonobos CEO Andy Dunn recently provided a great analogy on CNBC, “It’s kind of like what Netflix did. They started making their own content. And we’re of the belief the same thing is going to happen in commerce.”
The “Changing” Landscape of Diapers
Over 3.8 million babies were born in the United States in 2017, according to the National Center for Health Statistics, and with most babies using four to twelve diapers per day, depending on age and other factors, diapers are big business. Parents change thousands of diapers a year, and at an average cost of $0.20 – $0.50+ per disposable diaper, costs can really add up, reaching thousands of dollars before a child reaches potty-training age. Beyond costs, however, the environmental impact of the significant volume of diapers generated each year and the safety of the materials used to manufacture disposable diapers are increasingly on the minds of new parents and influencing purchasing decisions in this massive market.
If the Eco-Friendly Shoe Fits…
Consumers are clearly increasingly focused on the environmental and social impact of their purchasing decisions, and the fashion world is no exception. The demand for sustainable and ethical fashion products continues to grow, with new entrants into the apparel market trying to balance consumers’ desires for eco-friendly clothing and accessories while also creating beautiful, wearable products.
Weeds and Plant-Based Food . . . Heed the Weed!
So for all of you fixated on the Snoop Dog (Cheech and Chong for you older readers) interpretation of the last word in the title, sorry to disappoint, we’re talking real weeds here.
What is a weed? A plant whose virtues have not yet been discovered. – Ralph Waldo Emerson
The Evolution of Personal Care Companies
What do Harry’s, The Honest Company, Dollar Shave Club (acquired by Unilever in July 2016), Native, Schmidt’s, Lola, Hello, Brandless, and Quip, have in common? They’re all upstart personal care companies that are disrupting traditional Consumer Packaged Goods (CPG) brands and upending the status quo, not only in e-Commerce shopping carts but on retail shelves as well. These new brands have gained rapid market share by launching savvy digital marketing campaigns, offering free trials, and enlisting consumers to subscription services.
The Future of Retail?
During a recent trip to Seattle (to attend the ACG conference of course), I happened to find myself in front of the Amazon Go store. For those who aren’t on the bleeding edge, Amazon Go is a new retail concept where the shopper engages an app, enters the store, picks up whatever they want, and walks out . . . no check-out, no scanning, no cashiers, just lots of big brother cameras and highly accurate RFID and location technology. So far, Amazon has invested millions in its first Seattle location, and they intend to open several more stores this year, likely in San Francisco, Chicago and Los Angeles.
Summer Outdoor Retailer (“OR”) Wrap Up
Denver hosted its first summer, and only second overall, OR the last full week of July. The OR show moved to the Mile High City last year after a long run in Salt Lake City given its growth and some of the key participants not seeing eye-to-eye with the State of Utah and its approach to the use of public lands. Denver was a great host, and attendance robust. Thousands of companies, from large to small, came to show off their wares and point the way forward for the outdoor industry. From my consumer investment banker point of view, interest and participation by corporate development teams and private equity firms was high, demonstrating the continued enthusiasm institutional investors have for this highly attractive space. Here are a few takeaways from my time on the floor:
The Growth of Pet Services (Part 2) . . . a continuance from last week’s #shoptalk blog
Returning to our discussion of the rapidly expanding pet services’ industry, the location-based pet care/pet hosting business is also evolving. Camp Bow Wow, a large franchisor of dog day and overnight care, was acquired by VCA in mid-2014, and since then numerous models have sprouted up in dense urban and suburban areas. Cities such as Boston, New York, Chicago, Dallas and Toronto, among others, have businesses that largely operate a hub and spoke model with the spokes being doggy daycare, and the hub being a hosting facility (oftentimes near the city’s large airport). While the model holds promise, few companies have achieved significant multi-market scale. Challenges include the cost of real estate, finding the right type of workers to service a highly demanding clientele (pet parents), and brand names that, while sporting strong local recognition, mean little in adjacent markets. Several players have also attempted to partner with large multi-family, residential real estate players and contract for the entire property where the service is part of renters’ lease agreements, akin to the cable industry’s model.
The Growth of Pet Services, Part 1
While it’s no secret that the pet products’ space has been viewed as attractive for quite a while (look no further than Nestlé’s reported pending acquisition of Champion Petfoods for approximately $2 billion), pet services have increasingly garnered attention and affection from sophisticated players due to its attractive macro dynamics, and in part as a means to “Amazon proof” a business model. Consistent with the humanization of pets, a host of services stands ready to serve these four-legged friends and their human parents. Offer a human service, wait a few years, and voilà, you’ll likely find the equivalent service for pets.