2020 has been a strange year. Among other things, it feels like being inside a 'time slice' video. The changes are rapid and disconcerting. Surprises, counter-intuitive phenomena and soul-searching induced by stark differences between the old and the new - there are plenty of these. This week, I share a few that notice.
People are not that worried about hygiene
We expected people to be concerned about hygiene and sanitation and that it would have an impact on the 'fashion resale' market. That is not the case. According to ThredUp's recent research on this topic, 'resale' is likely to be 17% of the fashion market, next only to the 'off-price' segment.
Today's market rewards D2C laggards that did not go omnichannel
Omnichannel was and is the way to go. But PipeCandy's own research has shown a considerable decline in the rate at which pure-play D2C brands have set up physical stores. D2C brands that have had store presence are the slowest to bounce-back. A 'must-have' strategy in the D2C playbook is a short term liability now.
The proactive D2C strategy of CPG actually will drag down the margins
As CPGs launch their D2C operations ahead of plans, they are being cheered from the sidelines for being quick to react. Numbers will tell. Without volumes and long term contracts for fulfillment and last-mile delivery, they lose money as eCommerce volumes (and returns) pick up. Even savvy companies like Lululemon had a drag in 2020 GPM numbers due to eCom shift.
Shopify is undervalued
The main street thinks that Shopify is over-valued. But by the end of this year, we expect them to have nearly 50% more installed base that the last year. Yet, on an active merchant count basis, they'd still own only 20% of the market. Shopify is under-valued. (This is not investment advice!)
The investment community is looking for success in unlikely places
Everybody likes to invest in fitness, pets, and clean beauty D2C. But large corporate ventures and VC that are deeply vested in the D2C eco-system are looking for category creators. Puzzles, Skateboards, Plants, Cookware, and several esoteric categories are seeing rapid D2C-fication. Just this week, PipeCandy discovered 100+ brands in these categories with phenomenal resilience. But several of them are in markets that won't support a billion-dollar exit thesis. For a CPG corporate venture, investing in such brands is an astute step and is likely to make more difference than their own D2C bets.
D2C brands taking a stand against Facebook are harming themselves more than they are heralding change
Social networks are like plumbing or electricity lines. They could be rusty and maybe, a lot of sewage mixes with it along the way. But brands with a strong cause are the antidote to a poisoned timeline. Their communities (hosted on such platforms) can be forces of good. Yanking off ad spends on Facebook does not matter. The ad dollars of a few virtue-signalling brands won't dent Facebook but the lack of a growth channel will hurt the brands. Live with the dichotomy and communicate the need to stay with the constituents that care.
'Fashion on the ramp' events are cancelled. But streaming fashion is a $6B industry in one country.
The B2B side of the fashion industry needs fashion events. But the B2C side has gone online. China alone buys $6B worth of fashion goods through live streaming sessions. How long before designers figure out the D2C-first strategy and use it as a pull to get institutional buyers to line up? It is already happening. Designs that were supposed to be introduced in chic fashion events are quietly hitting the eCommerce storefronts of designers.
What do you see in your business that you have not seen before?
PS: If you don't hear next week, consider it a break from the routine :).
PipeCandy is a market intelligence platform that tracks the global eCommerce & 'direct to consumer' landscape.
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