D2C

Why Outdoor Voices Went Quiet

No one’s Instagram reflects their reality—not even the D2C brands that made "Instagrammable" an adjective. Yesterday, the NYT reported new details about the mistakes at athletic apparel brand Outdoor Voices that slashed its valuation by over 60% in January. 

OV, unfiltered

58% of Retail Brew readers said they didn’t see OV’s decline coming when I asked on Twitter. Turns out, a breezy approach to #DoingBusinessThings with over $50 million in venture funding led to rapid leadership turnover and budgeting blunders.

Two cooks, closet-sized kitchen. OV recruited J.Crew veteran Mickey Drexler as chairman. He left the position in 2019 after tensions rose between him and OV’s founder/CEO/chief influencer, Ty Haney.

• Executives from American Apparel, Under Armour, and Amazon were brought on to improve OV’s retail operations but didn't last. Nike alum Pam Catlett was hired as OV’s president and left after five months. 
• Last June, an anonymous memo sent to board members by employees called those departures a “red flag” and criticized Haney’s management style.

Everything got expensive. VCs backed OV because they believed it’d be the next Nike or Lululemon. But OV’s spending got in the way.

• OV burned through capital on increasingly expensive customer acquisition channels like Facebook and Google. Plus, it ran up costs signing leases for stores that didn’t open on time.
• Stores spent up to $103,000 on fresh flowers, boutique candles, and mineral water in 2018.

The result: By 2019, OV was losing up to $2 million per month on annual sales of about $40 million, BoF reports. Haney departed from her CEO role in January. 15 employees were laid off. 

Haney called coverage of OV's struggles a “one-sided narrative” on Instagram yesterday. “Because I stood up for myself [...] I am no longer with the company I started,” she wrote.

My takeaway: There are over 400 D2C brands using Helvetica font and bright colors as shorthand for a value prop. Like OV, the standouts among them are known for larger-than-life founders and mountains of venture capital. With OV’s sweaty laundry in the open, other D2Cs could reconsider the growth-at-all-costs mindset.

Looking ahead…OV is searching for a permanent CEO replacement and expects to become profitable by 2021, per the NYT.

EARNINGS

Dicks Doesn't Shoot, Still Scores

Retailers usually sit out of political conflicts to avoid alienating customers. Then there’s Dick’s Sporting Goods, which sprinted straight into the gun control debate.

In its Q4 earnings report Tuesday, Dick’s said it plans to remove firearms from 440 stores, or more than half its current fleet, this fiscal year. 

How we got here: Following a mass shooting at a Parkland, FL, high school in 2018, Dick’s said it would stop selling assault-style rifles and raise the minimum age to buy a firearm in its stores to 21. The company then removed firearms from 135 stores and destroyed about $5 million of rifle inventory.

After those early efforts, gun rights activists said they’d boycott Dick’s and over 65 employees quit in protest. Those moves barely left a mark.

• In Q4, comparable sales grew 5.3% year-over-year; online sales jumped 15%. 
• Foot traffic to Dick’s stores grew 17.8% in 2019, per retail tracking platform Placer.ai.

Looking ahead...Dick’s is converting shelves that once held rifles to low-controversy, high-margin categories like private label apparel and team sporting goods.

SPONSORED BY WINC

Put an Investment in a Bottle

The wine industry is worth $220 billion. Here’s your chance to invest in a company disrupting it.

Winc is uncorking massive amounts of data on the industry, sourcing over 3.5 million customer reviews and using those reviews to “make wines millennials go crazy for.” We were with a few millennials who’d been drinking Summer Water by Winc last weekend, and we can confirm this claim.

Traditional wineries don’t have access to customer feedback at scale, as most of their feedback is from tasting room experiences. This is what makes Winc’s model so revolutionary: No one’s ever had this sort of wine data before.

When you invest in Winc, you get to own part of a modern winery with growth to the tune of:

• $200+ million in revenue
• 195% compound annual growth rate
• 14M+ bottles sold

Winc’s campaign ends March 27, so time is running out. Don’t let this opportunity wash up on someone else’s shore.

Invest in Winc today.

TRENDS

So Much for Your 50 Year Hand Sanitizer Supply

Today’s Retail Brew tests positive for coronavirus. Source of infection: shoppers squirreling away a bunker’s worth of disinfectants.

Over the weekend, Target posted signs in stores saying it's limiting purchases of hand sanitizer, face wipes, and other disinfectant products to six products per customer. 

• CEO Brian Cornell said the company’s observed “aggressive shopping” and empty shelves across its stores.
• Target’s in touch with domestic vendors to increase store inventory in the coming weeks.

Rationing’s all the rage. Target joins Kroger, Publix, and Home Depot in limiting how many cleaning products shoppers can buy at once. EBay removed hand sanitizer and face masks from its marketplace altogether to prevent price gouging. Meanwhile, handsoap—the No. 1 most effective product for fighting germs—hasn’t flown off of shelves.

As for the precedent…an eBay rep says the company followed similar protocol for past outbreaks.

Another sacrifice? Free mini quiches, because Costco is reportedly suspending in-store food samples. Those sample toothpicks are petri dishes for viruses.

WHAT ELSE IS BREWING

• Walmart set an emergency leave policy for hourly workers concerned about coronavirus. 
• CVS is waiving prescription delivery fees during the coronavirus outbreak.
• Ikea is now selling furniture on Tmall, Alibaba’s e-commerce platform. It’s the company’s first deal with a third-party marketplace.
• We knew this was coming: Amazon is selling its cashierless checkout tech to other retailers.
• Tapestry said Coach CEO and brand president Joshua Schulman is stepping down.
• Bluestem Brands, a D2C holding company, filed for Chapter 11 bankruptcy.

SPONSORED BY SENREVE

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SWAPPING SKUS

Today's first story focused on the downsides of modern D2Cs. But as my top read and listen today suggest, there’s light at the end of the downturn. 

• If small brands are to survive, they have to have values. The most common: community and sustainability, execs from marketing to merchandising say (AdWeek).
• Bombas, a D2C sock brand, may have already cracked the do-good, sell-more model. CEO Dave Heath stopped by Morning Brew’s podcast to explain how Bombas balances social enterprise with enterprise enterprise (Business Casual).

ATHLEISURE TRIVIA

On Monday, NPD Group reported that men’s activewear sales outpaced women’s for the third year running. The stat immediately reminded me of a brand I’ve written about in Retail Brews past that made growing its men’s division a pillar of its “Power of Three” strategic plan. Aside from activewear for hiking and biking, the brand won over male customers with its lunge-friendly work pants. In Q3 of 2019, revenue in its men's division rose 38%.

Which brand is it? Keep scrolling for the answer. 

Thanks, as always, for tuning in. I’ll see you again on Friday—Halie.

ATHLEISURE TRIVIA ANSWER

Lululemon