Digitally-Native Brands Find Profitability In Traditional Brick-And-Mortar -12/13/19

From the Simplr studios in San Francisco, this is your daily briefing.  

Introduction

With your Retail E-Commerce Briefing for today, Friday, December 13th, I'm Vincent Phamvan.

As you’ve seen in the past few months, the lines between retail and consumer services are quickly fading. Next week, we’ll be rebranding this podcast as Today in Five, a daily briefing on all things digital disruption.

Unilever acquired Dollar Shave Club for $1 billion dollars over three years ago and the service still isn’t making money. Executives discovered the average cost of acquiring each new customer was about the same online as in stores.

First, here are some retail headlines.  

Old Navy Partners with Postmates for 24 Hour Delivery

Old Navy has formed a partnership with delivery service, Postmates. The retailer has offered same-day buy online, pick up in-store services since last year, but with the new Postmates partnership, customers will now be able to have merchandise delivered to them within 24 hours. The new option will be available through the end of January, but according to a Postmates spokesperson, they’re exploring longer-term opportunities. Old Navy hopes the partnership will help bring in a surge of last-minute holiday shoppers.  

Ulta Beauty Q3 Net Sales Up 8% Over 2018    

Ulta Beauty announced net sales of $1.68 billion dollars for the third quarter, an almost 8 percent increase from last year. The beauty retailer has continued to post strong sales, but the weak cosmetics market is still having an impact. Ulta had to lower its guidance Q2 and CEO, Mary Dillon, said that the U.S. makeup category was in a “down cycle,”  since 2017 and has continued through 2019. They noted that consumers were still buying makeup, even for natural looks, but skincare products now make up a large part of the retailer’s continued success as the category has grown in popularity with younger consumers. As a result, the retailer expanded its skin bar, which offers services like facials and mineral infusions.  

Nectar Focusing on Partnerships with Physical Retailers

Online mattress startup, Nectar, has turned its focus on partnerships with physical retailers. The company’s CEO said 80 percent of consumers still don’t want to buy a mattress online. He noted there was a tremendous amount of opportunity for growth with those 80 percent of consumers who want to try a mattress in-store first. The brand has signed on over 1,000 retail partnerships over the past 10 months and is seeing faster sales growth in-store than with online sales. They believe the trend will continue. The CEO noted that they think the investments in retail partnerships are worthwhile and ultimately end up costing less than what they spend on online marketing.  

Digitally-Native Brands Find Profitability In Traditional Brick-And-Mortar

Nectar isn’t the only digitally-native brand to notice the importance of traditional brick-and-mortar. That reality is hitting many of the world’s biggest companies that have collectively invested billions of dollars in digitally-native direct to consumer brands. Upstart brands are also realizing they have to move into stores to gain critical visibility and reach consumers who want to buy household staples in one trip instead of through a subscription model.  

Unilever acquired Dollar Shave Club for $1 billion dollars over three years ago and the service still isn’t making money. Executives discovered the average cost of acquiring each new customer was about the same online as it was in stores. Dollar Shave Club is expected to break even next year, but Unilever has determined it, “doesn’t make financial sense to sell staples as an online subscription.”  

The Chief Executive of Procter & Gamble said the company is still trying to figure out how to turn recently acquired brands into profitable businesses. He said, “There are many, many launches that grow fast, and people call them successes because they grow fast...We’re in the world of having to create value, not just grow. A business model that makes money is a higher challenge.”  

Closing

Just a reminder, starting Monday, you’ll see this podcast show up with a new name: Today in Five, a daily briefing covering digital disruption.

Find out how Simplr can cut your customer service response time through cutting-edge technology and on-demand talent at simplr.ai. That’s S-I-M-P-L-R.ai.

Thanks for listening to this latest episode of the podcast. We’ll see you next week with a new and improved name, Today in Five.