Month: May 2019

“A big part of our globalization strategy is connecting brands and small businesses from all over the world directly to the Chinese consumer,” Evans said during the NRF Show in January. “China is a massive consumer market and an attractive growth opportunity for many businesses today and in the future. Many brands globally have not properly understood the China opportunity.”

His job is to solidify Alibaba as the leading e-commerce company globally. In understanding Alibaba’s global ambitions, there are a lot of players, moving parts and priorities to unpack.

The first piece of Alibaba’s strategy — “the gateway to China” — is to get established international brands in developed markets to work with the marketplace by making it easier for them to appeal to and target Chinese customers. This has played out in a series of initiatives. The Tmall Luxury Pavilion, launched in 2017, offers a more high-touch customer experience only open to people Alibaba knows would be shopping for luxury brands. Since, 80 brands including Burberry, Valentino, Versace and Stella McCartney have joined. Outside of the luxury category, Alibaba has positioned itself as a partner for mass brands to create new products better targeted to Chinese customers. The Tmall Innovation Center works with international brands like Unilever and Mars to offer research development and data resources to drive China-specific product development.

And for less established brands in developed markets, there’s Taobao Global. Taobao Global works with small- and medium-sized brands that don’t have the resources to set up their own teams and operations in China to help them get access to Alibaba customers by setting them up with merchants who will sell their products on Taobao, Alibaba’s other consumer marketplace.

To target developing e-commerce markets, Alibaba is taking a “local to local” strategy: It’s either acquiring or investing companies that have existing tethers to local customers to introduce them to China’s local customers, or setting up bridges in-house that make it easier for customers in other countries to shop Alibaba, and businesses in other countries to sell there.

AliExpress is a growing part of this strategy: It’s a small- to medium-sized business platform that sells products from retailers in China to customers internationally, now being expanded to invite similar sized sellers from international regions to sell to Chinese customers. Alibaba.com, meanwhile, is the company’s international B2B business, linking businesses to a network of suppliers while enabling otherwise expensive logistics like cross-border shipping. Most recently, Alibaba.com partnered with Office Depot in March to join forces on inventory and domestic shipping.

Alibaba last year bought Lazada, an online marketplace selling to customers in Southeast Asia, investing a total of $4 billion into the company and posting an Alibaba executive into the CEO position last year. It also has a controlling stake in Paytm, an Indian e-commerce payments company, and a minority stake in Turkey’s leading e-commerce platform, Trendyol.

So, as the strategy boils down to two key initiatives — win over the big players and buy up the smaller ones — more brands, sellers and customers will be pulled into Alibaba’s orbit, either directly or indirectly. As Amazon struggles to get footing in regions like China and India, Alibaba is building a two-way network of business in and out of China.

“Whereas Amazon builds moats, Alibaba builds bridges,” Evans said.

Harry’s and the purity of DTC
Harry’s has made DTC history after being acquired by Schick parent Edgewell for $1.4 billion, more than the $1 billion its predecessor Dollar Shave Club sold to Unilever back in 2016. Unlike other DTC acquisitions, Edgewell is looking to the brands’ founders, Alex Katz-Mayfield and Jeff Raider, to do more than simply run their brands under the Edgewell umbrella. Instead, the two will be overseeing U.S. operations of a portfolio of brands to connect them better to customers as well as rethink wholesale relationships.

It’s a momentous exit, but not one that says much about the future of direct-to-consumer brands and whether or not any of them can survive independently, especially considering the money they’ve raised. Harry’s, while its valuation post-purchase was unknown, raised $461 million. Loose Threads puts the company’s potential valuation between $1-1.5 billion, which would make the $1.4 billion acquisition a down round for the brand. To that end, Harry’s founders have been building a DTC brand outside of the lines of the typical definition of a DTC brand, which is a brand selling to customers only through direct online or in-store channels. Raider told Digiday in March that the company eventually decided it didn’t matter if it was DTC-majority or DTC-first.

“For a while with Harry’s, we thought of ourselves as DTC-only. Then it was DTC-majority. Then it was DTC-first, that was going to be the focus. But that ended up feeling like an unnecessary constraint,” Raider said. “What we evolved to is being a customer-first brand. If at some point we sell more through retail than we do online, that’s okay. It’s about meeting customer expectations.”

Raider went on to say that Warby Parker, which he also co-founded, has only managed to stick to its own in-store and online retail channels because there’s no Target-equivalent for the glasses category. For a brand like Harry’s to reach scale, it has to be where the people are, regardless of what trendy Instagram brands try to tell you. And when Harry’s launched Flamingo, a women’s shaving brand, it launched in Walmart stores.

“Naturally, direct retail is going to grow as people start shopping there more over time. But for now, people still really enjoy shopping in stores,” Raider said.

And we’ll keep waiting for the first heavily-funded DTC brand to IPO.

CBD Boom
A new report from BDS Analytics has captured the sudden growth of the CBD market. As literally everyone looks to cash in, from CVS to Amazon to Coca-Cola, here are the numbers to know.

• Sales of CBD are expected to exceed $20 billion by 2024 in the U.S., an annual growth rate of 49%.
• That’s an increase from $1.9 billion in sales today.
• Customer penetration is still only at about 15%.
• Together, THC and CBD products will make up a total market of $45 million by 2024.
• CBD sales at dispensaries are outpacing the growth of overall sales at dispensaries.

What we’ve covered

The Harry’s exit: Edgewell has bought a DTC brand with a major wholesale operation.

Accelerating data: Target’s accelerators help the company build out its own data strategies.

The post Breaking down Alibaba’s global ambitions appeared first on Digiday.

The app was built using technology from Invertex, a 3D-scanning company that Nike acquired last March that specializes in using automation technology to build consumer and medical devices.

The Invertex team works within Nike Direct’s digital team, the team at Nike that works on digital efforts to grow its direct-to-consumer business, including app features for Nike+ loyalty members, which have hit 150 million. Zodiac, a data analytics company Nike acquired last April, also works within Nike Direct’s digital team.

The integration of the acquisitions into Nike Direct speak to the brand’s priorities to build its direct-to-consumer sales and rely less on wholesale revenue, in order to have more control over brand positioning, pricing and customer data. Nike has projected that its DTC business will reach $16 billion in sales by the end of fiscal year 2020. Nike Direct did $10.4 billion in sales during fiscal year 2018. 

Nike’s belief is that developing unique tech features will make it easier for customers to shop in Nike stores and on Nike’s site, and also provide Nike with data to better personalize the customer experience in the future. With in-store and online customer experiences, like Nike Fit, tied directly to Nike+ memberships, the goal is to use these features to increase memberships. So it prioritizes buying startups that can assist with that.

“I will say that at least from organic data we’ve seen, in the early testing from this, [Nike Fit] may be one of our strongest values yet that we’ve been able to provide for our members,” Michael Martin, global head of digital products for Nike, said at a demo for Nike Fit last month. Martin added that when Nike was testing Nike Fit in three stores earlier this year, “even people who hadn’t heard about membership were asking us about [how to store sizing information].”

New technologies only boost the profile of Nike+. Martin said in a follow-up email that Nike looks for “teams and technologies,” that will improve Nike’s ability to solve specific problems when looking at startups to acquire. He also said that Invertex in particular “had capabilities in areas like computer vision, machine learning and artificial intelligence that were completely complementary to what we were already testing and iterating.”

Before Nike acquired Invertex and Zodiac last year, its last acquisition was Virgin Mega in 2016. A tech startup that sat within Richard Branson’s Virgin Group, Virgin Mega developed mobile shopping features, and was acquired by Nike at the same time that it redesigned its app.

Aside from Nike, the most acquisition-happy athleticwear company in recent memory is Under Armour, which spent $710 million on a suite of connected fitness apps from 2013 to 2015, which included MapMyFitness, MyFitnessPal and Endomodo. All of these acquisitions served to help Under Armour gain access to new customers — MapMyFtiness had about 20 million registered users when it was acquired in 2013, while MyFitness Pal and Endomodo had 80 million and 20 million, respectively, when they were bought in 2015.

“[With its acquisitions] Nike did not acquire customers — it acquired capability to enhance the experience for the Nike customer,” said Jason Goldberg, chief commerce strategy officer for Publicis.

The computer vision and AI capabilities that Invertex has can be leveraged for Nike more than just Nike Fit. But, Martin declined to say how else they’ll be put to use, other than that it wants to focus on “solving very specific problems.”

“We made the strategic choice to focus on solving one problem first and moving onto the rest, versus potentially diluting our focus and not solving all the problems to the same degree,” Martin said of the development of Nike Fit. 

Nike Fit will also help Nike contend with some of the logistical headaches that come with selling DTC: Martin said that the hope is that Nike Fit will help the company cut down on returns, as it more accurately measures a customer’s foot size than the traditional Brannock device. It will also give Nike more data about what sizes, shoes and styles are most popular to help better manage inventory.

As for Zodiac, Nike hasn’t been as forthcoming about what it’s been using the startup to do since acquiring it last year, but its core offering can be easily connected to a membership program: Zodiac develops predictive models that purported to better forecast the average lifetime value of a customer.

“What Zodiac was good at was helping companies understand the true value of each customer to the brand, and then you can make much smarter decisions about how much to invest in each customer,” Goldberg said.

Ultimately, the value of both Invertex and Zodiac depends upon whether or not they will help Nike achieve what it says is the ultimate goal of its Nike Direct initiative: to build one-to-one relationships with customers. With Nike Fit, Martin said that the ultimate goal is to use the app to eliminate sizing for footwear.

“If you buy a pair of shoes online, [our goal is that] rather than have a number and a gender, it will just have your name,” Martin said.

The post How Nike is boosting its direct-to-consumer business with tech acquisitions appeared first on Digiday.

Content includes a video interview between London-musician Gaika and Labour party leader Jeremy Corbyn discussing climate change, a documentary featuring teenage climate activist and Nobel Peace Prize nominee Greta Thunberg and a sci-fi essay from synth-pop musician and artist Grimes. Content will be published on the Dazed site and main social accounts. How the Dazed audience responds will inform the content for the launch in September, although the publisher was unable to share much detail on the plans.

The Extinction Rebellion protests across the world last month propelled climate change to the top of news feeds, and while there are myriad examples of comprehensive articles on the topic from news publishers, Dazed felt there was a gap in content at the intersection of pop-culture and climate change for younger people spearheading the movement.

“Climate change is the biggest issue facing humanity. and it’s being driven by teenagers around the world,” said Thomas Gorton, digital editor at Dazed. “There’s this incredible energy for the movement. It wasn’t an option; we had to do it.”

Injecting the academic side into the series next week is the European Climate Foundation, which has been working with the publisher on the project for the last six months. The series next week will also feature two branded content videos from Nike, an existing advertising partner.

While a deviation from its core topics of art, music and fashion, Dazed has covered elements of science and technology in the past which have gone down well with readers: According to Gorton, in 2014 Dazed’s most-read story was about attacks in San Francisco for Google Glass wearers. Last September, it ran a weeklong series called “The age of AI” covering pieces how the tech impacts art and culture, including articles written by artificial intelligence influencer, Lil Miquela. In September 2017, the site added a tech and science vertical during its redesign.

According to Gorton, beyond broadcasting content, the aim with “A Future World” is to bring together communities in science, art and technology, more akin to a grassroots think tank. “It will be more like editorial events rather than feeling like a platform news feed,” he said. “This is the beginning, we want to explore how we can change, how corporations can behave better and how we can share the wealth.”

Last September, Dazed created Dazed Beauty on Instagram, which has 117,000 followers, with a similar goal showcasing talent found on social, involving them in campaigns and garnering opinions from the community to give more well-rounded articles. The vertical explores the idea of beauty in today’s world. “The ambition is anyone can be a part of these communities,” said Ahmad Swaid, head of social at Dazed Media. “Whatever we broadcast out in media, we make sure there’s a social element to it.”

More publishers are viewing audiences as communities, a two-way relationship encourages loyalty, people returning more often and for longer. The Financial Times and Der Correspondent use their audience to inform their journalism.

“The ambition is to evolve [Dazed Beauty] more and more,” added Swaid. “We’re trying to find as many opportunities to have that dialogue, via DMs, articles, showcases and takeovers. That’s the foundation of Dazed Media.”

The post Dazed branches from fashion and youth culture into science and tech appeared first on Digiday.