Fashion (DNVBs = Distressed Opportunity?)

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Look for Our Launch of New 'Lit' Brand "Unicorn & Bankruptcy" 

Why is that so many brands now are named "Something + Something"? Are we the only one's who've noticed that trend? Anyway, Bonobos is a failure because it sold(out?) for 3x its venture capital investment to Walmart Inc. ($WMT) - or so the narrative now goes. Curious. Walmart, after all, reflected the makings of a resurgence this week with a blockbuster earnings report that many largely attribute to Jet.com's Marc Lore and the e-commerce expertise he's assembled around him. Like Bonobos' Andy Dunn, for example. Nasty Gal, however, is an entirely different story; it didn't sell for 3x. It sold for parts in bankruptcy court. Its ubiquitous founder, Sophia Amoruso, now runs a, gulp, digital media company (see above). Seeing Bonobos mentioned in the same breath as Nasty Gal must have Mr. Dunn questioning life's fairness. Anyway, read between the lines in the piece and it sure sounds like there could be a waive of would-be digitally-native disrupters disrupting themselves all the way to bankruptcy court (or an assignment for the benefit of creditors). Choice quote,"'We’re seeing that some of the same brands that get celebrated for raising $10M, or hitting $100M in revenue, are gone a few years later or eek out a distressed sale.'" You're damn right they do. Who wants to start the latest hot DNVB called "Unicorn & Bankruptcy"?

Unicorns (Short the Hype)

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Calling Out Digitally-Native Vertical Brands (DNVBs)

"You know what? F*ck unicorns." Let's not lose perspective here: a number of tech startups (or, shall we say, alleged "tech" startups) are valued at $1b+ merely because the market is awash in so much money and such a hunger for yield that deals are getting priced upwards. To think that a $400mm exit is anything short of successful is bonkers. Meanwhile, a number of those unicorns are digitally native vertical brands (DNVBs). Think Warby Parker. And thisthrows some serious shade on them. Choice quote, "Given all of the expectations surrounding Digitally-Native Brands and their limited optionality, it’s unlikely that many of them will be around in their 47th year, let alone as independent companies. There will always be exceptions to this rule—Dollar Shave Club, Glossier, Proper Cloth—might outlast the pack as brands that either successfully exited or are mostly in control of their future. But other than these rare exceptions, over the next few years this gold rush will probably turn into a bloodbath" (emphasis ours). In other words, don't count the chickens until they hatch. 

Retail (Short Copycats)

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Bon-Ton Stores is beginning to look a lot like Toys R Us. Meanwhile, we've previously discussed Appear Here here and here. Now Simon Property Group ($SPG) is dedicating pop-up space in certain of its locations. It's a brilliant move, frankly: this plan lets digitally-native-vertical-brands test physical locations; it could also be accretive to SPG as they can generate buzz that couples with the DNVBs' online communities/networks to bring e-commerce shoppers to physical locations; it also gives SPG early looks at potential retail investment opportunities. Meanwhile, the knock against Abercrombie & Fitch and other retailers was that millennials didn't want to be human billboards rocking an A&F sweatshirt with 485-font lettering on the front. That is, unless you show em the paycheck. Now you can get paid for walking around big cities with Ipad-based advertisements on your back. Seems like a nice supplemental income for our friends in NYC.