New business model. Bring together and accelerate consumer product brands in Amazon FBA environment (Fulfilled by Amazon)

Strong growth of the Amazon FBA segment

Around Amazon, with an annual sales volume of about 400 billion USD and growth of +38% vs. last year, it is normal that new business models be generated. “He who a good tree is still, good shadow shelters him.”
Amazon’s segment of third-party services achieves its highest growth and profitability. Thousands of small businesses offer their specialized products by leveraging Amazon’s commercial and operational coverage that receives a commission for its services in return.
In many cases, it is successful small entrepreneurs who are behind these companies and who encounter sustained growth and profitability issues from some billing thresholds. Their revenue is often concentrated on a class-leading, privately branded individual product with 90% of the sales through Amazon.

Thrasio. Growth and profitability for a unicorn. Unusual

Thrasio, created in 2018, is a clear example of a company growing at high rates and with positive operating results. Unusual exception in unicorn typology with a valuation of more than USD 1 billion. It is focused on identifying, acquiring, and improving consumer product brands marketed primarily through Amazon FBA.
Thrasio does a detailed job of identifying and selecting candidate brands for their acquisition and subsequent commercial and operational improvement thanks to their super specialization in the Amazon environment.
In its first two years of existence it has acquired 40 brands with incomes between 1-40 million USD in categories as disparate as home, kitchen, leisure. Among these brands are: Angry Orange, Best Gear, Creative Space, Maxim Fitness, Coffee Gator, Trail Buddy Poles…

Apply effective business and operational improvements after acquisitions.

To materialize these acquisitions Thrasio has reviewed 400 candidate brands with an advanced and well-shot Due Diligence process.
Once within their portfolio, their own marketing and operations teams make improvements by applying a proven tool kit in just 35 days in areas such as:

• Positioning within Amazon, consumer ratings and comments
• Content and visual communication tailored to the Amazon environment
• Packaging
• Product design
• Range reduction
• Product Sourcing
• Expansion to other international markets where Amazon has a significant presence such as the UK, Germany, and Japan

The results are there and Thrasio already has a total annual revenue of more than 500 Million USD doubling every 73 days its turnover. Still far from the size of large consumer product conglomerates such as Procter & Gamble and Unilever that through acquisitions of individual brands and supported by strong traditional advertising investments managed to occupy end caps in large retail chains.

Omnichannel Retail >>

Replica effect. Clones in action

Thrasio currently has 700 employees and its high growth rate generates a wide range of vacancies (+240 positions in February 2021). The type of functions and profiles required are revealing the company’s priorities and contrast with the current structure of many retail chains. We recommend visiting their WEB Thrasio Jobs.
Thrasio’s acceptance among investors has been very good (including Advent as the main player), achieving a total of USD 900 Million in 6 rounds of funding.
The replica effect is fast and there are already clones of this type of business in both the USA and Europe. Among them are: Perch, Heroes, 101 Commerce, Razor, Seller X, Brands United….a whole new generation.

Selling on Amazon is “easy”. Growing and doing it profitably is difficult. Looks like Thrasio is in a good position to achieve it. Like any challenge, it is not without difficulties ahead including the heavy dependence of an innovative giant like Amazon.

Más info: carlos.dominguez@mheconsumer.com

www.mheconsumer.com

Restoration Hardware (RH). Nobody invites you to enter the luxury home decoration retail segment.
Incorporation on its own merits

No invitations are received to enter the Luxury segment. Restoration Hardware (RH) has achieved that difficult “Upgrade” journey through a clear strategy and firm execution in the last 8 years.
With the opening of its 6-storey flagship-store with 9,000 sqm. in NYC (Meatpacking District) at the end of 2018, a successful transformation phase culminates to become a chain with 86 Luxury Decoration stores (USA), sales of 2,690 million USD, productivity in store above € 10,000 / sqm. and what is even stranger today, profitably.
We are very used to seeing Flagships generating heavy losses. This is not the case for RH.

In its first year open, this store in NYC has generated sales of over USD 100 million and a positive contribution of USD 30 million.
Mission accomplished!

Gary Friedman, CEO of the chain, summed up in a certain way the situation of Retail and the trajectory undertaken by Restoration Hardware with determination.

“We believe that in the most recent period growth without profitability has been unfairly rewarded and valuations have been based, erroneously, on the belief that an online business is more profitable than a retail with physical stores”

“It is becoming increasingly clear that brands born online desperately need integration with stores to survive, as they are facing very high variable costs and difficult to bear in the medium term”

“Traditional networks, in some cases fueled by fears that millennials may not perceive them as fashionable, have invested to grow their digital business in an unnatural way. Without obtaining higher total sales, the results are a lower business margin and somewhat abandoned physical stores ”

“At RH, we have chosen to take a different path. Elevate the RH brand by building architecturally inspiring spaces that blur the boundaries between residential and retail, interior and exterior, home and hospitality with seamlessly integrated restaurants and services. ”

“Our brand is more valuable in creating a customer experience that cannot be replicated online”

“This dominant physical presence combined with an omnichannel and direct platform that already generates more than a billion dollars online will continue to allow the RH brand to stand out in the fragmented luxury segment of home retail”

2/3/2020 RH Reports Record Third Quarter Fiscal 2019 Results | Restoration Hardware

Retail Strategy >>

Main characteristics of the HR business

• Reasonable, non-exorbitant sales growth, with profitability on the rise and supported by operational improvements and sourcing such as reducing the stock by 20%, increasing sales by 7%
• Atypical customer program (400,000 members) with an annual fee of 100 Usd with great advantages and which already accounts for 95% of its sales
• Its physical stores are gaining participation, contrary to the general trend, supported by an integration of its new online restaurant activity with its customers.
• Harmony carefully applied to make its shops exquisitely renovated and recovering unique buildings that were once Museums, Post Offices …
• The direct channel made up of ecommerce, telephone, catalogs and professionals accounts for 44% of total sales. Their catalogs, called Source Books, constitute one of the best experiences in how to transform and enhance the strength of printed material and digital effectiveness.

Hard Restoration development
Future development is still based on inspiration through its stores. Two new segments such as Home / Ski and Home / Beach emerge in an incipient way, but with a permanent character.
In addition, the medium-term expansion to the European market (6 new stores) is decided.
RH’s commitment is to continue navigating with skill between two waters, increasingly difficult to separate:
• Retail vs Residential
• Home vs Hospitality
• Indoors vs Outdoors

Who said that Luxury is always traditional and conservative?

More Info: carlos.dominguez@mheconsumer.com

www.mheconsumer.com

Nordstrom NYC opened. Department Store Evolution.
Is the Shoe Bar the future?

More than 120 years in business. Continuous transformation

Nordstrom, since its start more than 120 years ago selling high segment footwear, has been evolving in line with its customers to become the best service exponent in the segment of Department Stores specialized in fashion, footwear and accessories.
Last October, it opened its first full size store in the heart of NYC, 35,000 sqm. and 7 floors dedicated to the woman to complete the previous opening of an adjoining building dedicated to the man. It has taken eight years to execute it since the building was completed.
Nordstrom is a retail business with sales exceeding USD 15 billion, 75.000 employees but without substantial growth or adequate end profitability in the recent years.

More than 30% of its sales are already digital

No one could have imagined a decade ago that more than 30% of their total sales became digital. The transformation of the business into omnichannel has been a priority and focus of the bulk of its major investments in the last 5 years.
The impact has materialized in a transfer from sales to digital activity, without the total having increased substantially and experiencing an increase in costs in the business. The same story is repeated in the different retail sectors. Omnichannel is necessary but not sufficient to ensure survival and success in profitability.
Its Off-Price Nordstrom Rack stores already account for 1/3 of its total sales and with higher relative growth than the Full-Price Traditional Department Store.

Mhe Services

Retail Strategy and Operations >>

Innovations in the recent NYC store

Among the omnichannel initiatives Nordstrom has implemented include:

• Priority and emphasis on areas to collect goods purchased online (click & collect)
• Ease of returns with an express “self-service” system kiosk
• Collection and processing of returns of goods purchased online from other competitors
• Diversity of alternatives for the customization of the goods; from sports shoes to jewellery
• Background stage and optimal brand pop up space for Instagram…

They also include:

• Single common treatment of environment and space for different brands
• High efficient fitting room areas
• Buying and selling second hand items
• Joint development of the Nike store for women adapted for Nordstrom format

Food & Drink and Retail Customer Experience

But, without any doubt, the biggest change lies in the treatment of Food & Drink operations across all floors and departments, adapting and integrating Food & Drink to each customer segment and in line with its shopping  itinerary.

Its maximum exponent is the Shoe Bar, where the purchase of footwear lives together with the consumption of drinks. Between pair and pair, cocktails to the customer’s taste. Who was going to tell us that Drinks and Shoes worked so well together!

Department Store format. Dynamo or Dinosaur

Department Store format, across its different typologies, has some common elements of the business such as:

• Need for a higher specialization towards personal products and services. Exceptions such as John Lewis (UK) in the home sector are rare
• Strong commitment to improve customer experience and integration with highly developped Food & Drink  operations
• Strength in the area of financial services as an additional income
• The role of International Brands shop windows now has to live together with the direct presence to the consumer DTC (digital and own stores)
• Strong investments and digital transformation that transfers your sales (like liquids) from your stores to omnichannel without adding real growth and increasing costs
• Unique real estate assets that have been authentic “oxygen ” for these businesses
• Non-optimal performance in shopping malls vs high street locations
• Rationalization of the number of current stores
• It is  not easy to replicate the model on a large scale and internationally. Singularity

Nordstrom keeps on innovating in search of its profitability.
Who was going to tell us that Drinks and Shoes worked so well together!

More info: carlos.dominguez@mheconsumer.com

www.mheconsumer.com