The rise and fall of brands has always been of interest to me. They fall often because of their own wrongdoing or an uncontrollable groundswell from a newcomer that starts as a fad from some celebrity. Either way, trying to understand the why is important. I remember the days when Columbia was all the rage, then it slowly became a discount brand as the market was oversold with their products. Then we witnessed the rise of North Face and they became the 800lb gorilla going from a higher end product and fad to complete market saturation. Now, if you have been paying attention, especially in larger metro areas, you will have seen that Canada Goose patch everywhere you go. You will also catch the name on a Drake track as OVO has collaborated with Canada Goose. Canada Goose has become the Louis Vuitton of the cold outerwear market. Stomping on North Face and not looking back. Many will say they are equally warm and of similar quality, but GC is significantly more expensive and to those buying them, more stylish as well as with more brand prestige. (Prestige is worth a pretty penny these days to some people as they will say the brands you associate with says something about you.) Much like Kors marching right into Coach’s space and jacking billions in revenue from their core market, GC is doing the same thing to North Face and similar brands right now. Did North Face rest on their laurels? Did they lack innovation? They kept doing the same thing over and over, thinking it would last forever but, hey, JCPenney, Macys and Sears thought that too right? Oops, the story is not going to end well for them. Do you invest in some different brands? Become an ambidextrous organization, printing money off your hot products now while you’re developing a whole new brand and look at the same time? Could you ride the wave longer if you don’t over saturate the market? A la Ferrari. When I’m at the malls in Michigan or walking the streets of Chicago, everyone and their pomeranian has something North Face on (women usually pair it with UGG boots. Dudes in UGG boots… Ah, that is another topic!) Fashion is fickle, success for certain luxury brands is fleeting from the moment they get a hint they have something cool, far before the apex. Right now we are watching $500-1000+ down coats sell out while the company prepares for an IPO. Is Canada Goose already planning for the day the fad ends or will they ride the high until the brands becomes uncool? I guess we shall see…..
You didn’t have to be an MIT quant or someone that trades off the pattern of migratory routes of elephants to see this one coming. With Buffet dumping $900M in Walmart stock, headlines like “Retail is dead” or “Buffet just put retail on notice” are inevitable. This actually was a pretty simple play on a couple levels. You already know Amazon is an unstoppable force at the movement. When you hear about Amazon, you hear about technology, amazingly optimized supply chain operations, and drone delivery. When you hear Walmart, all you ever hear is negativity, anti-Made-in-China sentiment (being in the Midwest, I may hear this more often than others), along with being voted amongst the most hated retailers. Add to the equation our current administration with a nationalist and protectionist viewpoint, Walmart looks like a sitting duck, as Made-in-America is going to be the beat everyone marches to for a while. Now Here Is The Key Amazon sells a lot of that same Made-in-China stuff that WalMart does, but they don’t catch all the hell for it. In the same way, do you ever wonder why Chipotle flies under the radar with their food? Chipotle is often viewed as a healthier option, not because of the nutritional value, but because you’re distracted with the marketing hype of antibiotic–free meat and locally-sourced ingredients. In fact, one Chipotle burrito may have more calories and sodium than a Big Mac meal from McDonalds. And Starbucks, they can serve you a Venti Mocha with 490 calories and 45 grams of sugar without all the unhealthy food rage but Coke catches hell for how much sugar is in their drinks, which is 39 grams for 1 can. This is about looking at what is going on in the marketplace and not so much about what should be happening. You have to be a 100% realist and look around with eyes wide open because some things just don’t make sense anymore. And it doesn’t have to make sense, you just need to be aware that it is happening and Buffet is great at that.
If you are in sales, marketing, running a business or a startup or anywhere in-between, this is a good use of 5 minutes. Often we only guess about why people buy our products or services. Sometimes we are selling or marketing for a reason that we think is the primary problem solver when in fact, our products and services can solve problems we never thought of. Many drugs have been created to solve a problem and as they test, they find out that the drug can solve other problems that they never intended to solve. This is no different than what we face in business. Watch this video and ask yourself: What is my milkshake equivalent? Then start to figure out what job your customers are hiring your milkshake for. https://www.youtube.com/watch?v=f84LymEs67Y
I recall some of my first stock purchases, tiny amounts from a discount broker as I was a punk ass kid with big dreams. With some money from hustling I bought a few shares, after reading the WSJ newspapers that I would get from Walden Books. Then my tech career took off, so I had a few more bucks. Just a tad bit later the tech boom happens. Here I was thinking I was Gordon Gekko getting crazy returns from my “steller analysis” but it was just luck. And even more than just luck, I actually rested some of the money before the bust and was able to avoid disaster (a mentor taught me to rest money often. Thankfully, I listened.) The reality was, I was picking thoroughbred losers, but it was good times in the stock market…. So, I have witnessed the boom and the bust. Also like all of you, I keep hearing about the next tech bubble, the next tech bubble, we are in a bubble, bubble bubble bubble, ahhhh just shut up already! And here we go now with the Snapchat IPO. Really a first of its kind with three classes of stock in which the founders get a 10x multiplier on their votable shares. And that results in their complete control over pretty much everything, even if they leave. And when you jump on your Robinhood account next month to cash in, just know that those Class A shares get you no voting rights. That is the real buzz here. You, as an everyday investor, gets no voting power (you can go to the shareholder meeting though, yay!). Doesn’t this partly undermine our markets? Facebook and Google are similar but not this intense in terms of control. This is like asking your parents for money and sticking your hand up in their face and saying: “Don’t tell me how to spend it!” I don’t know if we are in a bubble or not, but this will likely be the new trend for super-hot tech companies and I have to say, good for them! Keep control, this is every founders dream. It just sucks for investors. But, more importantly, if this how it will be, does it just encourage more short term focus over long term investment? But if you believe it’s going to rocket to the moon, do you care if you have voting power or not? Not really right? If you’re getting results, you give two shits about voting rights. But after you drop a chunk of your nest egg in and it drops by 25% because of poor management or decisions, how will you feel then? Yeah, you can’t do anything about it. And that is the reason why many will avoid it. With the rise of the activist investor we know why this is happening, but part of it just seems to defeat the purpose of investing in companies. I guess this is a sign of the times. If you’re a startup and want to own your future and pretty much control your business and day even after going public, this seems to be the new model to follow. But as investors, we may choose to take our money elsewhere.