How Kendra Scott Built Her Empire
Founded in 2002, the Kendra Scott brand went from a single mom hand-tooling jewelry in her spare bedroom to a retail behemoth with 130 stores in the U.S.
Good morning!
Here are today’s highlights:
Merchants are backing legislation that would target Visa and Mastercard.
The labor shortage is encouraging the spread of self-checkout.
Staffing problems are also forcing restaurants to simplify their menus.
Roomii wants to be the Airbnb of furniture.
PROFILE
Here’s how Kendra Scott built a cult-like following and a billion-dollar business: “In the familiar cadence of ‘Bama Rush’ videos, the subgenre of TikTok’s ‘outfit of the day’ posts that grew out of the University of Alabama’s sorority-rush season, one jewelry brand comes up again and again. Earrings? Kendra Scott. Ring? Kendra Scott. Bracelet? Kendra Scott! ‘It’s almost like a cult following,’ said Ms. Scott of her appeal, wearing a top in her signature shade of sunny yellow when we spoke over Zoom. When Bama Rush first began trending in 2021, it introduced Kendra Scott to the kind of coastal-elite audience that had been ignoring her for nearly 20 years. By the time she became a TikTok sensation, the 48-year-old jewelry designer had already steadily built an empire valued at more than $1 billion.”
“While the company now offers fine jewelry, including diamond engagement rings, it’s largely the inexpensive, colorful semi-precious pieces in the $50-$250 range that high school and college-aged women clamor for and show off on social media.”
“Founded in 2002 in Austin, Texas, the Kendra Scott brand went from a single mom hand-tooling jewelry in her spare bedroom to a retail behemoth with 130 stores in the U.S., an estimated $360 million in annual sales and a devoted fan base, especially among young Southern women.”
“In 2017, Boston investment firm Berkshire Partners closed on an undisclosed stake in Kendra Scott, valuing the company at $1 billion and with Ms. Scott retaining majority ownership.”
“Like Mary Kay, Kendra Scott has also grown in part by its word-of-mouth, women-to-women grassroots marketing—an approach behind its ‘Direct Retail’ community stylist program, announced this year.” READ MORE
PAYMENT
Merchants are backing a bill to create competition for Visa and Mastercard: “The bill, which Sen. Richard Durbin (D., Ill.) and Sen. Roger Marshall (R., Kan.) introduced in July, would give merchants the right to route many credit-card payments over networks other than Visa and Mastercard. In a letter this week to all members of Congress, the merchants said the proposed legislation would increase competition, leading to a reduction in the fees they pay when they accept credit cards. The merchants said the fees are passed along to consumers in the form of higher prices.”
“The two networks together handled roughly 77 percent of all general-purpose credit-card spending last year on cards issued in the U.S., according to the Nilson Report, a trade publication.”
“‘Swipe fees for credit cards are higher in the United States than anywhere else in the industrialized world—more than seven times as high as Europe,’ said the merchant group, which includes a diverse assortment of small businesses such as gas stations, restaurants and grocers along with giant chain retailers.” READ MORE
RETAIL
The labor shortage is pushing more grocery stores to turn to self-checkout—even though people hate it: “Despite bad vibes from some customers, automation at the supermarket has kicked into overdrive. More grocers installed the tech during the pandemic because of staffing issues and some customers’ fears about interacting with more humans than necessary. While many are experimenting with new-age tech that aims to make the self-checkout process easier for shoppers, those upgrades are a long way from showing up at most local grocery stores.”
“Self-checkout is nearly twice as widespread as it was before the pandemic, representing 30 percent of all grocery store transactions in 2021, according to an FMI-The Food Industry Association report released last week.”
“The machines are now at 96 percent of the 38,000 retail stores (across 96 companies) the group surveyed.”
“With the turnover rate for grocery store employees in 2021 at 48 percent, down slightly from a record high in the prior year, according to FMI, industry experts believe grocers may have no choice but to expand their use in the coming months.”
“‘We don’t see the labor crisis coming to an end anytime soon,’ says Mark Baum, who oversees industry relations for FMI. He adds that self-checkout machines, which cost anywhere from $14,000 to $40,000 to install, pay for themselves quickly.” READ MORE
THE ECONOMY
Here’s Mark Zandi’s take on the disappointing inflation report:
HUMAN RESOURCES
Amazon is raising pay and benefits for its delivery partners: “The company will invest $450 million to fund wage increases and other benefits for delivery drivers employed by members of its Delivery Service Partners network, it said in a release. The company started the program in 2018, encouraging entrepreneurs to start their own fleets of drivers with initial investments of as little as $10,000. Other benefits as part of the new initiative include up to $5,250 a year for drivers to pay for educational programs, and financial support for a 401(k) investment plan for drivers.” READ MORE
REGULATION
The Washington Post says California’s new fast-food regulations were well intended but a mistake: “In a nod to European-style sector-wide collective bargaining, the new law creates a 10-member ‘Fast Food Council’ of employees, franchisees, advocates and government representatives. The council will have the authority to set standards on working hours, conditions — and minimum wages. California’s current minimum wage is $15 per hour for businesses with more than 25 employees, but the council can increase it to as much as $22 in 2023. The law also authorizes counties, or cities with populations of more than 200,000, to create ‘Local Fast Food Councils,’ and it establishes a cause of action for workers facing retaliation or discrimination by an employer.”
“A smarter approach would be to increase funding for agencies to enforce the state’s already strong labor laws. This could improve oversight and bolster workers’ rights without inflicting financial and regulatory burdens on small businesses.”
“As the council forms and begins to weigh new standards, we hope it will pursue a thoughtful, evidence-based approach that does not add to sky-high inflation or harm job growth.”
“Meanwhile, other states considering adopting California’s model should listen to concerns from business owners and anxious employees, and find better ways to support vulnerable workers.” READ MORE
FOOD & BEVERAGE
There’s a reason restaurant menus are getting simpler: “Chefs have always had to worry about what’s known as production. It’s not enough to have an idea for a great appetizer; someone must also figure out how to execute and replicate that idea, often hundreds of times per night, while simultaneously ensuring that it doesn’t disrupt any of the thousand other details that cooks must consider during service. Now, with chefs beset by skyrocketing prices and ongoing labor shortages, the usual way of doing business is untenable. To cope, restaurants have slashed menus, simplified garnishes, and introduced streamlined recipes that can be sent out to dining rooms immediately — that is, if they can find enough cooks to hire in the first place.”
“Jennifer Saesue, who owns Fish Cheeks in Noho [New York City], says she has added fried chicken wings and grilled pork cheeks to her menu to help control costs, even though the restaurant’s specialty is Thai seafood.”
“The signature dish is coconut crab curry, but when the price of lump crabmeat rose from $26 per pound to $60, before settling back down to $40, she had to raise her curry’s price to $30 — a ceiling she felt she couldn’t exceed.”
“She hopes the simpler, cheaper items bolster her bottom line. ‘Our food costs used to hover between 25 to 27 percent,’ she says. ‘Right now that number is 30 to 32 percent.’” READ MORE
The best new restaurant in the U.S. features an indigenous kitchen: “In the summer of 2021, Sean Sherman, a forty-eight-year-old Oglala Lakota chef, opened a restaurant called Owamni, in Minneapolis. Nearly overnight, it became the most prominent example of Indigenous American cuisine in the United States. Every dish is made without wheat flour, dairy, cane sugar, black pepper, or any other ingredient introduced to this continent after Europeans arrived. Sherman describes the food as ‘decolonized’; his business partner and Owamni’s co-owner, Dana Thompson, calls it ‘ironically foreign.’ In June, the James Beard Foundation named Owamni the best new restaurant in the United States.”
“‘I had this bolt, an epiphany,’ [Sherman] told me. Why wasn’t there any Indigenous food up north? ‘In Minneapolis, I could find food from all over the world,’ he went on. ‘But nothing that represented the food or the people that were there before, which is completely insane.’”
“‘The diet of our ancestors, it was almost a perfect diet,’ Sherman went on. ‘It’s what the paleo diet wants to be: gluten-free, dairy-free, sugar-free.’” READ MORE
STARTUPS
A big bet on the future of small media companies: “In recent years, traditional media companies have been left to fight over the advertising scraps left behind by tech platforms like Facebook, Google, and Amazon. With Night Capital, TCG is betting that it’s pointless to invest in a new media business based purely on advertising, unless it has the chance to become a big platform, like Snapchat. Rather, investors should fund creators who can harness established platforms to sell products and market themselves.”
“When Kevin Espiritu quit his job at a book subscription service in 2016, his big idea was to grow food in other people’s yards while working on his blog, ‘Epic Gardening.’ At the time, the blog generated about $600 a month.”
“But the business took off when Mr. Espiritu began selling planters made of galvanized steel on the site. In 2021, the company generated $7.5 million in revenue, and, this year, it attracted a $17.5 million investment from the media and tech investment firm TCG.”
“Mr. Espiritu’s blog is the template for what TCG hopes will be the next wave of popular media companies.” READ MORE
The race to recycle batteries is heating up: “The world’s biggest automakers are betting that recycled material from old batteries will help supply the metal they need to build electric cars. The latest wager is on a startup that says it can take advantage of the Inflation Reduction Act. Jaguar Land Rover and South Korean battery giant SK Innovation are among the investors putting more than $300 million into Ascend Elements, a startup that aims to serve an emerging center of battery production in the Southeastern U.S. The company says it has an efficient way to turn used lithium-ion batteries into new components.”
“The Inflation Reduction Act added to the momentum in the sector by tying electric-car tax credits for consumers to how much battery material comes from domestic production and recycling or from U.S. trade partners.”
“The government has also made billions of dollars available to battery startups through last year’s infrastructure bill and Energy Department loans.” READ MORE
Roomii wants to make it easier for renters to move: “The online marketplace, calling itself the Airbnb of furniture, gives its users the option to either rent, sell, or buy furniture for one month up to a year, allowing them to move freely without a sofa tethering them to a single location. Available in Chicago only, founder and CEO Dapo Kolawole hopes to expand first regionally and then nationally.”
“‘We figured out there's no better place to try to figure this out than a city that has four seasons. If you can figure it out in Chicago, we could figure it out in L.A.,’ he said.”
“Over the next six months, he's looking to expand beyond Roomii's limited zip code to more neighborhoods across the city while also ensuring that the company does not overextend itself.” READ MORE
THE 21 HATS PODCAST
Another gift brought to you by corporate America: This week, in light of reports that half of the U.S. workforce has “quietly quit,” Shawn Busse, Paul Downs, and William Vanderbloemen talk about the latest rage: Is quiet quitting something new? Is it just a media creation? Have Shawn, Paul, and William experienced it in their businesses? And who’s to blame? Plus, the three owners explain how they hire for engagement and how they’ve changed their hiring processes in response to the pandemic and the labor shortage. For example, Paul explains why, in this brave new world, he continues to flip conventional wisdom on its head: Instead of hiring slow and firing fast, he’s been hiring fast and firing slow. And he says it’s working.
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