The Middleman Strikes Back
Today’s highlights: VCs discover menopause. Corner pizza shops try to compete with Big Pizza. And remind me again: Why would anyone take a company public?
With so many direct-to-consumer brands cutting out the middleman, do we need more middlemen? “A host of online multibrand retailers have sprung up to assist consumers in finding the gems amid the mountain of minimalist sneakers and men’s grooming start-ups. The Verticale, launched late last year, focuses on fashion, home goods and wellness products sold by digital brands (users must click a button labeled ‘shop the edit’ to browse). FastAF is a mobile app created by the warehouse start-up Darkstore promising two-hour delivery in New York and Los Angeles of ‘the top products from the top brands,’ a mix of DTC upstarts and established labels such as Aesop and Acne Studios.”
“The mattress-in-a-box brand Leesa hit the market in 2015 with a promise to cut out the middleman. Now, some of its founders have had a change of heart.”
“Last month, members of Leesa’s founding team launched The Fascination, a marketplace that specialises in direct-to-consumer brands such as Allbirds and Lunya. Their pitch: There are so many start-ups selling plus-size denim, CBD oil, moisturiser — and yes, mattresses — that shoppers once again need the much-maligned middleman’s help cutting through the clutter.” READ MORE
Can a corner pizza shop compete with Big Pizza? “Slice, the pizza platform, is solving that problem, working with 14,000 pizza shops in 50 states. And with a new $4 million TV ad campaign as well as sharper tools for small-town pizza chefs, it's hoping to make America happier with all their 'za decisions. ‘We aim to be a first-party relationship,’ says Preethy Vaidyanathan, its chief product officer, ‘not a third-party delivery app.’ Slice sets pizza shops up with its mobile app and a website. People can order their custom pizza delivery from their local shop quickly and easily–without forcing pizza cooks to do digital maintenance. While massive marketing teams and social-media gurus back competitors like Domino's and Pizza Hut, ‘Mom-and-pop shops don't have any of that. They're not marketers or technologists. They just make great pizza. We give them a partnership that helps them compete,’ Vaidyanathan tells QSR Land.”
“COVID-19 sent the company scrambling to help shops meet new demands as cities shut down indoor dining.”
“It launched Slice Delivery, an add-on service for shops without in-house delivery, adopted by 2,800 shops. It's built contact-free delivery (20 percent of all orders), curbside pick-up (15 percent of all pick-up), and cash-free ordering to keep restaurant workers and customers safe.” READ MORE
Startups and VCs are finally pursuing the menopause market: “By 2025, 1.1 billion women are expected to be postmenopausal. The space represents $600 billion of spending opportunity but is still largely untapped by startups and brands that could be creating new products and services for these women, according to data from early-stage investing firm Female Founders Fund. ‘Only 5 percent of femtech startups address menopause, and overall the opportunity is huge,’ Adrianna Samaniego, investor with Female Founders Fund, told Crunchbase News. ‘Fertility is nine months, typically, but menopause can last anywhere from four to 30 years.’”
“Natalie Waltz is a new entrepreneur chasing those potential dollars. She founded sex and menopause startup Tabu in March 2020 after a conversation with a friend about sexual pain affecting some 90 percent of women during menopause, which causes them to stop being active, she said.”
“Women are suffering now, and we have the science, the math and the investor dollars. People are so desperate that a startup with a $3.99 app could have $1 million of sales in three months. That’s why we are investing — we see the opportunity. Six-hundred billion dollars is not ‘niche.’” READ MORE
Ghost kitchens are finding homes in empty hotels: “Ghost kitchens, also called digital kitchens, are cooking facilities that produce food only for delivery or takeout. And as U.S. cities bounce from one lockdown to another, keeping restaurant dining rooms shuttered, demand for the concept is booming. Euromonitor, a market research firm in London, predicts ghost kitchens will be a $1 trillion industry in the next 10 years. So it’s perhaps unsurprising that the hotel industry, where occupancy rates are still down 30 percent from a year ago, is getting in on the trend. Hotels have become adept at repurposing their spaces throughout the pandemic. They’ve offered their empty rooms as housing for the homeless and temporary offices for executives; they’ve even turned their conference rooms into classrooms for children learning remotely.”
“Richard Zaro always wanted to open a chicken cutlet joint inspired by the deli sandwiches served across northern New Jersey, but the challenge was coming up with the required capital. The pandemic finally gave him an opportunity.”
“To turn his sandwich concept into a business, Mr. Zaro started renting space in July at the Four Points by Sheraton Midtown near Times Square, paying $6,000 a month for a fully outfitted catering kitchen. Average restaurant start-up costs for brick-and-mortar locations, in comparison, can run from $200,000 to more than $1 million.”
“Within four months, he had generated enough revenue — and created a large enough base of loyal customers — to move to a stand-alone location. His new business, Cutlets, opened in a former Tender Greens restaurant near Gramercy Park on Dec. 1, and has plans to expand.” READ MORE
Relying on locals, some new hotels are actually doing pretty well: “After a soft opening in February and nearly immediately shutting down, The Pearl Hotel, in San Diego, reopened in June with Covid-friendly bells and whistles like Zingle, a real-time texting service that allows guests to correspond with hotel management before and during their stay. ‘Guests are able to limit physical contact while checking in, but they also get personalized service and they feel they’re being taken care of,” said Carolyn Schneider, president and partner of Casetta Group, the hospitality management group that operates the 23-room boutique hotel.”
“Rooms also feature sealed boxes of sanitized high-touch items, including hairdryers — a detail not lost on Jessica Bender, 51, who has visited The Pearl nine times since July.”
“Ms. Schneider is reflecting on what she calls a “silver lining” at The Pearl: ‘It’s been exciting to connect with locals we wouldn’t necessarily meet otherwise.’”
“‘A new independent hotel has the opportunity to build a customer base from scratch,’ Dr. Walsh, of Cornell University, said. ‘It might’ve been harder to attract locals before, when people would have gotten on a plane.’” READ MORE
The owner of two Portland bars says it’s a myth that increasing the minimum wage will wreck small businesses:
New rules are coming that may make the skies a little friendlier: “Once the new rules take effect, beginning on April 21, a ticketed passenger who boards an airplane cannot be involuntarily bumped from an overbooked flight. Additional consumer-friendly rules will also be enacted on that date, and all will apply to flights originating in the United States that can hold more than 30 passengers. The maximum required compensation paid to passengers who are involuntarily bumped from a flight will increase from $675 to $775 for delays of up to two hours (or 200 percent of the ticket price, if it is less), and from $1,350 to $1,550 for longer delays (or 400 percent of the ticket price, if it is less). Foreign carriers must abide by these rules as well.” READ MORE
Thanks to London-based Tractable, owners of damaged cars can get an almost instantaneous repair estimate: “The startup is at the forefront of a growing number of technology firms trying to help car insurers use techniques such as artificial intelligence, computer vision and machine learning to speed up claims processes. Founded in 2014, Tractable already is working with big insurers in Japan and Europe.”
“Under Tractable’s approach, computers study the damage in photographs, which can be taken by policyholders while still at the wreck site or later. To produce estimates, the algorithms tap into data from a provider of parts and labor data.”
“Once the estimate is generated, policyholders can select a recommended body shop and get the repair work started.” READ MORE
The pandemic has given digital wallets a big boost. There’s just one problem: “The pandemic has done what Apple, Google and Samsung have long struggled to do on their own: get more shoppers to use their digital wallets. Some 46 percent of people surveyed by S&P Global’s 451 Research said the pandemic prompted them to use mobile wallets and other contactless payments more often or for the first time in-store. Problem is, many shoppers and cashiers have no idea how to use them. Even those who do find the major brands are still not accepted at the U.S. stores of some big retailers like Walmart, Home Depot, and Lowe’s.”
“Contactless transactions in U.S. stores—including mobile wallets and tap-to-pay cards—were up 226 percent in early December compared with early March, according to CardFlight, which supplies payment hardware and software to more than 70,000 U.S. small businesses.”
“Apple says more than 90 percent of stores in the U.S. now accept Apple Pay.” READ MORE
Remind me again: Why would anyone take a company public and rely on Wall Street? “Long-held strategies such as evaluating company fundamentals have gone out the window in favor of momentum. War has broken out between professionals losing billions and the individual investors jeering at them on social media. Meanwhile, the frenzy of activity is stirring regulatory and legal concerns, as well as the attention of the Biden administration. The White House press secretary said on Wednesday that its economic team, including Treasury Secretary Janet Yellen, is monitoring the situation. The newbie investors are gathering on platforms such as Reddit, Discord, Facebook and Twitter. They are encouraging each other to pile into stocks, bragging about their gains and, at times, intentionally banding together to intensify losses among professional traders, who protest that social-media hordes are conspiring to move stock prices.” READ MORE
THE 21 HATS PODCAST
Episode 46: A Fabulous Conversation About Marketing: This week, we introduce Stephanie Stuckey, a new regular on the podcast who tells Dana White and Laura Zander about the iconic road-stop business her grandfather founded: when it peaked, what went wrong, why she bought it back, and how she plans to rejuvenate it. Along the way, we discuss whether small businesses should outsource their marketing, how hard it is to find an agency that listens, and what agencies charge. Plus: Stephanie offers a tutorial on how to engage followers—and get free consulting—on LinkedIn.
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