The Affluent Male

I recently listened to the iProspect webcasst: “The Affluent Male: What His Online Behavior can Teach Luxury Brand Marketers”. I had previously read through their research and reported on it here, but I thought it would be worth sharing some more of their statistics.

The most interesting takeaways were that affluent men: visit Amazon more than any other site, are more influenced by sponsored links than banner ads, and prefer video and search ads to other forms.

Don’t forget there are 19Mil affluent men shopping online and they spend an average >$4K a year; that is an estimated market of $76Bil. Who says men don’t shop online?

Check out the below slides, and review the full deck here.

More

Fashion Fridays: July 13, 2012

Check out this weeks Friday outfit. Next week I’ll be featuring items from online only brands like Bonobos, Everlane, and Frank & Oak. In the meantime, working on a summary of a recent iProspect webcast on the e-commerce market size for Affluent Males and their shopping habits. Stay tuned…the numbers are staggering.
One. = J.Crew – Slub Jersey Tee In Deck Stripe, $40, J.Crew.com
Two. = Sperry Top-Sider – Classic Boat Shoe, $75, Barneys NY
Three. = Ransoun – Gray Braided Bracelet, $85, Ransoun.com
Four. = Jack Spade – Classic Chino, $165 Sale $69, Barneys NY

More

Fashion Fridays: July 6, 2012

For those of you that follow my blog regularly, you know that I’m focused on e-commerce startups and the venture capital ecosystem that fuels them. As I have mentioned in previous posts (see here), I am especially focused on the increasing interest in men’s fashion that is due to the convenience created by digital media tools and new e-commerce business models.

It is against this backdrop that I have launched Fashion Fridays. Fashion Fridays is a weekly post containing an outfit that I have compiled. The posts will serve as an aid to those of you that don’t frequent numerous fashion and e-commerce sites, but are looking for quick weekly ideas. I hope you enjoy the content and find some new ideas along the way.

One. = J.Brand Denim – Kane Worn-in Straight-Leg Jeans, $170, from Mr. Porter
Two. = TOPMAN – Brown Plaited Belt, $32, from TopMan
Three. = TAG Heuer – Carrera Automatic Chronograph Watch, $3,080, from Amazon
Four. = Cole Haan – Air Monroe EVA Penny, $188, from Cole Haan
Five. = Thom Browne – Plaid Oxford Shirt, $290, from Nordstrom

More

The Birth of Retail As A Service: A Trunk Club Review

Numerous e-commerce startups have recently launched utilizing a business model derived from the offline personal shopping experience provided by high-end retailers. These startups are using e-commerce tools to build an entire retail business around personal shopping. Under this model, consumers no longer have to shop; curated outfits are delivered to customers based on their style preferences, leaving customers free to spend their time doing something other than hunting for things to buy (i.e. shopping). In essence, these companies are building service businesses based on the traditional retail model, which is why I call them Retail As A Service (RAAS) companies.  Trunk Club is the clear front runner in the men’s RAAS category. Other companies utilizing this business model include: UnScruffBombfell, GentlemanSquare, and CakeStyle (for women). Below is a brief summary of Trunk Club’s history and a review of their current service offering.

TRUNK CLUB’S HISTORY:
Trunk Club was founded in 2009 as a personal shopping service for men who don’t have the time or desire to shop. Originally, the company used a remote network of personal stylist to make product recommendations via Skype calls. These remote stylist were then paid a commission based on the product sales they generated. Purchased products were then drop shipped from the manufactures or distributors to the customers.

In 2011, Trunk Club hired Brian Spaly, one of the co-founders of Bonobos, as their CEO. Spaly quickly moved to make changes to the company’s business model. His overarching change was to adopt a retail business model rather than a product recommendation model. The retail business model that he choose is exactly what I am calling Retail As A Service. The change in business model required numerous changes to Trunk Club’s key activities. These changes included: purchasing and storing inventory rather than having it drop shipped, locating all stylist (personal shoppers) at the company’s headquarters rather than remotely throughout the U.S., having stylist work with customers through email and phone calls rather than Skype, and – most importantly – sending customers curated boxes (“trunks”) of ~10 clothing items rather than making individual online product recommendations. Learn more: TechCrunch, TechCrunch, RedEye, and Forbes.

REVIEW OF TRUNK CLUB’S SERVICE:
I recently sampled Trunk Club’s current service (photos below). Overall, it was a very enjoyable experience. The online style survey, which is used to make recommendations, was engaging and quick. My personal stylist (shopper) called me soon after I completed the survey to discuss my style preferences. She then completed my trunk of ten items and had it shipped to me via second day air. They did not charge for shipping in either direction, this is consistent across most RAAS companies, and my trunk of 10 items arrived within 2 days.

The average MSRP of the items in the trunk was $160.40 (range: $36-$348). Most notably, all items were sold at MSRP. This is especially important as consumers (incl. me) have gotten used to discounts over the past 3 years. Based on Trunk Club’s business model, they are clearly banking on customers purchasing enough merchandise per trunk to recover the cost of shipping, fulfillment (it is a NICE box), and the inventory holding cost while customers make decisions. To give you some perspective, each trunk contains roughly $1,000-$1,500 in “value”, and if you assume that shipping, fulfillment, insurance, and other costs amount to roughly $50 per box, then based on an assumed gross margin of 40% (e.g. Nordstrom’s GM is ~40%), the company’s contribution margin breaks even if the average customer keeps one average priced item. It should also be noted that if the average customer keeps 2.5 average priced items then the contribution margin from each box is roughly $110 (GM*Q-S&H = $64*2.5-50). Please note, these numbers are completely speculation.

As noted above, this model creates a substantially high LTV, especially if the average customer keeps 1-3 items, and remains comfortable paying MSRP. I would add that this model is much more scalable than the traditional retail shopping model. As one example, a RAAS company doesn’t have to maintain a broad selection that can be shopped.

RECOMMENDED CHANGES TO SERVICE:
My biggest concern for Trunk Club, and the RAAS business model, is that men’s shopping habits are changing due to e-commerce tools. Affluent males (Trunk Club’s target market) are using the efficiencies of e-commerce to shop smarter and more often. In fact this very trend is at the heart of this blog’s focus (see post).

In order to fight this trend, Trunk Club should provide an online price guarantee. I understand the need for the company to keep its margin’s high and to differentiate based on service not price. That said, the one item I liked the most in my trunk was a blazer from Bonobos, and when I price matched it online it was $90 cheaper on Bonobos.com. I quickly chose to buy it from Bonobos instead. To be fair, I didn’t ask them to match the price, so there is a chance the may have. Regardless, it should be something that is advertised in the box, because at the minimum it reinforces that they aren’t gouging you from a pricing standpoint.

 

More

What’s in a Name: Why the Name Gentleman Standing?

Believe it or not, the name Gentleman Standing didn’t come from a random name generator or from a tireless search for a URL that wasn’t already taken (the latter is only partly true). The name Gentleman Standing was chosen to indicate a focus on e-commerce and men’s fashion, especially on the growing trend of men shopping for fashion online.

The ability to shop efficiently from the convenience of a computer or mobile device is attracting more and more men to rediscover fashion and to spend more time shopping. Robert Murray, Global Chief Executive Officer of iProspect, recently stated that “The old adage that men hate to shop is being upended by the digital experience. Not only are affluent men shopping online more, but this demographic is doing extensive research, shopping and then purchasing online…”

iProspect recently released a report that there are 19Mil affluent (>$100K HHI) men on the internet, and 98% of them shop online, while 27% make online purchases on a weekly basis and 13% spend more than $30K online on an annual basis. Over half of these men spend at least $4K online per year. There are more fascinating statistics in the iProspect report than I can list in this post, so check out the full report here.

Also, spending on luxury goods by men is outpacing spending by women. Bain & Co reports that spending by men on luxury goods is growing at 14%, while spending by women is growing at 8%. Jean-Marc Bellaiche, a consultant at Boston Consulting Group, stated that “Menswear…remains very underdeveloped compared to the woman’s market, so there is a lot of catching up to do.”

These trends are the core focus of this blog, but it is also an expression of my general interests and life experiences. The name Gentleman Standing wasn’t completely scientific, but hopefully it represents the content of this blog.

More

TechCrunch Disrupt NYC Hackathon: Recap

TechCrunch hosted its third annual Hackathon this weekend. As expected, the NYC hackers were able to complete a tremendous amount of work in the allotted 24 hours. They also regrouped very well to deliver some engaging pitches. There were over 90 pitches in all. Four of the pitches were particularly interesting to me; two that were simply interesting products and two that have the potential to become businesses.

WhizCafe and Pickle are both interesting products that could have various applications in social-commerce. Both could be used to make purchasing decision more social; WhizCafe by allowing you to video chat with an expert, and Pickle by allowing you to poll your friends in a quick “this or that” fashion. Learn more about WhizCafe and Pickle below.

WhizCafe                                                                      Pickle
     

Although the event was mostly a showcase of different products that where hacked together in 24 hours or less, there were a few products that have the potential to become businesses. Most notably, ThingScription and Fantasy Buzzer. ThingScription, which WON the entire event, is a website where you can order a subscription of anything sold on Amazon.com. This was one of the best pitches of the day, but, for me, the biggest issue is that Amazon already does this, its called Amazon Subscribe & Save. That’s not to say that ThingScription can’t beat Amazon at their own game, especially if they can create a better UI, and capitalize on their free publicity from TechCrunch Disrupt. ThingScription’s back-end analytics and business model will also help them remain competitive.

Fantasy Buzzer was the other product that I thought had the potential to quickly become a business. Fantasy Buzzer is a fantasy sports SAAS service. I’ve personally never managed my own fantasy sports team, so I can’t assess how truly breakthrough their solution is. But with >30Mil fantasy sports players in the US, this could be an interesting product for a passionate marketplace. Fantasy Buzzer’s goal of capturing 2% of the fantasy sports market, at $1 per team per league, is not large enough on its own for a venture fundable business. However, it could make for a good lifestyle business and potential product acquisition. We’ll see if the market sees the value as well. Learn more about ThingScription and Fantasy Buzzer below.

ThingScription                                                              Fantasy Buzzer
     

Check out the rest of the pitches here.

More

Internet Week NY: Recap

This past week I had the privilege of attending the Internet Week NY conference. I want to first thank the Internet Week NY organizers for making a student pass available. If only TechCrunch and Business Insider would offer a discount to their conferences as well (wishful thinking).

Internet Week NY is more of a crowd-sourced festival than an actual conference. Founded in 2008 in conjunction with The NYC Mayor’s Office of Media and Entertainment the week long event includes speeches and classroom sessions at IWNY headquarters in SOHO, and numerous other networking and educational events throughout the city. The conference kicked off with a speech on big data from Billy Bean, General Manager of the Oakland A’s. It was fascinating to hear the story of “Moneyball” first hand.

The other highlight was hearing Mitchell Baker, co-founder of Mozilla, speak about the future of Mozilla and Firefox. She seemed to have a clear vision of how Mozilla can become a larger player in the mobile space. The strategy includes using HTML 5 apps to let Mozilla become a platform for future devices. This shouldn’t be a surprising strategy at this stage, but it was intriguing to hear her discuss the future of the platform.

I was also able to attend a few e-commerce specific events: 1.) Recreating Retail: Bringing the In-Store Experience Online, 2.) Etsy: Transforming Search in the Digital Marketplace, and 3.) The Power of Content: How Women Connect, Catch Up and Share Online (relevant to my current internship at Totsy.com). The panels unfortunately confirmed my general dislike for panels. I believe only one comment during the Recreating Retail panel was actually relevant to the topic. The majority of the discussions were dominated by one or two people, and in both cases it was the people who added the least value. I continue to dislike panel discussions.

Overall it was a  great 4 day event and it was good to mix it up with the NYC startup scene during the short time I will be in the city. Now on to TechCrunch Disrupt.

More

1st Week in New York City: 5 Takeaways

1.| Finding short-term (<6wks) housing is hard and expensive, but doable.

After over a month of searching Craigslist and Airbnb for a 6 week sublet, Natalie (my wife) and I flew to NYC without an apt reserved. We used Priceline to book hotels for the first two nights and spent the days viewing and calling on as many apts as we could. LONG-story short, we eventually walked into a real estate brokerage in the W. Village called Citi Habitats. The initial broker at Citi Habitats was unable to help us, but another broker, Sara Neuman, overheard our conversation and recommended us to her friend, whom she had just found a new apt for. Within an hour, we were writing a check and subleasing her friend’s old apt. If we’re ever looking for a longer lease in NYC, Citi Habitats will be the first brokerage we consult. We are forever Citi Habitats customers.

2.| The subways and cabs are fantastic, and it’s great not having to search for parking.

Having the ability to get on an express train and go from the lower tip of Manhattan to the northern end of Central Park in 24min is extremely convenient. Not to mention the access to trains and taxis that exists throughout Manhattan. However, the driving culture that is prevalent in Southern California is not replaceable; there’s no mode of transportation that compares to a drive around Santa Monica or a drive along the coast of Malibu. But, from a practical standpoint, trains and taxis sure are nice.

3.| The energy is contagious.

There is a special kind of energy that comes from living amongst 69,464 people per sq mile in NYC. Their is also a distinct energy that comes from the work hard play hard culture of Los Angeles. Both of these environments are unique in their own way. There is definitely a cultural contrast between East and West coasts. It isn’t all hype.

4.| The Lakers are still better than the Knicks, and don’t blink, but the Dodgers have a better record than the Yankees.

Photo credit: LA Times, IBTimes, Zimbio, Associated Press

Enough said.

5.| Most importantly – Never forget September 11, 2001.

It’s chilling to be at Ground Zero and to live within miles of the site. The memories become even more sobering and real when the people and landmarks that experienced the tragic events consistently surround you. The size and scope of the attacks truly hit home as you walk the streets and become familiar with the area. The picture above (left) features “The Sphere”, which was a statue that sat in the lobby of the WTC. It was salvaged after the devastation and placed in Battery Park in 2002 as a memorial to the victims. Also above (right) is a picture of the current rebuilding efforts.

 

More

Vente-Privée: Still Losing the Popularity Contest in the U.S.

Founded in France by Jacques-Antoine Granjon in 2001, Vente-Privée originated the flash sales model in Europe long before it was popular in the United States.  Mr. Granjon’s company recently entered the U.S. market in 2011; long after other competitors had grabbed major footholds.

Flash sales were first introduced to the US market in 2007 during the financial downturn. Ideeli was first on the scene launching in the spring of 2007, and was then quickly followed by RueLaLa, Hautelook, and Gilt. These flash sales sites were originally focused on high-fashion items for men and women, but they have now branched out to other categories, including wine, travel, kids clothes, and home furnishings. Numerous other flash sales sites have also launched that are singularly focused on one category (e.g. One Kings Lane, Lot18, Totsy, etc.). As I mentioned in a previous post, Business Insider estimates that flash sales in the U.S. will grow from a $1.5Bil market in 2011 to a $6Bil market by 2015. Obviously, Vente-Privée would have been foolish to sit on the sidelines in Europe during the rapid expansion of the U.S. market.

When entering the U.S. market in 2011, Vente-Privée partnered with American Express, and to Mr. Granjon’s credit, he has admitted that it will take time for Vente-Privée to build up its presence in the United States. Prior to the launch, Mr. Granjon was quoted by Business Insider as saying “This is the US. There’s tons of competition, there’s an entrepreneur everywhere, there’s always someone who can do what you do better and cheaper. We have to be very humble. But our goal isn’t to flip this in two years. Our goal is to build something big over the long term.” Granjon was also quoted by DirectorsOf.com as saying “…I want to continue growing…but it is not the main purpose. For me the main purpose is quality of service and having a good offering.”

Although Granjon isn’t focused solely on growth, I can’t imagine he expected the company to grow this slow in the States. As the below chart shows, Vente-Privée is losing the popularity contest by a long shot.

The above chart measures popularity based on unique visitors. This metric doesn’t say anything about the company’s conversion rate or current membership, but as the chart shows, Vente-Privée is only attracting 22k unique visitors a month. This pales in comparison to its six leading direct competitors, who all attracted over 500k UVs. Obviously, using unique visitors as a metric has its flaws, but it is interesting to note how few visitors Vente-Privée is getting on a monthly basis. Ultimately, it is impossible to convert visitors that don’t come to your site.

*UV data from Compete.com

More

North X Midwest 2012: Recap

I attended the NXMW conference last night at the Innovatrium, which is on UofM‘s campus. It was a fabulous event, featuring a YCombinator vs TechStars panel and an after party at Savas restaurant in Ann Arbor. The most notable take away from the event was the speed and quality at which the UofM startup community is growing. I am always surprised by the number of new people I meet at these events who are building exciting digital media and consumer internet companies here in the manufacturing heart of the midwest.

During the event, Jeff Epstein (Zferral, TechStars Alum) and Zach Steindler (Olark, YCombinator Alum) discussed their different incubator experiences, and Ken Wohl (VP Marketing at Benzinga) did an excellent job moderating the event. Fortunately, a fight didn’t break out between TechStars and YCombinator loyalists.

This was my first entrepreneurship event outside of the b-school in months, and it was terrific to be surrounded by all of the sharp people designing products and building businesses in the Greater Detroit area. To name a few, Erick Bzovi and Lance Carlson (co-founders of HealPay) are building a financial services startup that could massively disrupt the debt collection process. Also, I was introduced to Andrew Rauh while using Highlight for the first time in a large group setting. Andrew is a rockstar iOS developer and freshman at UoM who works part-time at Detroit Labs.

Overall it was a fantastic night. Thanks to MPowered, Startup Weekend, and GrowDetroit for sponsoring the event!

Next on the Ann Arbor startup seen: TechArb demo day on April 13, 2012.

Go Blue!!

More