In terms of the analysis you provided of the various ways that Birchbox could leverage data analytics, I was most intrigued by your point (iv), optimizing relationships with manufacturers. Long term, I am skeptical about the sustainability of Birchbox’s business model, particularly given the proliferation of free sampling in the Beauty industry, the entrance of power players like Sephora (as you referenced), and the increasing cost of acquiring new customers to the Birchbox business. It seems that one of the only competitive edges that Birchbox has available is to be the preferred partner of beauty manufacturers, by offering unique, data-driven products for the brands themselves. Birchbox has been a compelling way for brands to launch new SKUs, as the model encourages trialability and incentivizes consumers to review the new product. If Birchbox could bundle these behaviors with additional data on the consumers who were receiving the product, thus allowing the brands to later directly remarket to those who had received the sample, they might be able to differentiate themselves as a partner.
I think what makes this issue so interesting, particularly given the company you have chosen to highlight, is the backlash that Nike has faced for decades in light of “sweatshop” allegations. For a company that has such a dubious reputation regarding labor practices to now be pressured to bring these same jobs back to the U.S. via reshoring is truly bewildering. From a lobbying perspective, it will be interesting to see how various political groups shake out in terms of supporting U.S. job creation versus a “not in my backyard” mentality regarding mass apparel manufacturing and the traditional labor conditions associated with the industry. Thanks for such a thoughtful and provocative piece.
I was intrigued by the final question that you posed in your challenge. With regards to the potential benefits (i.e. revenue upside), I think it is important to consider that real-time inventory visibility has significant implications for pricing / discounting, in addition to providing value to the consumer. More specifically, if Nordstrom invests in ship-from-store capabilities (as many retailers/department stores are doing), they will be able to use their own stores as “mini-warehouses” to fulfill their robust e-commerce business. If inventory isn’t moving within a certain store (either due to macroeconomic conditions, poor buying/merchandising decisions at the store level, etc.), it can be routed from stores and shipped to the customer who placed an e-commerce order. Ideally, the item is still sold at full-price, and doesn’t need to be marked down in order to clear the store inventory to make room for the next season. This flexible fulfillment, enabled by the digitization of inventory, has the potential to significantly increase revenues by maintaining margins!
Thanks for the great article. I can’t help but consider this issue from a marketing perspective — specifically, which channels do you think will be key to making this product successful? Given the consumer skepticism you referenced, trialability of the product seems important to grow consumer trust. Restaurants seem like an easy way to expose consumers to alternative meat products with relatively low commitment on their part, but what profile of restaurant would be willing to be an early mover in this space? High end? Health-concious? Particularly without a clear value proposition around (1) health, or (2) price, sustainability may not stand alone as a selling point. I would love your opinions on which channels and key opinion leaders must be won first, in order for this product to successfully diffuse in the market.
As a thought experiment, I found it helpful to compare and contrast this to the IKEA case, in which we considered the possibility of IKEA further verticalizing their supply chain by investing in more forests. As your article pointed out, smallhold coffee farms are an important source of livelihood for some of the world’s most marginalized communities. It was interesting for me to consider what would produce the most net social good in the context of sustainable coffee farming — Nespresso developing it’s own coffee farmlands (providing complete control over sustainability issues, but displacing the role of small farmers) vs. supporting existing farms with the above-average wages referenced in your case. I wonder if this is indeed a tradeoff that must be made, or if there are ways to optimize for both objectives?