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On December 14, 2015, T commented on Cameron Hughes Wine: fine wine for everyone :

Thanks for the introduction to this interesting business!

As you outlined in the post, Cameron Hughes has two “customers” for which they create value – the high end wineries and the end consumers. I think the value they create for the suppliers is enormous, as they are able to offload excess inventory that would have gone to waste otherwise. It would be interesting to know how much they pay the suppliers (how big of a discount to the winery-labeled wine?) I imagine Cameron Hughes has pretty substantial bargaining power on that side of the equation.

However, the consumer side is a less rosy picture for me. As an unsophisticated wine consumer (which may not be their primary target clientele), I would be skeptical of the quality of the wine if I knew that the wine is sourced from different producers every year.

I would also be wary of the sustainability of this company. It has a fairly low barrier to entry given the asset-lite strategy. One could argue that the relationship with wineries are hard to replicate, but I can also picture a scenario where an incumbent enters a price war with Cameron Hughes and attempts to gain market share by paying suppliers slightly more.

Lastly, I think the risk of supply fluctuation is fairly serious for Cameron Hughes’ business model as well. As we learned from the Chateau Margaux case in MKT, wine production is highly dependent on weather conditions of a given year. Since Cameron Hughes’ suppliers are all concentrated in one region (Napa), the “excess volume” for a given year is highly correlated for all of its suppliers. If there is a bad-weather year for wine production, it is possible that Cameron Hughes will get no wine at all, and vice versa. Hence, the company should think about diversifying its supply risk!

On December 14, 2015, T commented on REVOLVE: Mass Market Need Not Apply :

Thanks for a great introduction to REVOLVE! I have never heard of the company before, but I now know where I’ll be doing my Christmas shopping 🙂

I thought that your comment on their strategy to always be ahead of the fashion trend is interesting, and also very hard to do. It seems like they put a lot of effort into identifying the next big thing in fashion, but how do they ensure they order the right amount of inventory and don’t overstock a particular item? I imagine this would be particularly hard given that they also work with the smaller local designers to ensure authenticity?

On December 14, 2015, T commented on Birchbox: opening new paths for beauty & e-commerce :

Thanks for an interesting post, MC! Birch Box does seem to be the pioneer in the beauty product subscription category, and we see a lot of followers today.

My question is regarding the sustainability of the beauty product subscription model. Perhaps I’m not the target clientele for Birch Box, but I find it hard to picture anyone who would stay in the subscription base for a long time? Especially if Birch Box fulfills its promise of introducing great products consumers. Once the consumer finds the perfect product for him/herself, there shouldn’t be a reason to continue the subscription, right? Perhaps the company already saw that, which is why they have “Birchbox exclusive” products to keep these consumers in the ecosystem.

Thanks for an interesting post on Chipotle. I agree that Chipotle’s efficient service model is exemplary. In fact, there are a number of restaurant chains that are trying to mimic the same food preparation assembly line that Chipotle perfected.

I do, however, question their ingredient sourcing model. The company has long touted their use of local ingredients. They try to use local ingredients (defined as being from within 350 miles away) whenever available, but are forced to use non-local ingredients for a lot of the year given weather constraints. That means they are constantly shifting their ingredient sources based on local availability. That does not seem like an efficient model to me, and may also be the cause for the recent E.coli outbreak in many states. I’d be curious to hear your thoughts on this.