Back to school! But more importantly, I have some breaking news: Chase Sapphire Reserve fees will be increasing to $550 per year for the next billing cycle 😭.
It’s not all bad though, Chase also added a few new perks as well:
One free year of Lyft Pink (which normally costs $19.99 per month) that includes a 15% discount on all rides, free bike/scooter rentals each month, priority airport pickups, and more flexibility when it comes to ride cancellations.
10x points on all Lyft rides paid for with the Chase Sapphire Reserve - equivalent to a ~20% return.
One free year of DashPass (free deliveries on orders greater than $12). Cardholders will also get $60 in DoorDash credits in 2020 and $60 in DoorDash credits in 2021.
I feel my new year’s resolution to eat healthier slipping already…
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Magic Spoon 🥣
One of the first things I did after moving out for college is binge eat sweet cereals. My mom was a food scientist and sugary delights such as Lucky Charms were off-limits growing up.
After getting my fix freshman year, I realized while these cereals may taste great, they are awful for you. One cup of Frosted Flakes has almost 15 grams of sugar in it!
But what if there was a cereal brand that tastes just like the cereal you loved as a kid, but with 1/5th the sugar? *Magic Spoon has entered the chat.
Magic Spoon comes in frosted, fruity, and cocoa flavors that cost $10 (yes, I know that’s a lot) a box. As a sweet tooth aficionado, however, I had to order some. Stay tuned for my review in a later issue.
Andie 👙
What: Andie is a direct-to-consumer swimwear brand focused on fitting all body types.
Who: Andie was founded by Melanie Travis in 2016 when she became frustrated with the lack of non-bikini options for swimwear.
Why: Because (so I’ve been told) trying on swimsuits is not super fun for women - rifling through disheveled piles only to try on a wrong size in either unrealistically dim or fluorescent lighting that doesn’t at all represent how it will look IRL.
How: Tops and bottoms cost ~$40-$50 apiece.
Lillian Shalom 💍
While many of the brands I feature have a sensible product-market fit, every once and a while I discover a brand that’s pushing the boundaries of sanity in its category. This is the case with Lillian Shalome’s jewelry.
Endorsed by big-name celebrities such as Lady Gaga, Lillian Shalome creates custom-fitted rings and pendants that often look more like an elaborate spy-villain weapon rather than jewelry.
Most pieces cost $500+. Be careful.
News I’m Following 👀
👜 Amazon is launching a luxury fashion platform in the first half of 2020. Brands will pay a fee for a “storefront” on the platform that they have complete control over. Amazon will provide the logistics around delivery and returns.
I’m intrigued how these “storefronts” will look - as I mentioned in a previous Intangible, one of the big reasons luxury items don’t sell on Amazon is due to the proximity of very non-luxury items, such as toilet paper. If Amazon can distance its association with boring household items, it may work.
🌐 40% of Americans shopped at a direct-to-consumer brand in 2019. As the number of direct-to-consumer brands continues to grow, I predict this percentage will only rise.
Notable categories for DTC purchasing over traditional retail included health and beauty products (35%), apparel (34%), and tech and gadgets (26%). The leading reason for choosing DTC over a traditional retailer was cost (48%), followed by fast, free shipping and easy returns (43%).
Via Retail Dive.
💳 Gift card breakage income is a massive moneymaker for companies. For the 13th straight year, gift cards were the most gifted item this holiday season. Too bad millions will never be redeemed.
This phenomenon is called breakage: after 6 to 24 months (depending on several factors), companies can record unredeemed gift cards as normal income. In 2017 the breakage income at some companies was staggering:
Starbucks: $105m = 57m cups of coffee
Best Buy: $37m = 148k Smart TVs
Home Depot: $34m = 493k cordless drills
Outback Steakhouse: $26m = 1.4m 11-oz. sirloin steaks
Dunkin’ Donuts: $22m = 22m donuts
Chipotle: $4m = 615k burrito bowls
You’d best put that gift card in your wallet/purse ASAP.
Via The Hustle.
Brand Study: Starbucks 🧜♀️
Images via Starbucks
As someone born and raised in the Pacific Northwest, the smirking green mermaid has been an omnipresent character in my life since I can remember.
My dad, a stalwart coffee drinker, praised their “no-compromises” dark roast flavor since the early 90s and still drinks a cup each morning today. The smell of freshly brewed coffee served as a preliminary alarm clock growing up as it wafted into my room around 7am every morning.
In undergrad, I began my own habit by rewarding myself with a Grande Latte on mornings when I had to endure a particularly dense engineering lecture. Even today the emerald denizen of coffee finds a way into my schedule while on campus at Ross.
These days I think their coffee flavor is everything but compromised - yet their brand is one of the most widely known in the world. And it’s very much associated with luxury - one Millenial journalist proclaims the $20,000 she’s spent on Starbucks in her adult life is “the tiny dose of luxury” that keeps her going each day. While I’m not sure I agree with her, that’s still mindblowing. How did they do it?
Starbucks was founded by Jerry Baldwin, Gordon Bowker, and Zev Siegel in 1971 as a no-frills coffee shop across the street from Pike’s Place Market in downtown Seattle. They all had two things in common: they all loved coffee, and they all came from academia. One of their favorite classic novels was Moby Dick, so they named their store after the first mate “Starbucks” in the story (“Pequod” - Captain Ahab’s ship - was their second choice).
The partners were inspired by another coffee-roasting entrepreneur - Alfred Peet, and they modeled their business after his success in Berkeley California. They focused on selling high-quality beans and brewing equipment, with flavor the paramount goal in their roasting.
By the early 1980s, they had opened four stores in Seattle and had begun to attract a cult-like following. This is when Howard Schultz entered the picture. For those familiar with the movie, The Founder, his story has striking parallels to Ray Kroc’s.
Schultz was a sales representative for Hammarplast (a Swedish kitchen equipment company) that had Starbucks as a client. He was so impressed with the quick growth of their order sizes that he decided to visit Starbucks HQ and meet the founders. Their connection was immediate, and Schultz was hired on as their new head of marketing.
In 1983 Schultz traveled to Milan to attend an international kitchenware convention. While in Milan, he was impressed with the city’s style of coffee and cafes: small restaurants where Italians congregated to socialize and drink espresso. Schultz recognized this as a huge opportunity in the US, as cafes serving espresso simply did not exist.
Upon returning to the US, he tried to convince Baldwin and Bowker to begin serving espresso and open up seating areas, but they did not want to deviate from their traditional model of business - serving drip coffee and brewing equipment.
Ultimately Schultz left Starbucks in 1985 and founded his own coffee chain called Il Giornale. He opened his first store in the lobby of Seattle’s newest, highest office skyscraper, the Columbia Center. He saw immediate success and quickly expanded to multiple city centers in the US.
In 1987 Baldwin and Bowker decided to sell Starbucks, and Schultz was ready. He used the capital he made from Il Giornale and combined operations under the Starbucks brand. He committed to the cafe model he fell in love with from Milan, and Starbucks began its meteoric rise as the defacto coffee shop.
So what makes Starbucks such a valuable brand?
Standardized look and feel: Starbucks has invested significantly in ensuring the customer experience is consistent no matter which Starbucks you go to. Everything - from the music that’s being played to graphics on the cup you’re served - is dialed in to make you think “I’m at Starbucks”.
Positioning: Before Starbucks, coffee was cheap. Drip coffee hovered around $2 (or the time period equivalent) for most of the 1900s. But with the introduction of espresso, coffee drink prices shot up to be over $4 for most beverages on the menu today.
Habit-forming: Coffee is objectively addictive, but Starbucks has cultivated an addictive brand around forming a habit of treating yourself. They’ve also expanded the options for non-traditional coffee drinkers to get their fix of caffeine at any time of day.
Third place association: Starbucks pioneered the “third place” (the space outside of your home or work that you spend time) revolution. People associate going to Starbucks to socialize, write newsletters 😉, do job interviews, or anything else that they don’t want to do at home/work.
Starbucks in 2020 is ubiquitous with fast coffee. They have over 28,000 locations worldwide and made almost $25 billion in 2018. I would bet many of you have been to one in the past week.
But what people many people forget is that their founder thought of their original product as “courageous for being niche”. This is one of the principles that stuck with me the most after learning Schultz’s story. As he said in his memoir:
“Often times you have to create the thing you want to be part of.”
Jobs 💼
Harry’s - Director of Growth Marketing (NYC)
Rothy’s - People Operations Manager, Marketing Analyst (SF)
Bombas - Senior Acquisition Manager (NYC)
Peloton - Senior Acquisition Manager (NYC)
Allbirds - Director of Brand Marketing (SF)
Alleyoop - Lead Product Manager (LA)
Internships 🎓
Dominos - MBA Marketing Internship (MI)
YETI - MBA Operations Internship (ATX)
Lucasfilm (not consumer products, I know… but still cool) - MBA Analytics Internship (LA)
Ibotta - MBA Marketing Internship (DEN)
Shareables 😏
🎵 What happens when you mix DraftKings with Rap? You get Clouty.
💁♀️ The rise of Gen Z: The Hype House and the Los Angeles TikTok Mansion Gold Rush.
🧊 What’s cooler than being cool? Ice cold. Why people associate ‘cold’ with luxury products.
🙅♂️ What’s the opposite of FOMO? JOMO: The Joy of Missing Out.
🤑 Did you know grills often go on sale in March? Here’s when everything will go on sale in 2020.
😅 How anxiety traps us, and how we can break free. Courtesy of Harvard Business Review.
📺 Advertising nerds rejoice! AdWeek’s 25 best ads of 2019.
💪 Ah January, the time of year when the gym is a nightmare. Here’s an interactive website for learning new exercises for each muscle group.
⛷️ The biathlon: A sport invented from Norwegian skiing warfare.
🏢 This week’s oldie but goodie: The American Dream - a hilarious (true?) story of an employee’s ascension of the corporate ladder only to be left behind as a manager without a team. Internet literature nirvana.
Hey! I’m Sean, a first-year MBA at the University of Michigan. Know of a new brand I should feature? Holla at me! I’d also love your feedback - feel free to shoot me a note at seansky@umich.edu.
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