New threats to retail. JAB vs. Nestle. Sequoia's e-commerce bet.
Seizing the means of production
From the printing press to the internet, new technologies tend to threaten middlemen.
Hundreds of direct-to-consumer startups have threatened retailers over the past few years, using the power of their brands to reach out to shoppers without relying on Macy’s, Walmart, or other third-party retailers.
Will the next step be to cut out brands altogether?
This week, investors backed several startups that connect shoppers directly with producers.
(Here, I’m not talking about private labels, or about startups like Brandless, which positions itself in opposition to big brands but which is really a brand in itself).
DFF #1: Direct from factories
In retail, the trend birthed a unicorn. Sequoia Capital China led an investment yesterday into Jollychic, a Hangzhou-based e-commerce startup that lets Middle Eastern shoppers order unbranded products from Chinese factories.
Jollychic sells unbranded clothing, unbranded cosmetics, and even generic electronics. The startup had raised just $35M before yesterday’s deal, which valued it at $1B.
High-momentum startup Wish (also a unicorn, with $718M raised and a valuation headed toward $8B+) brings the same Chinese factory connection to US shoppers.
DFF #2: Direct from farms
On a smaller scale, startup CrowdCow raised an $8M Series A last week led by Madrona Venture Group, with participation from Ashton Kutcher and others.
CrowdCow lets people order specific cuts of specific animals directly from farms.
It’s more than just a way to learn about your friends’ weird preferences for animal parts (not an authorized company description) — it connects shoppers with independent farmers, and only charges them for their share of the animal once the whole animal has been bought.
With its model, CrowdCow cuts out both retailer and brand (e.g. Tyson or Smithfield).
Similar direct-from-farm meat startups include ButcherBox, which just announced a new $10M packaging partnership, and Porter Road, which raised $3.7M last week.
Interestingly, direct-from-factory shipments erase the stories associated with products. In contrast, direct-from-farm platforms attract shoppers by serving up narratives, highlighting the farms, farmers, and animals behind the food.
Narratives (in the food space) and lower prices (for other consumer goods) have drawn shoppers toward DFF platforms and away from traditional brands.
To get ahead of the small but growing threat, incumbent brands could consider acquiring these platforms. They could also focus on transparency around their own sourcing, shipping, and pricing.