Friday Aug.28, 2020

🍼 Walmart + Microsoft = TikTok co-parents?

_Everyone wants to be TikTok's daddy_

Hey Snackers,

Tom Cruise is burning bridges in a Polish town. The producers of the 7th "Mission: Impossible" really want to blow up an abandoned old bridge in Poland. The town's residents became protective of the semi-forgotten bridge, now deemed an "extraordinary monument." Don't do it, Ethan.

The Dow briefly turned positive for 2020 on Thursday. The Fed announced a new approach to monetary policy that could keep interest rates lower (and loans cheaper) for a long time.

Acquire

Walmart & Microsoft team up in the race to become TikTok's American parents

So many TikTok headlines... So little time. Bytedance-owned TikTok could choose its new American parent in less than 48 hours. ICYMI: earlier this month, President Trump said he would ban TikTok in the US on national security concerns due to its ownership by China's Bytedance. Then Microsoft revealed it was trying to buy TikTok's US operations, and Trump agreed such a deal would avert the ban. He gave Microsoft until September 15 to strike a deal. But wait, there's more:

Last week, Corporate software giant Oracle revealed it was also in advanced talks to buy TikTok's US operations.
On Wednesday, TikTok's new CEO Kevin Mayer quit. LinkedIn update: 23 years at Disney...3 months at TikTok. Womp.
Yesterday, Walmart came out of left field, saying it's teaming up with Microsoft to make a joint bid for TikTok.

Make (or break) Your Day... It's a high-stakes, $30B race against time to become TikTok's American parents. TikTok has been downloaded over 2B times and 100M Americans used it in the past month. This deal would also include ownership of TikTok's Canadian, Australian, and New Zealand-ian(?) operations. Together, Walmart/Microsoft could monetize TikTok's massive userbase to rival Facebook's ad biz. But more importantly...

This is really about Amazon... Amazon is Walmart's biggest competitor in retail and ecommerce. It's also Microsoft's sworn enemy in the cloud computing race. Walmart uses Microsoft's cloud service to avoid giving Amazon's AWS any more dominance. It's also launching Walmart+, a $98/year membership to rival Amazon Prime. Walmart could leverage TikTok's massive ecommerce and advertising reach to sell ads to its suppliers and sell its own products.

See

D2C glasses pioneer Warby Parker is worth $3B after a fresh funding round

Squinting to see if it's an E... Eff, it's a Series F. Warby Parker raised $245M from two Series of funding rounds. The direct-to-consumer glasses pioneer is now reportedly valued at $3B (#tricorn). 10 years ago, Warby revolutionized the glasses game by selling affordable prescription glasses online.

Profit-in-focus: For decades, designer glasses have had ridiculously high profit margins. Say a frame costs $20 to make — eyewear giant Luxottica might sell it for $250. Oh and BTW - there's an extra $200 for certain prescription lenses (total = $450).
Consumer-in-focus: Warby ditched the price-inflating middleman. It cut costs by going D2C (fewer middlemen take profits) and designing glasses in-house (don't have to pay Armani). It passed savings to consumers, offering frames and lenses for a combined price of $95.

I can see clearly now... Besides affordability, Warby's success comes from 3 factors:

D2C customer service: Free home try-on of 5 pairs, virtual AR try-ons, 30-day free returns, and online visits with specialists to extend prescriptions.
Experiential retail: Warby's 125 sleek stores look like the retail versions of a Wes Anderson movie. Barista-like employees approach to say that “Valencia tortoiseshell frames your face perfectly.”
Millennial-friendliness: Warby's cutely-packaged glasses have vaguely endearing names like “Percey,” “Watts,” and “Wilkie." It's also a socially-conscious brand, with charitable initiatives like “Buy A Pair, Give a Pair.”

Warby's biz model could thrive in any economic climate... It sells products that are consistently in demand (eyeglasses, sunglasses, and contacts). In a recession, Warby can win with its affordable offering for a necessity: Helping you see. In a pandemic/lockdown, Warby can thrive with its strong online model. In normal times, Warby's physical retail experiences attract people who prefer in-store shopping.

FYI: On today's Snacks Daily podcast, we chat about why we think Apple should buy Warby Parker.

What else we’re Snackin’

Testy: Abbott Labs just got FDA approval for its $5, 15-minute at-home COVID test — Trump plans to order at least 150M tests for Americans in a $750M deal.
Bling: Tiffany swung back to quarterly profitability as demand from China recovered. Now it has 3 months to complete its $16B merger with LVMH.
Beyonder: Beyond Meat stock jumps after launching an ecommerce site for direct-to-consumer plant-based meat with two-day shipping on all orders.
Throwback: Abercrombie stock surges after the middle-school mall staple reported a surprise profit — online sales surged a toned 56%.
Spotty: Joe Budden is taking his popular Spotify-exclusive podcast off Spotify, claiming the streamer is "pillaging" his audience.

🍪 Thanks for Snacking with us! Want to share the Snacks? Invite your friends to sign up here.

Friday

Consumer spending report.
Earnings expected from Big Lots

Disclosure: Authors of this Snacks own shares of Apple, Amazon, Beyond Meat, and Spotify

ID: 1316350

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Obviously there’s no question that Apple’s $3,500 face computer will have a limited audience and could be a huge flop, but this also doesn’t seem like accurate news.

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