1) Sweetgreen aims to become a $1 billion salad empire, but will have to scale sustainably to maintain its image.

What happened

  • Sweetgreen, the fast-casual salad chain founded in 2007, has grown to approximately 90 locations across California, Illinois, Massachusetts, Maryland, New York, Pennsylvania, Virginia and Washington, D.C. The brand specializes in sourcing local ingredients and cycling a seasonal menu, along with standard favorites that have built a reputation for the brand as premium, but accessible. Between 2014 and 2015, Sweetgreen’s revenue grew from $50 to $75 million with only 39 stores.
  • Now the company is pursuing a $200 million fundraise led by Fidelity Investments that would value the brand at more than $1 billion. In the past, the company has stated that it wants to become bigger than $12 billion Chipotle—a “farm-to-counter empire.” It has plans to reach 100 stores by the end of 2018, and recently was the first restaurant to open in the Hudson Yards development in New York City—coveted space for the dining industry.

Why it matters

  • To date, Sweetgreen has raised a total of $100 million. Few dining establishments have achieved near $1 billion valuation in the fickle food industry—Shake Shack, is one exception, initially valued at $1.6 billion after raising $105 million to go public in 2015. But Shake Shack also exercised an international footprint at that time, whereas Sweetgreen only exists in seven U.S. states and the District of Columbia.
  • The company has yet to elaborate where it plans to direct new funds, but it will likely seek to expand its physical presence and lean into expanding its tech-driven operations. Sweetgreen stores stopped accepting cash payment in 2017 and the company has also experimented with delivery at outposts within office buildings so that employees don’t need to leave to pick up lunch. The company says that online ordering revenue is rising 80% year over year—by the end of 2018, 1 million consumers will utilize its digital platform (launched in 2013), and more than 50% of orders will start online or mobile. (This also suggests that Sweetgreen has successfully attracted a devoted younger and more digitally savvy customer.) In contrast, Chipotle, which launched its app four years before Sweetgreen, sees only 8.5% of orders from digital channels. Still, Sweetgreen will have to scale responsibly to maintain its image and execution of a transparent, localized food business.

2) Shopify courts larger businesses, but shouldn’t follow in the footsteps of Amazon.

What happened

  • In its Q3 2018 earnings report, Shopify points to a growing revenue opportunity from its larger vendors. Called Plus accounts, these businesses comprised 24% of the Shopify’s total revenue in the last quarter, or $9.2 million of $37.9 million. In September 2017, Plus accounts made up 20% of the company’s overall revenue. These accounts include businesses like Tommy John, Victoria Beckham, Kylie Cosmetics and K-Swiss, along with brands owned by large companies like Unilever, Nestlé and Pepsico.

Why it matters

  • Shopify is a $17 billion company, but wants to heighten its value by taking on larger accounts, especially in the face of competitors like Amazon, which is honing in on big business. Shopify offers appealing resources to bigger vendors like logistics management and fraud protection, but has also forged a reputation as the go-to marketplace for small, nascent sellers (those that earn $100 million or less in annual sales). This is particularly true of its new brick-and-mortar space in Los Angeles, which offers education, consulting services and community events.
  • This in-person relationship, as well as Shopify’s more hospitable policies toward smaller vendors, have differentiated the marketplace from Amazon in terms of third-party sellers. In fact, as Amazon courts larger vendors, it has faced rising criticism about its aggressive seller policies. One study found that out of 1,200 small vendors on Amazon, 26% had plans to sell on Shopify as well, in order to avoid competition with Amazon’s private labels and access better seller privileges—a shift that Shopify should milk as much as it can.
  • Shopify’s intention to grow its larger accounts makes sense for growth, as well as its quest to expand more internationally (as of now, most of its vendors are based in North America). If Shopify is able to balance obtaining and managing large business accounts with providing for the small, direct-to-consumer brands that continue to flock to the platform, it will be able to capture a significant share of the market. But Shopify should take pains not to snub smaller vendors, as this relationship currently differentiates it from Amazon.

3) Banana Republic will launch a Cos Bar shop-in-shop, but risks dependence on the beauty brand.

What happened

  • Gap has seen its lower-priced Old Navy brand grow, while its namesake brand and Banana Republic flounder. But in order to buoy the latter—and especially to acquire and retain customers—Gap is opening Cos Bar shop-in-shops at its San Francisco flagship, hoping that shoppers will stop in for beauty and leave with apparel and accessories. The shop-in-shop will be about one-third the size of a typical Cos Bar store, and Cos Bar employees will man the station. Products will include luxury items and a cheaper line.

Why it matters

  • Banana Republic isn’t the only brand Gap is working to catalyze new growth. After seeing its women’s activewear brand Athleta attract higher sales than some of the other brands in its docket, Gap plans to launch a men’s counterpart, Hill City, within Athleta stores.
  • Turning to beauty makes sense for Banana Republic—cosmetics is a burgeoning industry and one that has infused fresh growth into other struggling retailers such as JCPenney, which operates Sephora shop-in-shops (one of the best-performing segments at the department store). But Cos Bar is an odd match for Banana Republic. Though Banana Republic’s price point is higher than that of Gap or Old Navy, Cos Bar is a luxury cosmetics boutique that sells high-end brands like La Mer and Tom Ford, which are likely aspirational to many Banana Republic shoppers.
  • In the same vein as JCPenney, Cos Bar may attract new customers to Banana Republic stores, but these shoppers won’t necessarily be interested in the apparel brand—Banana Republic will simply become a receptacle for Cos Bar, or serve as a Cos Bar destination. And even if Cos Bar rejuvenates Banana Republic in San Francisco and the shop-in-shop expands to more locations, the company risks reliance on an external brand instead of addressing problems endemic to Banana Republic itself.

4) Streetwear-meets-luxury retailers End Clothing and The Line suss out the new department store.

What happened

  • Since launching in 2005 with ecommerce and brick-and-mortar, End Clothing has remained a trailblazer in uniting luxury with streetwear. The retailer, which recently opened a flagship store in London, has sold luxury brands (Balenciaga, Valentino), along with emerging streetwear brands (Off-White, Gosha Rubchinskiy) and activewear brands (Nike, Adidas) from the very beginning—long before other department stores or high-end boutiques embraced a high-low mix. End has also centered its in-store experience around “the drop,” garnering lines as long as 500 people, and bringing a similar concept offline—a raffle for new, exclusive sneakers.
  • In addition, The Line is a leader for its innovative retail concept, The Apartment—a personalized home-meets-store in New York City and Los Angeles. While The Line plans to shutter its New York location in February 2019, it will continue operating both its ecommerce site and Los Angeles Apartment.

Why it matters

  • Through its drops and raffles, End has built a community that rivals competitors like SSENSE and MatchesFashion, even though the latter two companies have significantly higher revenue—End’s September 2018 web traffic hit 7 million compared to 5 million at SSENSE and 3 million for MatchesFashion. At the same time, legacy players are only beginning to jump on some of the concepts that End and The Line embraced early on. Barneys, for instance, launched “The Drop at Barneys” in 2017—a two-day experience featuring exclusive luxury items, a capsule collection, food, workshops and entertainment. This concept not only emulates the drop model popularized by brands like Supreme and retailers like End, but also echoes the experiential and exclusivity-minded shopping event adopted by retailers like The Line, whose Apartment welcomes consumers to an intimate setting and offers private appointments.
  • Two of the rising stars in luxury-meets-streetwear retailing, End and The Line are joined by Farfetch, Net-a-Porter, Grailed, MatchesFashion and SSENSE (many of these retailers also share investors). Net-a-Porter and Farfetch capture much more of the market with their robust, global ecommerce operations—and they have revenues to match. But as the inventories sold by each of these retailers increasingly overlaps, only the companies that provide something unique will stay relevant. If End and The Line are able to continue feeding their brick-and-mortar channels with personalization and exclusivity, they’ll set themselves apart as experience- and community-driven retailers, instead of simply moving the department store online, which has little defensibility in the long run.