WHAT HAPPENED: Simon Property Group, Neiman Marcus, Sephora and Barney’s all want a part in the CBD and cannabis craze taking over the wellness economy, despite skepticism from health professionals, legal scrutiny and the risks of buying into a viral trend.

Why it matters

  • As CBD continues to woo consumers, Simon Property Group is embracing the trend, opening its doors to Green Growth Brands, a CBD product retailer, which will forge an offline footprint at 108 of the company’s U.S. malls. While Neiman Marcus and Sephora have also pivoted to selling CBD brands, Barney’s is taking on its cousin, opening a permanent “cannabis lifestyle shop” called The High End in Beverly Hills in March.
  • CBD’s purported health benefits continue to raise skepticism, and the FDA still dictates that CBD is illegal when used as a food additive. At the same time, there is great confusion emanating from consumers about the effects of CBD and cannabis, not to mention the difference between the compounds. Luxury retailers’ interest in this market raises questions about their intentions—is it simply to grasp at relevance in a fast-changing consumer economy?—but may be poised for greater success than other players in the consumer economy. Their reputation as established, premium brands will help cultivate trust with consumers trying out these products for the first time, as long as the price point doesn’t dissuade them. Still, these retailers need to place education at the forefront of retail. Barney’s is thoughtfully limiting the number of cannabis accessories, edibles and beauty products sold online through The High End to prevent cannabis misuse and others should follow suit.

2) Public Goods wants to compete with Whole Foods and Trader Joe’s, but it looks a lot more like Brandless.

WHAT HAPPENED: Public Goods, a direct-to-consumer CPG brand that launched in 2015, wants to position itself as a brand that sells healthy, affordable products in the same vein as natural grocery stores, but it looks much closer to Brandless.

Why it matters

  • Both Public Goods and Brandless are attempting to build a one-stop shop for essentials without the brand tax and they’re doing so in eerily similar ways. Public Goods launched with personal care products, later expanding to household goods and non-perishable foods—the company now releases new products on a weekly basis (it has 107 SKUs in all, the majority of which are $3-5, though prices can rise up to about $36). The company also claims it has tens of thousands of members who partake in its $59-a-year membership program. Brandless, which was founded in 2017, sells 400 SKUs, most of which are only $3, and began offering a yearly membership in January 2019 for $36.
  • Even if Public Goods aspires to be associated with the likes of Trader Joe’s and Whole Foods for selling healthy, high-quality products, the company doesn’t look like it’s entering the grocery delivery business any time soon. It also has to be careful about relying on expanding its product assortment as a means for growth—or growing it too quickly before establishing a devoted customer base like Brandless did, which was part of the reasoning behind launching a membership program last month. Public Goods claims that it’s seen most traction selling its products to consumers outside of New York City and Los Angeles where high-quality but affordable household items aren’t as widely available. Positioning itself as premium without the markup for these shoppers may be the best route for Public Goods to compete with Brandless, which focuses more heavily on its lower price point than anything else. But regardless of how the products from either company are marketed, it’s unclear if these low price point items can really scale and sustain online only given rising advertising costs.

3) Lawless Beauty’s Sephora expansion provides a foil to Fenty Beauty, raising questions about how third-party brands can balance exposure at the beauty retailer while forging a sustainable, multichannel retail strategy.

WHAT HAPPENED: Lawless Beauty has yet to fundraise, but may require external capital for its planned expansion at Sephora—a microcosm of the risk the brand faces if it focuses too heavily on wholesale moving forward.

Why it matters

  • Lawless Beauty first entered Sephora in March 2018—only five months after its 2017 debut. Participating in the Clean at Sephora program, Lawless will double its exposure from 25 to 50 stores in March, and then to all of the retailer’s 320 U.S. locations by the end of 2019. It will also increase its Sephora-specific product assortment threefold (72 SKUs), which will be placed in its own gondola in stores. Lawless will continue to integration into Sephora’s system, planning to manufacture samples that the retailer will sends through its booming sampling and loyalty programs.
  • This setup provides Lawless with online and offline visibility at one of the U.S.’ biggest cosmetics retailers, without necessitating an exclusive partnership (outside of Sephora, Lawless currently sells some of its SKUs at both Neiman Marcus and Bergdorf Goodman). It’s seen notable growth at (and thanks to) Sephora, which has prevented the brand from having to raise any external capital. But to move to all 320 Sephora locations in the U.S., Lawless may need a Series A round—the retailer isn’t helping to finance this expansion like it would for a private label such as Rihanna’s Fenty Beauty. Lawless may be featured like Fenty in Sephora’s stores, but it doesn’t get the same perks as the private label and will likely continue to face working capital challenges in its wholesale partnership, particularly when it it comes to the long lead times between when Lawless must pay its manufacturer for inventory and when Sephora pays the company back. As it grows, Lawless will have to be thoughtful in its allocation of resources to prevent a multichannel strategy that skews too heavily at Sephora and thus prevents the brand from establishing higher-margin direct-to-consumer sales, or even owned retail, later on.

4) MeUndies has podcasts to thank for helping it sell nearly 9 million pairs of underwear in five years.

WHAT HAPPENED: MeUndies realigned its ad budget in 2014 to focus more heavily on podcasts than Facebook ads—and it hasn’t had to raise external capital since.

Why it matters

  • Today, MeUndies spends one-third of its marketing budget on podcasts—one of the company’s biggest expenses—which it credits largely for its expected $75 million in 2019 sales. The company’s founder and CEO notes that he views podcast ads like product referrals from a friend—something it has milked with celebrities like Conan O’Brien and Anna Faris. While podcasting isn’t a cure for all consumer brands, MeUndies’ focus on comedians utilizes them like influencers, which matches well with its fun-loving brand aesthetic.
  • But more importantly, MeUndies’ pivot away from Facebook is a lesson for other brands to seek out less-trampled marketing ground, and avoid rising Facebook ad costs. Facebook and its acquiree Instagram are convenient advertising channels where most consumers spend time, but it’s increasingly difficult for companies to stand out in the space. The podcast market, on the other hand, is significantly smaller than the digital ad market, but can narrow exposure to targeted demographics based on age and interests in a productive way, making it a more cost-effective approach. Men’s shaving brand Bevel, for instance, turned to podcasts, particularly in its early marketing strategy, which boosted word-of-mouth growth.