July 27, 2020

A D2C biz inspired by Costco

Italic relies on memberships — not high markups — to make money.
July 27, 2020
The Hustle
TOGETHER WITH
Aircall

Need a little Monday morning procrastination? Fabricius, Google Arts and Culture’s new machine learning tool, translates texts into hieroglyphics. Fabricius even interprets emojis. It’s fun… but some things get lost in translation.

“I need more coffee 🙃” becomes…

… which translates back into “I need 🙃”

But, y’know, it’s Monday. Sounds about right.

The Big Idea

Like Costco? Then you’ll probably dig this new take on DTC.

If there’s one thing that gets our team fired up, it’s innovative business models.

Enter Italic.

This ecommerce brand spent 3 years partnering with manufacturers of the world’s top brands on a product line that sells at cost.

Translation: The company offers 1k+ items, from kitchenware to clothing, but it makes zero profit on each sale. To get the deals, consumers pay an annual membership of $100.

Sound familiar?

The $143B retail giant Costco is famous for charging membership fees and selling products at ultra-low markups. But the membership model isn’t as common among D2C brands.

Italic’s CEO, Jeremy Cai, thinks of his company as “a premium consumer brand running a marketplace that connects consumers directly with manufacturers.”

Cai is inspired by 2 other businesses that have mastered subscriptions: 

  • Netflix capitalizes on its large audience by investing in original content that attracts and retains subscribers. 
  • Spotify disrupted incumbents that relied on a lucrative but outdated model (digital and physical sales).

Italic is seeing bold demand

Italic has a waitlist for new members in the thousands (you can sign up here). With 93% of members breaking even on the first order, it’s probably worth the wait.

We asked Cai if he had any requests for startups that might interest The Hustle’s community.

Here are 2:

  • A company combining land acquisition with prefabricated homes
  • Financing for creators akin to what’s available for ecommerce companies (think Clearbanc)

If you’re working on either of these, reach out to Cai here.

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GP-SOL

Garmin is the latest big name taken out by ransomware

Road warriors using Garmin smartwatches ran into trouble this weekend.

A hacker group called Evil Corp demanded $10m from the GPS giant in the latest high-profile ransomware attack. The feds have been chasing Evil Corp for months.

Garmin said Garmin Connect, garmin.com, and even its call centers were hit.

On Twitter, runners used #garmindown to let the world know that — despite the lack of fresh data — they did work out.

Ransomware attacks are on the rise

According to ZDNet, ransomware incidents quadrupled between 2018 and 2019, making them more common than credit-card theft. 

Analysts say the pandemic could invite more attacks — remote workers rely on VPNs, which are especially vulnerable.

Having a well-developed cybersecurity system is important for young companies, says John Reed Stark, a former SEC internet enforcement chief. 

“If your goal is to someday be bought or to someday to grow or go public,” he says, “you want to surround yourself with sophisticated people early on when it comes to your biggest problems. You want to have the best to help you.”

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Snippets

5 stories to catch you up quick

1️⃣ Congress is pushing back its antitrust Super Bowl — a hearing featuring the CEOs of Facebook, Google, Amazon, and Apple — to Wednesday.

2️⃣ Everlane promised a culture of radical transparency, but the company’s ethically minded image is crumbling

3️⃣ Europe’s economy is on track to bounce back much faster than America’s in the 2nd half of the year.

4️⃣ Apple is giving employees paid time off to vote. 

5️⃣ “My DMs mostly consist of swapping memes.” And more insights from Elon Musk’s big interview with Maureen Dowd.

And 5 more to delight you 

1️⃣ A pair of Taiwanese octogenarians have become global Instagram stars for posing in abandoned clothes left in their laundromat. Style points: +100.

2️⃣ Still want to go to an NBA game? Microsoft Teams will now beam you into the arena.

3️⃣ A British student designed a handheld device that does the work of a guide dog.

4️⃣ Thought your tiny house was cool? Try living in a tiny orb

5️⃣ The Hagia Sophia is undergoing a lot of changes, but its Instagram-famous cat named Gli will be allowed to stay put.

SPONSORED

Sales culture, it’s a-changin’ 

The floors are empty. The phones are quiet. The gongs are un-banged. 

Yep, this whole remote work fiasco has been a curveball for everyone — none more so than sales teams, who typically thrive on hectic environments and the energy of their coworkers. 

Lucky for us, Aircall and HubSpot joined forces to put out this free guide to help your sales team stay one step ahead of all the changes. 

Download “Selling in Uncertain Times”.

It covers every change in remote sales front-to-back, including:

  • Best practices for remote selling
  • How to keep your reports happy as a newly-remote manager
  • Smart workflow and accountability tools for your team

It’s great for sellers, helpful for managers, and indispensable for anyone tasked with keeping a remote sales team on track for their goals.

Here’s your guide →
Hot and Cold

The hottest thing in real estate is cold storage

Ordering groceries online? Every time your pint of Chubby Hubby arrives unmelted, you can thank 2 kingpins of cold storage — Americold and Lineage Logistics.

Cold storage is a pretty chill gig: For decades, the 2 specialists have had the market pretty much to themselves

But now the industry is heating up

The average cold storage warehouse is entering middle age. Because of the pandemic, we’re cramming more and more produce into them.

With online grocery sales booming, some analysts say we could need 50% more cold-storage space in the next 5 years. 

Could the freezer titans get iced out?

Real estate giants like PGIM are investing millions in the red-hot biz. The $98B industry will expand by more than 12% each year through 2025, one report said.

The booming business does more than just keep your ice cream cold. All those peanuts that aren’t being sold in ballparks? They’re waiting out COVID-19 in giant warehouse fridges.

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Not A Trick

Put down your jack-o-lanterns. Halloween might be taking this year off.

When Kit Kat released its pumpkin-pie-flavored wafers this month, I thought Halloween 2020 couldn’t get spookier. I was wrong. 

It’s not even August, but based on a series of frightening headlines, Halloween might already be over:

  • Only ~27% of parents are planning to take their kids trick-or-treating, according to a new poll. 
  • The sweets specialist Hershey’s racks up ~10% of its annual sales from the holiday. But it’s bracing for an exodus of Halloween buyers.
  • Universal Orlando canceled its annual Halloween Horror Nights, a month after Disney World kicked its own Halloween festivities to the curb. 
  • Even the studios are spooked: Horror films like Halloween Kills and The Forever Purge are running scared to 2021

It’s a wicked turn of events for the candy, costume, and decoration companies that rake in almost $9B — including $500m from outfits for pets — every Halloween.

If your costume-making friend looks like they’ve seen a ghost, those numbers might be why.

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THE BIG NUMBER

Please welcome our pixelated overlords: Startups that create virtual humans have topped $300m in VC funding. 

Digital stars like Lil Miquela and a fake Deepak Chopra just hosted their own Zoom conference, called the Virtual Beings Summit. The event was a victory lap of sorts for the emerging industry.

(Source: Wired)

SPONSORED

A $10K investment in 2016 Shopify and 2012 Tesla would have bagged you how much?

Oh, just $917,441.

Guess we should’ve been following The Motley Fool’s recommendations all along…   

  • Tesla (+4,672%): In 2012 — before a single Elon tweet could make or break the economy — they recognized the potential of electric cars.
  • Shopify (+4,303%): In 2016, an uptick in eCommerce caught their eye, and they predicted the rise of Shopify.

Now, they’re noticing a similar demand for the new 5G surge — and they think this company is the next big winner.

See it here →
Small Business Stories

A snack company hatched in a basement rises to $1.8m in annual revenue

Samy Kobrosly, co-founder of Snacklins, describes his company’s story as “a joke that got way too big.” 

During a late-night basement hang, he and his friends whipped up a vegan pork rind so Kobrosly — a Muslim man — could try one. 

He passed out samples at a friend’s brewery. Someone told him if he put them in a real bag with nutrition facts, he could sell them. Pretty soon, he was pitching to Whole Foods. 

Years later, the pseudo-pork snacks are bringing home the bacon to the tune of $1.8m a year. Clocking in at 80-90 calories per bag, Snacklins are a solid option for the healthy snack revolution.

Snacklins earned a $250k buy-in from Mark Cuban on Shark Tank, in exchange for 5% straight equity and 5% of advisory shares.

Kobrosly attributes the company’s success to a quality product and a DIY mentality, refusing to outsource production or marketing. Up next: Expansion into new markets like Boston and LA, teaming up with regional grocers.

  • Founders: Samy Kobrosly
  • Employees: 20
  • Years in business: 4
  • Cost to launch: $100
  • Funding methods: Personal savings, friends/family contributions, venture capital
  • Operating costs: $480k
  • 1st-year revenue: $10k
  • Current annual revenue: $1.8m

Want your story featured? Fill out our Small Business survey. See startup stories and financials on hundreds of companies by subscribing to Trends.

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How You’re Getting By

“I’ve been propagating the same 2 plants since mid-March, which has led to the scattering of ~22 mason jars, wine bottles, shot glasses, and hastily-scissored Gatorade bottles around my room in an attempt to yield more plant babies. I can’t bear to think of letting a trimming go to waste!”

Helena Starrs, Queens, NY

How are you coping with the pandemic? Send us your story, and we’ll share the best ones here.

TRENDS

You know the saying…

“You are the average of the five people you spend the most time with”. 

Well, in a COVID-era, most of the people you engage with are online. And even though you may miss the serendipity of running into a Starbucks stranger, the Internet allows us to self-select… it allows us to surround ourselves with the best. 

That’s why we love the Trends community. Everyday, we notice new folks in the community that inspire us.

Andrew Warner joined this week. There was an AMA with Josh Wolfe. And we’re pretty sure we saw Kevin Kelly sign up for a trial. And this is just a normal week.

Try Trends for $1 and get access to all of our previous AMAs, including founders of Vungle, Recess, Jucy, Gleam, Hydrant, and more. And of course, the opportunity to recalibrate your “five”. 

Join our community →
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