One Step Up #51
This week, we look at Farfetch, Luxottica, Active vs. Lazy Thinking, in-stadia advertising, the semiconductor industry
The antidote to failure is active thinking. Force yourself to think in clear, verifiable hypotheses, and obtain data that validates or refutes those hypotheses. Ensure to ask questions, challenge assumptions, and identify where the real bottlenecks and constraints are. It is the only way you will be able to sort through the noise to identify the reasons you failed. On the other hand, lossy information transfer (see more: Information Compression) results in unchecked assumptions being propagated.
Science is active thinking. Religion is lazy thinking. There is a reason why most human progress and quality of life improvement is derived through the scientific method.
Tollymore Investment Partners, December Q4 Letter to Shareholders
Read this to understand the long thesis for Farfetch, the global luxury goods marketplace. Lots to unpack right here, but some interesting highlights:
30% take rate to FTCH: This is high by the standards of marketplace business models. But it seems to economically be a better deal for brands, no longer required to pay the retailer margin. Under traditional linear industry economics, a product costing $20 may sell for $100. The retailer typically keeps most of the $80 mark-up, perhaps around two thirds of it. The brand margin is therefore c. 25%. For a brand selling directly on FTCH, this might double to 50%, what is left after the product cost and FTCH’s 30% take rate are deducted from the retail price. Brands can achieve incremental sales by making their inventory available to a global luxury audience without increasing their invested capital or diminishing their returns on capital.
Like Next plc, Farfetch is embracing the omnichannel advantage. But unlike Next, FTCH’s distribution is largely decentralised and offline sales are made via partners’ stores. FTCH has c. $5bn of inventory available to its customers, which has two channels. For the online channel FTCH represents most online sales for sellers. There is also a compelling offline advantage to being on the FTCH platform: you become a distribution partner. That is, FTCH will distribute through those fashion boutiques that are on their platform, sending footfall into the stores, creating offline selling opportunities not available to non-FTCH partners.
Farfetch is investing in further integrating itself into the luxury value chain through Farfetch Platform Solutions (FPS), a white label ecommerce offering. On the front end, FPS creates global websites, apps or WeChat stores. Back end services allow retailers and brands to synchronize their websites with in-store and warehouse inventory, both from mono-brand stores and other suppliers in their distribution network and facilitate in-store pick-up and consumer returns. Layered on top are services such as marketing, localisation, production and warehousing. These white label solutions are being provided for Harrods in the UK and 20 other clients.
Meet the Four-Eyed, Eight-Tentacled Monopoly That is Making Your Glasses So Expensive
Luxottica estimates that at least half a billion people around the world are currently wearing their glasses.
They also make glasses for an array of brands including: Prada, Chanel, Dolce & Gabbana, Versace, Rayban and Oakley + more.
Luxottica controls 80% of the major brands in the $28 billion global eyeglasses industry. This monopolistic structure of the market leads to profits that are “relatively obscene,” says Tim Wu, a professor of law at Columbia University and the author of The Master Switch. In a speech given at this year's annual conference for New America, a Washington, D.C.-based think tank, Wu remarks that products in some industries seem to only get better and cheaper -- laptops, for example -- while other products, like eyeglasses, remain strangely pricey, with only superficial innovation.
The difference is due to market structure. Because it controls so many prominent brands and retail chains, Luxottica is what economists call a price maker. That means it can set the price of its goods near the highest amount that consumers would be willing to pay for them, unlike more competitive industries, in which competition both encourages constant innovation and forces the price of goods down toward what they cost to manufacture. Having control over the pricing of a huge variety of different brands means Luxottica can also carefully engineer the prices of different brands to encourage you to shell out an additional $80 for that beloved logo or streak of Tiffany blue.
Different ads across live streams in different regions/countries. Absolutely wild.
The camera is mounted on a "virtual head" which reads the positioning and alignment data. The lens of that camera is calibrated with the camera body and sensor, along with the software, so that the virtual software can be adjusted for any variance for offset off "zero" when the camera was mounted.
Think of a virtual 3D box, and they just tell the computer where to put everything relative to the camera.
Data is fed from the camera, to a computer running the virtual software. After the calibration the virtual operator will load in the graphics they have been given, created to whatever specifications. They then use various keys to mask out what they want and don't want the virtual graphics to appear on.
This same technology is not only used to make virtual billboards, but distance lines (e.g. horse racing), stat overlays, on-ground logos and images...up to and including whole studios.
Have a look at companies like Broadcast Virtual, Statcast3D, and Zero Density for more examples. Even MLB Advanced Media do some amazing stuff.
As others have pointed out, the top left is what people in the stadium see, this is not green-screen, just a key overlay. You can tell this by the shutter speed between the camera and the signage being different.
Jon Bathgate of NZS discussing TSMC / Semis
Till next time, folks!
There is nothing so bad that politics cannot make it worse.
– Thomas Sowell