Rundown: Instacart may finally IPO, Aldi's new acquisition & Everlane's turnaround plan

0:05Hello and welcome to the Modern Retail Rundown. I'm your host, senior reporter Gabby Barco, and I'm here with editor-in-chief Kale Guthrie-Weissman. Hello, Kale. How are you? I'm doing well. How are you, Gabby? Doing very well, yeah. We had a lot of news to get through this morning to prep for this. So that was really fun. But yeah, let's get into it. First up, we are apparently any day now we are getting an Instacart IPO. So we'll delve into that first. After that, we'll talk about Aldi's acquisition of a Southeastern grocery chain that owns Winn-Dixie. And we'll round it off by talking about Everlane's renewed ambition to become a top apparel brand after a few years of turmoil internally.

1:00So first up, let's talk about Instacart with this latest report from Bloomberg, which looks like it is prepping to go public as soon as September. Yeah, this has been a long time coming. I think it's been many, many years that we've talked about an apparent Instacart IPO. There have been stories very similar to this one written in the past. So we'll see if this actually pans out. But Bloomberg reported earlier this week that sources with direct knowledge of the matter say that there's going to be an IPO potentially next week. But the hope is to go public as soon as September, which is wild given, you know, the fits and spurts that this company has seen with relation to its plan to go public.

1:49Yeah, because I believe originally it was going to be sometime during the COVID haze when Instacart was on top of the world, but they missed that window. And then from there, the valuation has been dropping pretty dramatically. I think they slashed it from$39 billion to$24 billion, and now it's down to$13 billion, which sounds a lot more realistic maybe. But yeah, this time, I think with what you were saying, it's hard because this feels like deja vu. We've heard it a couple of different times. We know this story. No, but I mean, there are a few key differences with this latest announcement. One, Instacart gave a press release in May 2022, if I'm not mistaken, that said it had confidentially filed to go public, which was the initial move to do a direct listing.

2:48then the company was ultimately like no never mind not things aren't right the valuation got slashed not only that but the markets are complete crap and this is not a good time for us to make our public debut which fine now you know we don't have a press release from instacart instacart did not give a comment from what i from what i've read to bloomberg but it's doing a traditional route so it's not doing the direct route it's going to do the usual dog and pony show of of an IPO, which I think is of note, and we'll probably get to this in a few minutes, but it shows that I think Instacart is trying to be one of the, you could say, battalion leaders.

3:26You know, there's been a real cooled public market right now. A lot of valuations have dropped. We've seen other companies that were maybe going to go public, look for a sale or other companies unable to raise money. You know, it's a weird moment we're in, but there have been hints that things could be rebounding on Wall Street. And it seems like Instacart is viewing this as the time when it can pounce and be the leader within that. But there are other things we should talk about first before we get into those details. Yeah. I mean, for one, despite online grocery, of course, slowed down over the last year or so, Instacart does have a pretty big monopoly on it.

4:11And, you know, they do kind of, they control, according to insider intelligence, about 73 % of digital grocery orders. So they do, they have been continuing to grow, maybe not at the same rate as they were in 2020. But I think earlier this year, it was reported that their revenue increased 39%. So that's not nothing. So it seems like they are confident. but maybe this has more to do with well why don't we talk about I think it's worth noting that Instacart specifically has a very maybe polarizing reputation among both the public and retail in general because you know now it's it's been trying to build its ad revenue up it's trying to diversify, you know, beyond just grocery.

5:03But it's always had this issues with its gig workers and pay issues and working conditions, especially, you know, during when they were basically working the front lines during COVID. But they have been, you know, kind of this has been kind of on the back burner over the last couple of years while they prepped for this IPO. Yeah, I mean, Instacart was sort of the, I don't want to say poster. Yeah, we'll say it. Instacart was one of the poster children of gig work in the sense, not in a positive light, but in the light of this has become a ubiquitous thing. People are using these services and there are workers who will be picking and packing your groceries and then giving them to you.

5:49And that was the ultimate, you know, it started with Uber, then it went to platforms like DoorDash, et cetera. And then Instacart was the one that really took it by storm and made it into a national phenomenon. And that was really the value proposition that Instacart first launched with was the idea that you can order your groceries with an app and someone else will get them for you. Someone else will deliver them to you. And that got a lot of questionable press, stories. Modern retailers written stories from the perspective of an Instacart worker during the pandemic when it was pure hell. There have been questions about how equitable the pay system is.

6:32It's been very opaque. But I think what Instacart has been trying to do specifically for the last two years with this as a backdrop, this IPO as a backdrop, is rebrand itself not just as the delivery platform where other people get your things for you. For one, it's been trying to go beyond grocery and go into things like stores. I think we've talked about this on the program multiple times, but is it Sephora that it currently has a partnership with multiple retailers? Like, I think, is it Old Navy? I don't know. They're like apparel. There's beauty. There's convenience. It's trying to go beyond that.

7:07But then the real thing that I think Instacart is trying to sell specifically to Wall Street is the ad platform, as you said. So it's been building out a robust ad platform so that brands can sell ads on the app in many different ways, trying to be the leader in the retail media space. What's more, Instacart is also trying to rebrand itself as a retail tech company. And so it's been building a lot of new bells and whistles that its retail partners like Mom and Pop Groceries can put into their stores, like a smart cart that automatically checks things out and other more ad focused but still in-store related types of technology.

7:51So I think there's been a very big rebranding on Instagram, not Instagram, on Instacart's part that's been focused specifically on showing that it's not just the app where you buy groceries and someone else will get them for you, but it sells all these ancillary services that have, for one, better margins, but also tell a bigger story about all of the things it does that's related to the retail industry. Mm-hmm. Yeah. And like you said, this is all now happening in a very interesting environment for public debuts. It's not that there aren't any IPOs happening, but they're just nowhere near what they were in 2021, especially for these types of e-commerce, retail startups.

8:37But if it does happen, this could also be like Instacart kind of taking the lead and ushering in a lot of the companies that are kind of standing on the sidelines. They just wrote about this. We have companies like Skims and Birkenstock that have really high valuations, just raised some money. But they are just, for all intents and purposes, they have been just standing by, waiting to see what's going on. And then there are a couple of companies that have gone public and seemingly doing okay. So it's not all scary out there. But yeah, what are your thoughts on whether things will be picking back up with this momentum?

9:20I mean, it seems like things are going to pick back up because that's the natural cycle of things. There are dips and there are rises. And we've definitely been in a dip. And we've definitely seen a few examples of some IPOs that got the business press's attention, that got investors' attention. You know, there's Kava, which clearly a fast, casual, quasi-Mediterranean restaurant is not Instacart. But Kava is also doing quite well still. I checked its stock price this morning, and it's still trading above what it had set its price at, you know, a few months ago. Oddity also went public not too long ago, and it still is doing well in the public markets.

9:59And I think that sets a precedent for specifically commerce and retail brands that are thinking about doing this, saying like, OK, maybe the time is right. And I think that there's something very specific with Instacart that I want to mention is that Instacart missed the boat last time. I think it really wanted to be part of the onslaught of IPOs that happened, you know, during the, you know, in the midst of the pandemic. and it went too slowly. And as a result, realized it wasn't able to do it then because it just wouldn't have been advantageous. So I think the fact that the company is now saying we're laying the groundwork and we're going to do this quickly is pretty much proof that it wants to be ahead of this curve and in the right Wall Street moment to do this.

10:42And so I think it's smart for Instacart to do it now. And I also think Instacart knows that it's probably now or who knows what's going to happen. And maybe there'll be another dip after a series of, you know, good performance six months to a year from now. So I think it's being very, very, thinking very, very critically about when the time is right. And now probably the time is right. Yeah. And, you know, one of the things we always talk about is that an IPO brings those numbers publicly right now. We really can't tell whether Instacart is profitable or not. And interestingly enough, if you look at Kava and Oddity, which is a beauty tech platform, they both turned a profit or were already profitable before going public.

11:26So sometimes, I don't know, I was talking to someone who said, maybe it's timing. Maybe it's just kind of like knowing exactly when to push the button. We are profitable right now. Right this minute, push the button. Yeah, who knows? I mean, maybe they'll go public and we'll see that. Yeah, Instacart's profit margins are crazy high. But yeah, I think if it does happen in the next couple of weeks, that'll be a real turning point for public debuts. It's true. And you'll probably be hearing us talk about it even more. So stay tuned. We are going to keep talking about groceries, one of our favorite topics.

12:03We love grocery. We love it. Yeah, this week, maybe a little bit in a different direction, but there's been some consolidation happening where Aldi, the German grocery giant, announced an acquisition of Southeastern Grocers, which is the parent company of Winn-Dixie and Harvey's. They have about 400 stores across the Southeast region and essentially kind of compete with Publix just on a smaller scale. But, yeah, we don't know how much the deal is for, but this is actually Aldi's first acquisition. They've been more on the like opening their own stores streak for a while now. But this kind of, yeah, gives them a really big presence in the Southeast.

12:52Yeah, it's definitely interesting. Aldi has been on an expansion streak that's pretty wild. I think we'll get into this later on, but it wants to have over 2 ,000 locations, I think, by the end of next year, which it already has a fair amount open. But just it's that company has really gone from zero to 100 over the last few years in terms of grocery expansion. And so I think the fact that it's going after a chain, if you had asked me a couple of months ago, do you think Aldi will specifically buy, you know, Winn-Dixie, I would have said, I don't think so. So it's an interesting and kind of surprising strategy for me, but it makes sense because, A, the Southeastern Grocers hasn't been doing well.

13:36It filed for bankruptcy, I believe, in 2018, closed nearly 100 stores, was going to try and go public again, but then scrapped that. Clearly, it was in a distressed situation and was looking for someone to help bail it out. And also, it already had probably the perfect footprints for what Aldi wants. You know, a grocery store. Winn-Dixie is pretty value-based, so it probably had a lot of the right elements in place in order to convert it to the way that Aldi works. You know, now that I think about it, now that I see it, it actually makes a lot of sense. With Aldi specifically, I mean, you know, I'm sure those of you who know that it really competes with, like you said, value.

14:19It's known for its just cheap pantry, groceries, and whatnot. And so, especially in this economy, I mean, they've told us that their biggest goal is to really undercut competition with their prices, their dropping prices while other retailers are raising them. And so, yeah, it'll be interesting to see whether they could kind of dominate that region with these 400 new stores. But with that said, do you want to talk a little bit about just expand it out to all these U.S. investment in the last few years? I know you just mentioned it, but in just the Southeast specifically, they say they've poured in about$2.5 billion since the mid-90s.

15:04So this isn't really like a new strategy, but it has ramped up in the last couple of years. Yeah, I would say in the last few years, it's really ramped up in terms of the amount of store openings. It's planning to open 20 of its own stores, I think, you know, in that region. And so that's a lot of new stores. Pretty much what Aldi has gone on the record, you know, it's a company that usually holds its cards pretty close to its chest, but then will go public saying pretty much one statement, which is we're expanding. And so Aldi's been expanding a lot and trying to become more of a ubiquitous player in the United States.

15:44I think it said, is it 2 ,400 that it wants to open, have locations in the U.S.? Yeah, it's currently just over 2 ,300. And then by next year, it'll be 2 ,400. So yeah, we're looking at 100 more stores. This is separate from the new fleet. But this also comes at a time when consolidation is also facing pushback. We saw currently there's a deal where Kroger and Albertsons are supposed to merge in a$25 billion deal, but there's antitrust pushback, as usual with these types of big mergers. So, of course, you know, Aldi is not really on the same level, but there does seem to be kind of, you know, there's a public and government awareness of all of this does minimize competition.

16:35Of course, the retailers say that, no, it's good for the employees and the customers. But yeah, do you think we'll just continue to see all of, I mean, Kroger already obviously owns, it is the biggest grocery chain in the country, but it seems like they're, yeah, they're just on the path to become almost a duopoly with Albertsons. Yeah, no, it's, you know, if that goes through, which it's seeming less and less likely that it will, given I think earlier this week, there was a group of many, many secretaries of state who wrote a letter to the FTC pretty much saying, don't let this go through. it would seriously undercut competition.

17:20This is specifically about Kroger Albertsons. They said that if Kroger Albertsons do merge, they would hold almost 25 % of the entire grocery market share, which is wild when you think about it. And I think that that's a real and serious claim that the FTC will have to take into account. And I also think the fact that Aldi, the fact that Aldi is buying another ailing company just shows how shaky the grocery industry in the United States specifically is right now, where I think it is the bigger leaders who are leading the pack. Walmart is, you know, a grocery leader. You know, Amazon is increasingly trying to grow its footprint.

18:00It is not anywhere near, you know, it's not anywhere near the size of Walmart or Kroger for that matter, but it has the amount of money that it could be, you know, grow more to a present, grow its presence more if it does find a strategy that does work. And the fact that we're seeing, you know, these regional players that have been around for decades going bankrupt, closing up, selling up shows that it's a pretty dire situation out here for specifically the smaller guys. So, I mean, like, I think that it's, you know, the regulators are right to keep an eye on this and try and keep competition as healthy as possible.

18:41And I do think that there is a huge risk of antitrust issues if you do have two of the biggest players come together. And so we'll see if this letter from the secretaries of state has any real push. And we'll see what actually happens with Kroger Albertsons. But I think that just the fact that that's happening and we have the Aldi thing happening just shows that we're in a real moment of consolidation. So interesting times for groceries, what I'll say. Yeah. Yeah. The Aldi deal is supposed to close in the first half of 2024, probably more likely so than the Kroger one. But we, yeah, we'll see what they do with those stores.

19:23It'll be interesting. Next up, we are talking about Everlane, one of the first D2C brands to ever exist. Probably the first one I've ever shopped. What about you, Cale? What's the first D2C brand you've shopped? I mean, there have been direct-to-consumer companies since, you know, the 60s and 70s. So I don't know. Okay. Well, let's talk about the new renaissance of one. Yeah. I will say of digitally. Yeah. You're totally right. I think Everlane was the first one that I ever knew about and understood that it was different than other brands. Yeah. There's always that person who's like, actually, Lululemon was the first one of the 90s.

20:01But I'm talking, yeah, the digitally native. Yeah. But with that said, you know, Everlane's had a tumultuous few years. It launched in 2010, was doing pretty well. Never really came close to anything we're talking about with these other brands, whether it's like an IPO or exit, which I always found pretty interesting. They've always just continuously raised hundreds of millions of dollars. But being this, you know, sustainable, I'm putting that in air quotes, brand, it had its own value prop as far as disrupting the apparel industry. But it faced a lot of hurdles, especially in the last maybe five-ish years from, you know, greenwashing to the internal structure of the company and how they treat their employees.

20:51Yeah, I mean, it was the DTC, or I guess we could call it vertically integrated marketing playbook. The idea as do you want to know where your things came from? Go to our website, we'll tell you. Everlane really, really mastered that and made that into a marketing tactic that became pretty ubiquitous with other DTC, DNVB companies. And then, I'd say, in the last five years, definitely in the last three years, a lot of holes began to show, both in terms of, you know, questions of greenwashing, as you mentioned, questions of company culture. There were many exposés that came out. So there was one really big one in the New York Times, I think, in 2020 that just talked about, you know, the company saying that it was inclusive and then, you know, workers saying, no, it isn't.

21:38And it was, you know, something like a four bylined New York Times expose about how people did not feel included in this company. And then, you know, there were even allegations of things like union busting. I think Bernie Sanders even went so far as to make a call out that, you know, the company wasn't living up to the values it espoused. And so it's been a really interesting trajectory. And I think what's specifically fascinating with Everlane is clearly the values were aligned with the shoppers because the company sort of began to, you know, we don't have sales numbers, but it was not as beloved in the last five years as it was before.

22:14And I think that happened in tandem with all of these different controversies that were about chipping away at the truth of its values. Mm hmm. Yeah. And with that, I think there, Everlane was sort of the poster child, if you will, of kind of this bigger magnifying glass on these companies, especially like, I mean, it's one thing when a big conglomerate talks about it and everyone just kind of rolls their eyes. But these were these new startups that are like, we're actually sustainable. We are eco-friendly. You know exactly what factory your clothes are coming in from. But then I think a lot of people felt like there was a sting of hypocrisy that was happening.

23:00And maybe that obviously put a stain on Everlane's rep. But all of that is now there is a turnaround plan with new executives. I believe that the co-founder and CEO has stepped back and now there's like, you know, actual fashion veterans who came in and are trying to kind of reinvent Everlane into this just like just really nice, timeless staples, which I guess was sort of maybe what they were trying to do to begin with. But yeah, I think that the focus is now much more on the fashion and the durability and less on the marketing side of things. That's at least... The reason why we're talking about this is there was a Forbes piece that came out a few days ago that was essentially an interview with the new CEO, Andrea O'Donnell.

23:52She's a veteran of places like Decker's Uggs. And she's been in place as CEO for a couple of years now, but is now beginning to show a little bit of what the plan is. And the plan is, as you said, Gabby, the idea of forever. You know, the clothes, it's very, very anti-fast fashion, anti-seasonality. It's you can wear this this season, you can wear it next season, you can wear it forever. But another really important thing that she's hammering away, but we haven't seen the numbers, of course, is profitability. Everly wants to get profitable. And so putting together a business plan that is about apparel, that is more durable, that can work in any season, but also a company that will allegedly become profitable somewhat soon.

24:36So that's the plan that's being presented to us right now. Yeah. And like you said, we don't really know whether it ever hit that profit margin, but they did raise about$90 million in debt just last September. And usually that points to just extending runway and not being there quite yet. But yeah, it'll be interesting to see whether this, you know, grant plan will actually bode any type of, I guess, maybe the public perception or the media perception of Everlane, because it has been sort of in the background for a little while. Yeah, I mean, I think it's been quiet for a couple of years now and probably thinks now is the time to reenter.

25:22I don't see why not. It's not, it wasn't like a brand that was given a real, a real lasting blow that means that it wouldn't last forever. I think it definitely has the makings of coming back and it just needs to have the right messaging, the right assortment, all of that different things, which O'Donnell says she now has. I do think the idea of it being forever clothing is really interesting and does kind of speak to the moment we're in, specifically with all the backlash to Shein, to, you know, other fast fashion players. I feel like there's a really big battle going on right now for companies in the middle.

26:00So, you know, you're not quite luxury. You're more expensive. I guess Shein is pretty value-based, but I think that there are other, you know, apparel brands out there that are trying to combat with Shein because Shein is making clothing that looks nicer. And so the fact that Everlane is saying what we're making, A, will last a very long time, but B, is not tied to seasonality. It's very timeless. You can wear it whenever. I think it's a really interesting marketing, you know, ploy. We'll see if it works. We'll see if people understand what sort of the counterbalance it's trying to create. But I don't know.

26:41Yeah. And we're seeing that with its collections. They mentioned that for the majority of it, about 70 % is continuous releases as opposed to new products constantly dropping. So yeah, it seems like they are trying to kind of stick to this capsule wardrobe theme or concept. Great. Well, that is our show for this week. Please rate and review us on Apple Podcasts, Spotify, or wherever you're listening. And don't forget to subscribe to the Modern Retail Podcast to hear interviews with industry leaders every Thursday. Kale, do you want to give us a preview of who you have on next week? Sure. Next week, I'm talking with the CMO of Georgia Pacific, which is the company behind every paper product you use, like Dixie Cups and things like that.

27:34And so she leads that marketing charge. It was a very interesting conversation. Oh, all right. And of course, come back every Saturday for the Modern Retail Rundown. And as always, thank you for listening.

27:54Thank you.