It’s All McKinsey’s Fault

Animal Crossing is grooming our kids into good little consumers
November 9, 2022

The current state of Big Tech, and the resultant layoffs in the space, rests solely on the shoulders of one company.

Or at least that’s what Mark Zuckerberg said in a letter to employees on Wednesday announcing a 13% reduction in the Meta workforce: 

At the start of Covid, the world rapidly moved online and the surge of e-commerce led to outsized revenue growth. Many people predicted this would be a permanent acceleration that would continue even after the pandemic ended. I did too, so I made the decision to significantly increase our investments. Unfortunately, this did not play out the way I expected.

Among others, Zuck bought into the narrative shared by “many people” that the “10 years in 3 months” acceleration to digital was permanent. This narrative came from a sole source: a 2020 McKinsey Quarterly publication, Five Fifty, entitled “The Quickening.” 

It turns out it was bulls***. Within months of the publication, pundits and strategists were critiquing the numbers based on hard data from the US Census Bureau, the Commerce Department, and UK commerce data began to show a regression to the mean.

Chart courtesy of bad data, distorted thinking; with a bold disclaimer by Benedict Evans

Benedict Evans, a famed venture partner and independent analyst, broke the seal on Twitter critiquing the numbers. Jason Goldberg, the Chief Commerce Strategy Officer at Publicis weighed in: “Although the USCB methodology for e-commerce estimation is imperfect enough that the McKinsey estimation while optimistic, is probably in the margin of error. I wouldn’t take any of this e-com data to the bank,” is a nice way of saying McKinsey had it dead wrong.

McKinsey was basing its data on a number of differing definitions; for one, the Forrester Research definition of retail, which incorporates gaming, e-ticketing, and a whole host of other digital-heavy engagements. This oranges-to-apples comparison creates a compelling narrative, and a pretty chart; but is fundamentally misleading.

So, If analysts knew in August of 2020 that the data was proving the narrative incorrect, why did Zuck go on to double the headcount at the company in the intervening time?

Because it confirms our priors. The oft-shared graphic made its way around eCom social media circles faster than disinformation about masking requirements. It was so juicy, so tantalizing: the extremely-online thought-leader-led industry that we all happen to work in is now the cornerstone of the new economy.

Nothing is so intoxicating as the narcissistic belief that we’re changing the world. Well, maybe one thing: blaming the ill-fated “wisdom of the crowd” for poor judgment.

— Phillip

P.S. if you actually want to change the world, you’ll need to start with how your business operates. That kind of change requires a lot of management; and fortunately we’ve got a rocking piece from Alex Greifeld on how to not lose your mind when instituting change at any scale on this week’s Insiders: A Guide to Realistic Change Management. It’s worth your time.

Buy Humbug? High-end retailers say customers are holding off on purchasing luxury items. This trend is true among middle-income and affluent shoppers, which could be a sign that the holiday shopping season may not be a time of extravagant spending.

Pricing Disputes and Closures. Dollar General is getting sued over a lack of pricing integrity, citing that prices charged at the register were higher than the prices marked on shelves. At the same time, reports are telling of store closures coming in December.

More Sights & Sounds. Twitter saw a 20% increase in users post-Elongate. Klaviyo’s joining forces with Blueprint, and acquiring Napkin.io. Former Peloton CEO is launching a DTC custom-cut rug business called Ernesta. Macy’s is beating the competition at combatting inventory increases this year. Dollar General is getting sued over a lack of pricing integrity and at the same time, reports are telling of store closures coming in December. Drones lit up the New York sky with innovative Candy Crush images that resembled fireworks, but without the negative impacts on the environment. A quick experiment showed that giving shoppers some positive reinforcement on the cart page of their experience increased revenue per session. ButcherBox CEO on how he built a $600 million revenue business without any external investment. And a Chick-fil-A owner offered a 3-day work week and received over 400 applications for the job. Café 11 is a collaboration between Hennessy and the proto-DAO cool kids club FWB. Faire, a San Francisco-based company, is trying to break into the international market.

Digital Fashion Spins a Yarn. Following a Roblox activation, The Fabricant, a digital-only fashion company, is launching a Web3 visual storytelling project, called Wholeland. The experience will include NFT drops, collabs, and online activations.

  • Our Take: The interest in digital fashion is on the rise. On a recent episode of Future Commerce podcast, we discussed digital fashion’s evolution in non-commercial spaces; places where the “fashion” experience has yet to be monetized. In games like Animal Crossing, Skyrim, or even the Nintendo Switch Mii designer, character creation sees a non-trivial amount of play time among younger players. 

    “My ten and eleven year old spend more time in the character designer of Animal Crossing, Breath of the Wild… than they actually spend playing the game,” says Phillip Jackson of Future Commerce. This behavior grooms how we expect the next generation of experiences to behave. For many, gaming is the first taste of digital commerce. Those experiences inform the UI and UX patterns of future retail, as well as the tastes and preferences of the shoppers who use them.

To follow this more closely, Future Commerce has launched a Roblox Brand Activation tracker, where we’re following over 75 consumer brands that have created experiences in the online game. Roblox has 50M monthly active users, half of which are under 14 years of age.

A New Sport Fashion. Playing pickleball grew in popularity during the pandemic. And as the number of people playing the game has increased, so has the market for pickleball apparel. Recent data shows that by 2026, the market could continue to grow by $680.3 million.

More Touch News. Costco dropped a Kirkland Signature brand hoodie. Kohl’s CEO Michelle Gass will be leaving to join Levi Strauss, with plans in motion to become CEO there in the next 18 months. Rothy’s, a DTC shoe brand that received investment last year, is building out its executive team. Digital brands are increasingly signing deals with multi-brand retailers, signaling that the era of going solo may be winding down.

Liquid Lasagne? Stouffer's has released its first-ever cocktail drink mix, a Bloody Mary Mix featuring the meaty, savory essences of lasagne. Because, why not? Meanwhile, Swiss Miss is releasing a holiday sweater that smells like hot chocolate. There’s so much to be grateful for this year.

It’s a Treat. And it’s Cripsy. But this isn’t from a global CPG brand. Sweetgreen is trying its hand at sweets again, launching a new twist on the Rice Krispies Treat. Though it seems to be positioned towards the keto crowd, the only dessert option at the recently IPO’d salad company packs a whopping 190 calories; more than twice the calorie count of a Kellogg’s Rice Krispy Treat.

Microbiological Robots. A new shift in health care could be on the horizon, thanks to xenobots — the tiny, biodegradable organisms are part living thing, part machine, and 100% ribbit; they’re made from frog DNA. Let’s hope they can be programmed to safely cross a busy road.

Secondhand Markets Analysis. Few can break down the world of fashion and luxury like the Banana Republic turnaround artist herself, Ana Andjelic. In this paid subscribers-only post on Substack, Ana breaks down the key to winning in secondhand markets

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