By slashing its North American retail base by 30%, Nike will boost margins, customer loyalty, and brand value

Photo by Barrett Ward on Unsplash

The day you stop changing is the day you die. Nike built its business off a strong wholesale distribution network. In 2016, this channel accounted for 74% of its sales. In 2017, Nike’s distribution network was over 30,000 strong, ranging from independent shoe stores and skate shops to scale players like Amazon and Foot Locker. But the world doesn’t stand still. Winning means skating to where the puck is going, not where it is. The secular shift to e-commerce meant consumer behavior was changing, so Nike changed too.

Skate To Where The Puck Is Going

In 2017, the company replaced its wholesale distribution playbook with Consumer Direct…


For online businesses, improving conversion is a superpower. Below, a look at conversion rates, what Bill Gurley, a general partner at Benchmark, calls the most important metric of all. Thanks for reading.

Conversion 101

Conversion is the holy grail of online business. Improving conversion is a force multiplier producing outsized financial results and driving competitive advantage. No wonder Gurley sees conversion as the most important metric:

This is the art of conversion: improve your site’s conversion and you simultaneously increase operating leverage AND increase competitive differentiation — a truly powerful combination.

A conversion rate is the ratio of visitors that take a…


Bill Gurley is a general partner at Benchmark with deep expertise in online marketplaces. His blog, Above the Crowd, chronicles the rise and fall and rise again of tech over the past two decades. It’s a great resource for learning about online business models.

This week, a look at the uses and abuses of the lifetime value formula, a frequent topic for Gurley.

Thanks for reading.

LTV 101

The value of a business is the present value of its customers’ future cash flows. Businesses grow by acquiring new customers, retaining existing customers, and improving monetization (getting customers to pay more). The consumer…


The e-commerce platform’s acquisition of Depop is only the latest move in its ambitious expansion plans

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When businesses decide how to allocate their capital, they essentially have four options: reinvest, return capital to shareholders through dividends or repurchases, take on mergers and acquisitions, or build the balance sheet. Historically, tech companies have favored reinvesting: hiring more engineers, entering new markets, and building new products. But as tech profits and cash flow has grown, companies are increasingly turning to M&A and capital returns. One tech company that has fueled its expansion through M&A in the last few years is the e-commerce marketplace Etsy, that was founded in 2005 and went public in 2015.

Building a House of Brands

When Josh Silverman and…


People love free stuff. In the summer of 2007, I interned on a Wall Street trading floor. Times were good. Housing prices and bonuses could only go up . At lunchtime, I was struck seeing traders in Ferragamo ties jostling for free Chinese food. As a college student, there was a lot I’d do for a free meal: attend guest lectures, film screenings, club info sessions, you name it. It turns out a trading floor wasn’t that different, except for all the Gucci loafers.

On June 22nd, Peloton launched Corporate Wellness. The program’s economics should make the company as happy…


Music streaming is crowded with competitors. Can Spotify’s podcast gamble keep it ahead of the pack?

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“When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.” — Warren Buffett

Music streaming is a business with bad economics. The industry’s byzantine licensing structure has many mouths to feed. For each dollar that Spotify earns streaming music, over $0.60 goes to artists, labels, and publishers. This doesn’t leave it much to build a reputation on.

Smart Pipes Become Dumb Pipes

Before the internet, buying music meant going to a store to buy a digital file on a plastic CD. Napster changed this by launching (illegal) peer-to-peer…


The internet enables lots of great stuff: unparalleled scale, fantastic business models, Google Maps, memes. But technology isn’t inherently good. It’s neutral. The same product used to organize a charity fundraiser can be used to organize an insurrection. This week, strategic bombing and the limitations of techno-optimism.

Bigger, Faster, Stronger

Airplanes entered combat during World War I, mostly in artillery spotting and reconnaissance. Initially, the US Air Force wasn’t its own service branch. It was a wing of the Army called the United States Army Air Corps (USAAC) tasked with supporting ground troops. It remained a part of the Army until September 1947.


Economies of Scale

Booking.com is the largest aggregator of accommodations in the world. At the end of 2020, it offered reservations for nearly 2.4 million properties. This included over 430,000 hotels and 1.9 million vacation rentals, apartments, and alternative accommodations 1. In contrast, Marriott ended 2020 with roughly 5,600 hotels and 943,000 rooms 2. For every room that Marriott has, Booking has two-and-a-half properties. Advantage, Booking.com.

Booking’s global, diverse supply enables it to serve multiple travel needs. Whether you’re looking for a hotel in Tokyo, a vacation rental in Lake Como, or a chalet in Chamonix, it has the supply. …


Unhappy Families

Customers are like Tolstoy’s unhappy families, all different in their own way. To value a consumer business, you need to understand customer lifetime value (CLV), which is driven by acquisition, monetization, and retention.

Because these variables are dynamic and interactive — and there’s no average customer — calculating CLV is difficult, as Michael Mauboussin, Head of Research at Counterpoint Global, writes in a recent report. Mauboussin is the finance equivalent of Daniel Kahneman, who wrote Thinking Fast and Slow. His report illuminates the tradeoffs and complexities of forecasting consumer businesses.

Customer Lifetime Value (CLV)

CLV is composed of customer acquisition cost, monetization, and retention:


Hi 👋 — Companies like Booking.com and Etsy earn a fee for connecting buyers and sellers. This post looks at take rates, pricing strategy, and the tools marketplaces use to increase them. Thanks for reading.

Take Rates 101

Gross merchandise volume (GMV) is the lifeblood of a marketplace. It measures transaction value and is a key metric for operators and investors. For example, Airbnb’s GMV is the number of nights booked times the average price per night. To grow GMV, Airbnb needs some combination of higher volumes (nights booked) and higher prices (average daily rate).

Marketplaces aggregate supply and demand and sell transactions…

Kevin LaBuz

Head of Investor Relations at 1stDibs. Previously finance at Etsy, Indeed, and internet equity research at Deutsche Bank. Find me on Twitter @kjlabuz.

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