7 September 2018 Courier Weekly

Too old to crowdfund?

PLUS: Tights shops – Delivery – Railway arches – Coffee chains

Too old to crowdfund?

When does it become distasteful for a business to keep asking the public for money to fund its expansion? It’s a question that’s been tested since the launch of crowdfunding platforms like Seedrs and Crowdcube. Brewdog, which was founded in 2007 and has raised well over £30m from Crowdcube investors, this week extended its current crowdfunding push and plans to raise £22m.

Hotel bookings platform Mr and Mrs Smith is also looking for £1m in crowdfunding to expand into the US.

‘We like the idea of getting numerous investors who, we hope, will become advocates and customers,’ Tamara Lohan, co-founder and chief technology officer at Mr and Mrs Smith told Courier. ‘These days businesses at every stage of growth have turned to crowdfunding. We’re lucky to have an incredibly loyal membership base and feel comfortable going to them for such support.’ Lohan also added that if the crowdfunding target was not met, the company would still go ahead with the expansion plans ‘in a more organic way’.

The issue for companies is justifying these asks when the prospect for investors to cash out are few and far between. When investment group TSG invested £213m in Brewdog, ‘Equity for Punks’ investors had a window of opportunity to sell their stock. Otherwise, there has been no opportunity to turn their shares into cash.

Another direct-to-consumer shop opens

The trend of e-commerce brands opening a physical retail location continues. Following in the footsteps of Warby Parker, Glossier and Everlane, tights brand Heist is launching its first store in London’s Covent Garden.

For direct-to-consumer brands, which cut costs by (initially) stripping out physical retail and wholesale operations, opening a store is more about providing a unique customer experience than shifting stock.

Heist is introducing a try-before-you-buy service in its London store, which is unique for an intimate product like tights; any that aren’t purchased will be washed and donated to charity. Joanna Bell, Heist’s head of retail, says the plan is for staff to guide customers thoroughly enough that by the time they try on a pair, they’re committed to buying them. ‘This is our first test store but if it works we’ll open in all [of Heists’] core cities,’ Bell says, citing Paris, Stockholm and New York as examples. ‘We are also speaking to wholesalers at department stores – but the importance of our online business is fundamental to our company.’ The stores, she adds, are a touch point for customers to discover the brand as well as to purchase items.

Is smaller better for speedy delivery?

Amazon is doing all it can to make sure it can effectively get products to consumers’ doors within a matter of hours.

It’s just announced that it’s adding 20,000 vans to its delivery fleet in the US, which will all be branded with the Amazon Prime logo. Earlier this year, Amazon launched a Delivery Service Partners programme, which allows entrepreneurs to run their own local delivery networks in partnership with the e-commerce giant. Last month, it also announced a 30-minute grocery delivery service via Whole Foods.

It’s difficult for companies of Amazon’s size to get last-mile delivery right. The balance of being able to house huge amounts of stock in warehouses while simultaneously getting it to inner-city locations quickly is the big struggle. This presents an opportunity for small businesses that can figure out how to shift products to consumers quicker than incumbent brands. For example, London-based startup Home Run partners with retailers like Waitrose and guarantees to deliver grocery orders to customers within an hour.

Life in London’s railway arches

There are approximately 4,400 railway arches housing businesses across the UK, and all are under threat from plans by Network Rail, their landlord, to sell up.

In Courier London – a special edition free paper covering retail, food and drink out this week – we spoke to a number of founders operating businesses out of London’s arches. The owner of Chu’s Garage, a mechanic shop in London Fields, said Network Rail wants to increase their rent from £18,000 to £45,000 a year.

‘Untried and tested upstarts who get crowdfunding may be willing to pay high rents, but that’s a short-term approach,’ said John Scarrow, general manager of vintage car dealership Tower Porsche, which operates out of a railway arch in Bermondsey.

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Coffee expansion plans

Two interesting bits of news around coffee shop chains this week. First, the Department of Coffee and Social Affairs is reportedly opening seven more stores in the UK, bringing its total number of outlets up to 26. Second, Costa Coffee has been acquired by Coca Cola for £3.9bn.

Creating a successful coffee brand can become a lucrative gig, but it’s not easy. ‘Occupancy costs in London have gone bananas,’ James Dickson, founder of Workshop Coffee, said at a Courier event in June. ‘It’s important to get those costs right because if you don’t, your screwed.’ Similarly, Allpress founder Tony Papas said that smaller sites are often a better route to profit.

Five things on our radar this week