The Best One Yet - Warby Parker launches its 2nd product, Microsoft vs. Slack (Microsoft is winning), and Home Depot’s DIY website problems

Episode Date: November 20, 2019

Warby Parker is the OG disrupter, cutting out the middle man of retail — now it’s launching its 2nd everproduct line: “Scout” contacts. Microsoft was threatened by Slack, so it launched a rival/knockoff messaging service called Teams — we just learned it’s got 20M users. And Home Depot usually just rides a strong housing market to strong profits, but it botched one part of the business that relies on Home Depot alone.Learn more about your ad choices. Visit podcastchoices.com/adchoices Hosted on Acast. See acast.com/privacy for more information.

This is Nick. This is Jack. And this is snacks daily. It is Wednesday, November 20th. We're bringing the best one. This is the best snacks daily we have ever done. Jack, can you hit me with the three stories? All right.

We've got three awesome stories. The first. The housing market is up, but Home Depot stock is down. We're looking at how they botched like a DIY situation with their own e-commerce. Shouldn't do do it yourself website building Home Depot? Second story, Jack, what do we got? Microsoft suddenly mentioned that it's Slack competitor, which is called Teams. is way bigger than slack.

Turns out there's an incumbent advantage. We're jumping into this thing snack style. Third and final story is the unicorn of the day. Warby Parker. You've probably heard of it. The Warby Parker of Warby Parker. It's actually the unicorn of unicorns. And Warby Parker just launched its second product,

not eyeglasses. They're calling it scout. And their contact lenses. All right, Snackers. Before we jump into all that, we've got to talk for a second here. You maybe know the WinkleVos twins, aka the Winklevite.

Yes, you probably saw them in the social network. These are the two giant rowers who kind of got ripped off by Mark Zuckerberg, I think? You stick them together. They're like the size of a tall building. These two are thoroughbreds. I'm telling you, they win Best in Show at the Westminster Dog Show. Absolutely. Well, it turns out in the time since they've gotten over their, like, Facebook drama, they've been running a cryptocurrency.

Yeah, it's called Gemini. And it turns out Gemini just made its first acquisition. And it turns out that Gemini didn't just make its first acquisition. It made a very unique acquisition. You can't make this up, actually. We couldn't wait to share this with our snacks. The first company that the Winklevoss Twins acquired has co-founders that are also twins. We couldn't make this up.

This sounds like an onion headline. This is a company run by twins acquiring another company owned by twins. We're just going to leave it there. We'll late in. Let's hit our three stories. You're tuned in the snacks daily. We spoke to the lawyers and we got to get something legal out the way. The snacks about the hair ain't food. It's air candy.

They don't reflect the views of the robberhood family. It's all informational just so. You know, we're not breaking. recommending any securities. Nope. It's not a research report or investment advice. Not an offer or sale of a security. Right.

Snacks is digestible. Business news for you. Robberhood Financial, LLC, member FINRA slash SIPC. For our first story, Slack has a problem. Microsoft's office communication service is way bigger than Slack. We're talking about a $1.1 trillion company here. Microsoft. Verse an $11 billion company.

Slack. Both battling for your inter-office banter. Or as Microsoft likes to put it succinctly, chat-based workspace. So you guys know about Slack, right? Yeah, we heard of Slack. Slack is trying to kill email. Yeah, as like the purpose of communication within offices. With a lot of emoji, a lot of like announcements, a lot of noises,

and a lot of stuff you end up looking at all the time. Now, Nick and I currently use Slack, but we jumped into this one, snack style, to check out and test drive Microsoft Slack copycat. So we jumped in, literally, we downloaded it, tried using it. Here's the only problem. I didn't have anyone else to like Microsoft message teams with. So it wasn't that effective. So the product is called Microsoft Teams and Microsoft just issued a blog post which was a total humble book. Okay. So the blog post was about how teams can like work together better.

The five things to make teams function performally. You know the classic we've got to like improve ourselves professionally. We might as well read this. Well embedded in there in like the fifth paragraph was a little bit of a humble brag. It casually dropped that there are 20 million users of teams. big deal. It could have been a mic drop situation. That is up 54% since July, just a few months ago. Jack, where is Slack right now? Slack had 12 million users as of September. So 20 million for Microsoft, 12 million for Slack. And get this, Snackers, this isn't just like people who have heard of teams. We're talking about daily active users. On average, 20 million people use Microsoft's team

product. You can imagine with the Slack people were slacking each other all yesterday. This is a situation. The stock dropped 8%. And it's down 50% from its peak when it direct listed earlier this year. Now, Snackers, Jack and I were curious. We looked in further, and there was one interesting element of this that really confused us, bothered us, and we thought was fascinating. Both companies were bragging about these metrics that we don't understand at all. This is like trying to assess a hockey game, but instead of goals, you're using the amount of times people touch to touchdowns. Touch to touchdown with their foot with the leg.

All right. So Slack commented on yesterday's news from Microsoft, and they basically said Slack continues to see unmatched. unmatched engagement on our platform with 5 billion weekly actions, including 1 billion mobile actions. Okay, 5 billion and 1 billion? Big numbers. That sounds great. Actions?

What the heck's an action? Are they using this a noun, a verb? Is this like an adjective? I want a piece of this app. No one knows what they're talking about. All right. Then Microsoft made a statement itself. Users have performed over 220 million open, edit, or download actions using teams.

Open, like, edit? What verbs are these for? Again, what are these actions? Is that a good? thing, is editing better than opens? So, conveniently, Microsoft and Slack, they didn't mention the same metrics, so we can't compare them. We have no idea if it's good or bad.

Classic move. So, Jack, what's the takeaway for our buddies over Microsoft and Slack? Microsoft has the incumbent advantage versus Slack. The key here is the bundle. Microsoft has it. Well, Microsoft has been offering that bundle to corporate clients for decades. We're talking that, like, Office 365, Business Premium, a little bit of this, a little bit of email that.

Yeah. Imagine a company like General Electric, which is, probably used Microsoft Office for like 50 years. If they were thinking of maybe using Slack, they're probably not going to because they're already using all these other Microsoft products. Right. So Microsoft is offering this product called Teams. Just in case GE is interested in dabbling in like a new novel communication platform.

But it doesn't actually have to make it that much better than Slack because its customers are already using 90% of its products. I would argue it doesn't even have to make a product better than Slack. It can be inferior to Slack's product and it will still win because of the incumbent advantage. For our second story, Jack, I'm going to feng shui this thing. Home Depot renovated its website, redecorated its online shopping cart, and it looks terrible. Oh, two thumbs down. Two thumbs down. Let's get Tim Allen in here to rip this thing apart. Actually, no, we need that chef Gordon Ramsey. Do we? Third quarter earnings report were announced yesterday for Home Depot. Sales rose by 3.6% compared to

the last year, but analysts were expecting a 4.7% jump. So the stock ended up falling after all that drone. Remember, Snackers, stock price movements equal expected news minus actual news. Another issue that kind of came up here, same day housing starts, which are like the paces of new houses being built, they hit their highest level in the last 12 years. Right. So it's a little in conflict, these two news stories. There were 1.3 million home construction projects that broke around in October should mean a lot of trips to Home Depot for supplies. Oh, hold on. Honey, one second. Is it a two by four or a four by two? Yeah. So Home Depot has no excuse for this missed earnings report. In fact, it turns out Home Depot's problem was that it wasn't really that good at building technology.

All right. Let's address two facts brought up in the Home Depot earnings report. Okay, the first fact over here, pros, like the people who know what they're doing, they make up 45% of sales. Yeah, professional contractors. The other 55% of customers, Home Depot refers to them as DIY customers. Is a flat head? Is this a diamond head? Is this a Phillips head? You're like two screws away from calling a task rabbit for the whole project. It's the people who don't know what they're doing. They make up 55% of sales. You go to IKEA, you're yelling. This didn't make sense. It didn't make sense. All right. Fact number two, those professional contractors, they shouldn't be shopping on the same Home Depot website as you. You're ordering like a four pack of light bulbs. They're ordering nails in packs by the million. So Home Depot had an ambitious plan. It said, you know what?

We're going to build our own e-commerce website for the professional home builders and contractors out there who know what they're doing and buying in bulk. The CEO specifically called out in the earnings report 135,000 professional contractors who deserve a personalized experience when they shop online. Now here's the thing that Jack I thought was kind of funny. That personalized website, it isn't actually working out that way. No, the company had been boosting expectations for this quarter

relying on a personalized website for the pros. Totally ironically, Home Depot wasn't that good at the whole DIY build your own website situation. Yeah, the project is way behind schedule, it'll eventually boost sales but did not this quarter. So Jack, what's the takeaway for our buddies over at Home Depot? Home Depot's performance is ruled by an 80-20 rule. 80% of Home Depot's business depends on the housing market. 20% depends on its actual work kind of isish. Now, give us a little wiggle room on that 80-20 breakdown. Exactly. It's not exact. But the point here is, Home Depot does well if the housing market is doing that. I think we should have measured twice cut

once on this thing. Either way, what Home Depot situation is like is picture that like hot dog stand outside like a baseball stadium. If the baseball team is doing well, then it's going to sell out and it's going to get more hot dogs because more people are going to the games and they're going to be hungry for hot dogs. Doesn't really matter what kind of hot dogs are cooking. Are the Yankees doing well or poorly? So Snackers, let's look at this. Home prices are up. Home starts are up. Home Depot sales should be up. But the 20% of what Home Depot can actually control, it isn't controlling that well. Don't DIY. your own website, Home Depot.

Gala contractor. For our third and final story, Jack, can you read the letters written on the wall over here? Is that an E? It's an E. It's an E. It's an E. Warby Parker is launching its second ever product. Contact lenses. And it's got its own new brand.

They're called Scout. Nicely done there. Full disclosure, Jack and I have 20-20 vision. Yeah, although my brother brags that he's 2015 or something. Also, full disclosure, we both get a vomiting feeling when someone, like, puts contact lenses. True. Fingers should not touch eyeballs.

How are they doing that? If there's an eyelash in my eye, it's staying there. Waiting until a wind comes by, Jack, to get that thing out of that. So, Warby Parker, it's nine and a half years old. It's the original gangster of direct-to-consumer cut out the middleman retail. We've all been at that dinner. You turn to your right. Susie starts talking.

You got a great idea. All right, guys, just listen up. Just listen. It's the Warby Parker of Blank. Yes, we've all heard it. Their stores are gorgeous. These things are like... I don't buy glasses, but I've been with people who bought glasses.

My wife bought glasses there. They look like libraries you'd want to get married in. Yeah, they're gorgeous. But they're launching a new brand. The new brand is called Scout. My take on that name, Native American Scouts need good vision to, like, see things, right? So Warby is built out a large customer base that happened to be needing one thing. Glasses.

Well, they actually need a second thing, Nick. Turns out from their research, 40% of Warby customers were also using contact lenses. Now, so they're launching these contact lenses. They're pretty much the same as other contact lenses. Except they've got, like, fancy pack. It's instant candy. You get it. You're going to want to show this thing off.

But there's one crucial innovation here. It's a microvation. The lenses arrive upside down. So that when you open the package, they're like ready for you to pluck your finger on it and put it right on your eyeball. Apparently if you're a contact lens user, that's like atypical.

So this is actually a pretty good thing. Yeah, apparently contact users need to like put it in one hand, flip it in the other, clean off one side and then put it in their eye. You don't have to do that with it. This is like when they came out with the ketchup bottle that was already upside down so that you didn't have to like hit that thing.

kind of a situation. Now, if you're curious about Warby Parker's strategy, just look at the pricing. Warby Parker glasses are $95-ish on average. Interesting, Jack and I looked into this. The average American is changing their glasses every two years. Okay. So a good Warby Parker customer only pays the company $42 per year on average. But here's the thing with these lens prices.

They're doing three-month supply for $110, which means you'd spend $440, annually. So a lens customer for Warby Parker makes 10 times the revenue of a glasses customer for Warby Parker. The pricing reveals the strategy. So Jack, what's the takeaway for our buddies over Warby Parker? Warby calls this a holistic offering. We're calling it the sequel strategy. There's a lot of alliteration in there. Jack and I stumbled through this thing prepping a lot. So the sequel strategy is when you spin off your first core long-term product with a short-term recurring product. So Warby Parker, it's selling glasses like once every two years. now it can sell you contact lenses frequently, many times, in between.

And we're seeing this with some of the other Warby Parker for other things, like Casper. Take Casper. Casper sells you a mattress once every like 10 years. But now they're selling sheets, which you'll probably buy much more often than every 10 years. And Albirds, they're selling you shoes like once every couple years. But in between, they're now starting to sell you socks because those feet need new socks more than every two years. My prediction, Warby Parker is going to change its branding to a vision company. just like Casper did with sleep and Allbirds did with...

Active, moving, feet, toes, feet company? And even all the above. Jack, can you whip up the takeaways force over there? Microsoft Slack knockoff has 20 million users way more than Slack's 12 million years. Because Microsoft has the incumbent advantage. Home Depot should have had an awesome quarter considering the housing market is doing great.

But Jack and I noticed it botched its new website for pro-contractors, and that's never a good thing. Warby Parker is launching contact lenses, calling it scout. Great name scout. Fun fact here. There used to be an NHL team called the Scouts. Really? Kansas City.

No way. Out of nowhere. Snackers, you're getting a double-fax situation right now. This is a very nice mix. This one sent in by Oliver O'Neill in Denver, Colorado. McDonald's is the biggest toy distributor in the world. They're giving out 1.5 billion little toys annually because 20% of all their orders are happy meals. Wow.

Now, a slight thing we've got to clarify here. Jack and I were fact-checking this one further. The last date for which we could verify this was 2013. Back then, there were 1.5 billion tiny little toys in Happy Meals. And it's really gorgeous. It brings me back. It actually sounds wildly wasteful. Snackers, love to have me with us today.

Remember, you can not only follow us on Spotify, add us to your daily playlist. Spotify is where Snacks Daily is at. Check it out. Follow us there, and we'll keep snacking at you. The Robin Hood Snacks podcast you just heard reflects the opinions of only the hosts who are associated persons of Robin Hood Financial LLC and does not reflect the views of Robin Hood Markets, Inc. or any of its subsidiaries or affiliates. The podcast is for informational purposes only, is not intended to serve as a recommendation to buy or sell any security,

and is not an offer or sale of a security. The podcast is also not a research report and is not intended to serve as the basis of any investment decision. Robin Hood Financial LLC, member FINRA, SIPC.