The @Opendoor SPAC has me thinking about real estate as an ecommerce category and why its worse than other online verticals like fashion, electronics, and auto.

The key is centralized warehousing & inventory.

businesswire.com/news/home/2020…
Nationally centralized ecommerce companies like @Carvana, @Wayfair, & @amazon move supplier inventory to the middle of the US population.

They take the 200+ local brick and mortar markets, and create one consolidated US ecommerce market. ImageImage
The problem for real estate is that it can’t be moved. Therefore, iBuyers like Opendoor, Zillow, Redfin, & Offerpad can't achieve the benefits of centralization.

What are the centralization benefits exactly? Image
The main benefit is maximizing eyeballs per SKU, and SKUs per customer.

For example, every car purchased by CVNA has 665 potential buyers. A KMX car just 285.

A Carvana shopper sees 18k vehicles, a KMX store shopper just 245.

This means higher conversion & inv turnover. Image
Centralized inventory also minimizes the aggregate network distance between suppliers, inventory, and consumers.

This enables quicker & cheaper logistics.

From a CVNA IRC in TN to top MSAs is 1,150mi. The distance for KMX stores in SF/BOS/MIA to the same MSAs is 1,600mi. ImageImage
When pooling inventory, you're also pooling risk.

Since local markets are smaller & subject to demand fluctuations, storefronts hold significant safety stock. with a centralized portfolio, demand fluctuations are counterbalanced.

This is exhibited by the square root law. Image
Smaller in-market presence provides scalability and cost savings on real estate and personnel.

Some businesses can also arbitrage pricing across markets. For example, trucks are cheaper in TX and convertibles in FL because of oversupply.

bucks.blogs.nytimes.com/2013/02/18/use…
Like real estate, local services (electricians+) & perishable goods (fresh grocery+) also can't centralize.

Industry incumbents are therefore better equipped to handle an online shift, as their existing footprints only need to be slightly modified.

progressivegrocer.com/digital-first-…

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More from @TenebristGlobal

27 Aug
Warby Parker, arguably the most successful D2C business, is unsurprisingly raising money again.

Why is this unsurprising? Because pure D2C is inherently a bad business.

techcrunch.com/2020/08/27/war…
In ecommerce, you need to continuously improve the breadth/depth of your product offering to attract new customers and maintain a product lead. This is the antithesis of D2C, generally only offering a few products.

For example, Casper has a grand total of...3 mattresses!
Also, D2C companies are typically not vertically integrated into production, payments, logistics, etc. And even @smiledirectclub which is, still attracts a significant amount of competition from copycats.
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