Earlier this year, Canadian retail firm Hudson’s Bay made it known that it was considering selling off one of its properties: the “iconic” Lord & Taylor department store chain. Founded in 1826 and a staple at malls across America, Lord & Taylor’s revenue last year was around $1.1 billion. But like other department stores, it has struggled to adjust to the digital era, closing stores and even selling its storied, flagship Fifth Avenue location to WeWork; it lost about $90 million last year.
A few weeks ago, a buyer emerged: Le Tote. That name is likely less familiar, given that it’s a seven-year-old startup that is part of the retail trend du jour: clothing rental. Le Tote’s revenue is reportedly about a tenth of Lord & Taylor’s — and indeed, revenue for the entire clothing-rental category is estimated about $1 billion. Le Tote, a private company reportedly valued at around $180 million with backers including Andreessen Horowitz and Google Ventures, is not even the alpha dog in its category, with less recognition than Rent The Runway. The deal has some unusual details, but the big picture is that Le Tote is paying about $75 million, and granting Hudson’s Bay some equity.
In other words, this is an example of a particular kind of deal that could be shorthanded as “Thing You’ve Never Heard of Acquires Thing You’ve Heard of Your Entire Life.” It’s not the first example. And it definitely won’t be the last.
It’s a notable phenomenon, because it represents a shift in the new-vs.-old dynamic of the post-digital business era. For years, we’ve been offered two basic narratives: The old will simply absorb the new (familiar business swallows clever startup), or the new will erase the old (clever startup “disrupts” and ultimately obliterates familiar business).
But maybe, as technology slowly changes consumer habits, these curious-sounding mashups of tech-centric startups and venerable “legacy” companies offers a third narrative: the new world swallows the old. Maybe Airbnb acquires Delta, Snap scoops up Viacom, or Lyft buys GM. Who knows, maybe Bird buys GM.
Okay, maybe that’s a bit much. Either way, central to this narrative is the sometimes-squishy idea of the brand, and its value. After all, it would most likely take Le Tote many years, and many millions of dollars, to implant its name and basic brand proposition in the number of consumer brains that recognize the name, and essential meaning, of Lord & Taylor. Building a brand has never been easy, but in the hyper-fragmented digital era, it’s arguably harder than ever. You can’t introduce yourself to the masses in one fell swoop through ads on three networks and a handful of magazines; getting noticed in the all-against-all attention economy is an expensive slog. So why waste the time, effort, and expense when you can just buy a brand somebody else built?
An interesting precedent: Last year’s acquisition of the venerable Zagat brand by The Infatuation, described as an “upstart restaurant review company,” with an editorial-driven, app-centric approach. Zagat, founded in 1979, built a family-owned empire around collecting what’s now called “user-generated content,” curated in its familiar, burgundy-covered city guides. The internet era brought a wave of competition from Yelp and other crowdsourcers, but the brand was valuable enough to attract a $150 million acquisition by Google in 2011.
For years, we’ve been offered two basic narratives: The old will simply absorb the new (familiar business swallows clever startup), or the new will erase the old (clever startup “disrupts” and ultimately obliterates familiar business).
This fit, however, never really worked. By 2017, Zagat’s print guides were discontinued, and Google — obviously not an upstart, but a major brand of its own right — was focused on integrating its own user comments into its Maps product. By one account, “Zagat was thought to be essentially dead.”
Enter The Infatuation, a New York-based startup that began as the side hustle of two music executives obsessed with finding cool new places to eat, and known among other things for its successful use of the hashtag #EEEEEATS on Instagram. The company has indicated Zagat will remain a stand-alone brand, and announced it would bring back Zagat’s New York City print guide later this year — but a more digital-centric one, revamped by its new owners’ innovative tech prowess and “highly engaged millennial audience.” The new owner was blunt about what it was getting: “Iconic brands don’t become available very often,” its CEO said at the time, “and Zagat is about as iconic as it gets.”
But the appeal of the familiar was perhaps most forcefully demonstrated earlier this year when a company called Authentic Brands Group — best known as the owner and licensor of the brands of celebrities like Marilyn Monroe, Muhammad Ali, and Elvis Presley, along with a slew of consumer brands, all leveraged for everything from events to T-shirts — bought Sports Illustrated from publisher Meredith for $110 million.
More precisely, the firm bought the “iconic” (that word again!) publication’s intellectual property: its photo library, its famous name, the rights to its recognizable Sportsperson of the Year and swimsuit issues. As for actually publishing an ongoing editorial product, with employees and an audience — that would be just another item to license out. The transaction, as The Times delicately phrased it, “suggest[ed] that the magazine’s most coveted asset is its brand.”
A month or so later, Authentic Brands struck a deal with a Seattle-based digital publisher called Maven, which has agreed to produce S.I. for at least a decade. Like Le Tote and The Infatuation, Maven, cofounded by former Yahoo executives, is a young company boasting digital-era skills (in this instance, a publishing, distribution, and advertising platform), making a bet on aligning with a legacy brand. It’s a remarkable turn of events, given that we’re just a few years removed from Sports Illustrated’s role as a celebrated member of Time Inc.’s formidable array of household-name publications.
What’s notable is that in all these cases it’s the brand part that seems to matter most — because none of these legacy entities seems particularly exciting as a business. This new narrative aims to make that disconnect an advantage: a chance to inject something familiar with a more up-to-date, tech-centric model (one that, among other things, brings easier access to fresh capital).
Indeed, these are experiments in a perpetually morphing marketplace. Some of them will fizzle (Remember that time AOL acquired Time Warner?). But if the alternative is that these brands disappear forever, maybe a little experimentation is worth a shot. There are probably more than a few Thomas Cook customers who would be happier today if, say, Airbnb had swallowed that venerable, and formerly iconic, brand.