KC Underweight Deal: Can We Interest You in Military-Themed Barware?
Summary
Today in our equity crowdfunding ratings series, we’re diving in and taking a close look at the pros and cons of TAPtical Design LLC. As always, the purpose of the review is to give in-depth information about the company, its background, associated risks, and growth prospects so that investors can make an informed decision.
TAPtical Design is a manufacturer and seller of barware and outdoor goods inspired by the military and first responders. TAPtical’s products are meant for tactical gear enthusiasts – with the end goal being to bring a sense of community among consumers.
The company was started by a disabled veteran, Emil Reynolds, who seeks to engender the bond between people who have been a part of the military. His products help veterans and those who support them start a conversation, share a drink, and stay closely connected.
Products of TAPtical include military-inspired clothes, grill and brew sets, alcohol kits, chef knives, combat cleavers, wine glasses, tumblers, corkscrews, and many more.
Image Source: gettaptical.com.
TAPtical Design seeks to bring communities together – fair enough.
But it does raise questions surrounding a limited target audience, highly competitive landscape, and high valuation of TAPtical.
Below we go through our concerns in greater detail.
Overview
1. Limited Target Audience
The products of TAPtical Design are aimed at veterans, people who have served in the military, or the first responders and their families and friends. As the company’s “About Us” page says, “We produce custom designed, military inspired gifts for the discerning drink enthusiast.”
It begs the question: How many Americans want tactical-inspired barware? We’d assume a small percent of the 20 million Veterans in the U.S. today, and within that small percent of people they will have to compete against other similar brands.
It seems more a product meant for QVC – not a long-term business.
In our opinion, it’s designs limits its target market and therefore growth potential.
2. Lack of Uniqueness in the Products
In addition to the limited target audience, TAPtical fails to offer any unique products. The cups, mugs, tumblers, alcohol kits, and bar kits are nothing that cannot be found anywhere else – save for the logos and designs. For example, the military print beach shorts fail to strike us as innovative.
A quick trip to amazon.com reveals that many of the same or similar products are available for similar prices. Those products that are unique, such as a $115 Grill ‘N’ Shots Set do not appear to be “must haves.”
3. High Valuation
TAPtical’s Form C Filing with the SEC reveals that the company failed to generate ANY sales in 2018. For 2019, the company expects to generate sales of $125,000.
We have little to go on.
The target expectations look quite unrealistic considering the restricted target audience, lack of uniqueness in the products, and the past year’s results.
All of this is to bring into question a nearly $1 million valuation. According to its crowdfunding raise page, TAPtical is currently valued at $900,000, giving it a projected sales multiple of 7.20. Were we sure these sales were to materialize – to say nothing of profits – that would be one thing.
As it stands – a $900,000 valuation strikes us as inflated, at best.
4. Tough Competition
TAPtical is in the business of manufacturing and supplying commoditized goods like barware and outdoor goods. This highly commoditized space is brimming with competition – hardware stores, Amazon, and specialty shops all vie for consumer dollars with similar products.
Bottom line: There are a large number of manufacturers, sellers, online vendors, etc. who are better established and offer similar products at cheaper prices.
Therefore, TAPtical is entering a space with high competition and without the arms and ammunition to combat the competition (get it?). We wonder how it intends to set itself apart from the other stronger and better-established players in the market.
5. Uncertainties
The company has yet to establish an inventory supply and it currently takes about 30 days to ship bulk orders even for basic products like mugs, cups, and other mass-produced items.
It is uncertain whether customers will be fine with waiting for more than 30 days to receive their order of products that competitors can deliver in a much shorter time.
Wall Street has Morningstar, S&P, and Bloomberg
The equity crowdfunding market has KingsCrowd.
Rating
For all the above reasons, we are assigning TAPtical Design the rating of an Underweight Deal.
The company started with a community cause of bringing veterans and their families together; however, the concept itself lacks caliber. The products of TAPtical can be easily replaced in a market that’s already brimming with similar products.
Simply put: The target audience will likely always remain limited, and the competition will always remain high. It does not seem probable that TAPtical will be able to overcome the obstacles and become a profitable enterprise.
We love themed products as much as the next team of investment analysts, but we urge investors to exercise caution before investing. As early-stage investments go, we believe there are greener pastures elsewhere.
If you have any questions regarding the underweight rating of TAPtical Design, you can reach us at hello@kingscrowd.com.
