August 22, 2019

Sluggish Retail Investment Levels A Sign Of The Times

 

By now, you should know how the format of these posts go: I start with some witty intro into the topic at hand, move to a high level analysis, and then get a little deeper into the weeds…

You can’t go too far these days without seeing something in the news about the Retail industry. Macy’s saw its profits fall 48%, and its stock responded with a 16% price decrease. Amazon, in addition to being the go-to source for streaming old episodes of Survivor, is one of the world’s biggest retailers. One of the founders of Alibaba (another of the world’s largest retailers), just bought the Nets…the Nets! Last week, the announcement that tariffs on Chinese imports would be delayed until late in the holiday shopping season bolstered retail stocks, though these companies still fear the long-term impact of these tariffs. That’s right, this week is Retail week here at KingsCrowd.

Retail companies make up a smaller share of my dataset, with only 35 offerings (just over 3% of the sample population). The majority of these offerings appear on SeedInvest (10), StartEngine (10), and Wefunder (9). The unique aspect of the SeedInvest offerings appearing in this set, as opposed to the StartEngine and Wefunder offerings is that these offerings are often side-by-side offerings (Reg CF and Reg D). 

Unlike the Medical offerings I took a look at a few weeks ago (and the sample as a whole), the retail offerings lag behind in the “Success” Department (retail pun intended), at only 51%. Part of this could potentially be attributed to the high average offering minimums. On average, Retail offerings target a raise of $72K, though this is admittedly skewed by some larger minimums (the top two minimums of $450K and $300K were unsuccessful), with 14 offerings looking to raise a minimum of $10K. These offerings also lag behind some of their successful counterparts when it comes to the cash register too. These offerings are raising only $145K, on average, compared to the $213K Medical offerings pull in and the $244K brought in by Food and Drink offerings. 

With as much as we have heard about Retail in the news, it is definitely an industry with room to grow when it comes to Reg CF offerings. The industry lags behind in success rates and funding, but recent trends point in a promising direction, with 7 of the last 10 offerings in our sample have hit their targets (average target of $18K).  Much has been made about how traditional brick and mortar retail is on its way out, but the offerings we’re seeing attempt to bring a fresh spin to the industry.


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About: John aland

John is an Accounting PhD candidate at the University of Michigan’s Ross School of Business. His research interests include crowdfunding, disclosure, and debt contracting. Prior to Michigan, he worked as an auditor at KPMG in Philadelphia for seven years, leaving the firm as an audit manager. John has a BS in Accountancy from the University of Notre Dame. He can be reached at alandj@umich.edu.

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