TheChek News Flow

Why Telfar’s New Pricing Model Matters

For its latest apparel collection, the brand will cap prices on items the faster they sell. The idea is to make fashion more accessible — and future inventory easier to plan.

American independent brand Telfar will release a new apparel collection next week and along with it, a novel way of setting prices.

When the assortment of basketball pants, mesh shirts and hoodies hit the virtual shelves Monday, they will be priced at wholesale, typically about half off retail. Every second, the price will go up, Telfar explains on its website, until the piece sells out. That will then become, more or less, the item’s “forever” price. A crewneck sweatshirt could start out at $65 and rise to $260. The highest potential prices listed on Telfar’s website reflect a standard retail markup of about four times the cost of making the garment.

The idea is that the faster an item sells out, the lower its price is the opposite of conventional retail wisdom, which dictates that the cost of an item should rise if demand exceeds supply. The brand itself describes Telfar Live as “a total reversal of the markdown sale structure of the fashion industry… literally a sale in reversal.”

In theory, Telfar may be leaving money on the table; it’s conventional retail wisdom to raise prices on in-demand products for a reason. But there are plenty of potential benefits to the brand.

By assessing the popularity of each style in real time, Telfar will get a clear sense of what its customers want, which will inform future buying decisions. If that crewneck sweatshirt sells out in seconds, Telfar can place a big order with its factory to replenish its stock, likely at a lower manufacturing price. This system also makes it far less likely Telfar will have extra inventory, eliminating waste in the supply chain.

Dynamic pricing could even ultimately boost Telfar’s margins, according to Yasen Dimitrov, co-founder of retail insights service Intelligence Node.

“This is the whole idea of the loss leader [approach] — sacrifice margin on low-cost popular items and make it up with lower velocity, high-margin items,” Dimitrov told BoF in an email. “It is the oldest trick in the marketeer’s pocket.”

Of course, retailers have another way to gauge potential demand and avoid overstock that doesn’t require reinventing the pricing playbook: preorders. Setting aside the economics of Telfar Live, it’s also a clever marketing moment. Most retailers use dynamic pricing to strategically raise prices, ensuring they can extract as much money as possible from their customers.

That’s in keeping with Telfar Clemens’ approach to his brand, which he founded in 2005: that high-quality fashion should be accessible to anyone who wants it.

Telfar’s wildly popular “Bushwick Birkin” retails for the same price today as it did in 2014: $150 for the mini, $257 for the large. In the resale market, the bags frequently command twice that, indicating Telfar could raise prices significantly if it wanted to. Plenty of its competitors have: luxury labels increased their prices 25 percent between 2019 and 2022, according to retail intelligence firm Edited.

Telfar has bucked retail convention in other ways, including eschewing a traditional New York Fashion Week show and launching a streaming app called Telfar TV to keep customers engaged.

These unconventional business decisions also tie into Telfar’s social justice mission; keeping prices low is cast as a statement of political solidarity with the brand’s core consumer.

“[Telfar Live] provides an economic model that corresponds to the nature of black cultural invention — in a market where Black culture moves all culture — but Black people don’t own their shit,” the company said in an online statement about its dynamic pricing model.

Telfar isn’t the first fashion company to use pricing to send a message. Everlane, for one, built its business around the notion of “radical transparency,” with the “true cost” of each item shown on product listings, next to the retail price. The strategy comes with risks: In 2020, current and former employees alleged Everlane fostered a toxic workplace culture at odds with its ethical tagline. Radical transparency also wasn’t enough to keep customers hooked on Everlane’s basics. The brand is now focusing on a much more traditional mission to boost sales: creating differentiated products.

The trajectory of “radical transparency” should serve as a warning to brands that think they can copy and paste Telfar’s dynamic pricing strategy into their own business models. Telfar’s pricing will likely succeed in selling clothes, and at the margins Clemens and Radboy need to grow their business, because the brand is trusted by its large and growing customer base.

The same strategy would come off as gimmicky at a label with less cultural cachet; a fading brand doesn’t need dynamic pricing to know that nobody wants its clothes. And the concept would strike many shoppers as hollow coming from a big chain; Old Navy Live or Macy’s Live doesn’t have the same ring to it. These retailers will need to come up with their own, brand-specific ways to keep their customers engaged.

The Telfar Live experiment runs through April 24. It’s unlikely to change the industry’s dominant thinking when it comes to the right price being as much as consumers will pay. But it may convince more companies to innovate. And it’s a fitting move for Telfar in its mission to democratise fashion.

Rocket Lab has proven that it’s much more than a launch company. One glance at the company’s most recent earnings presentation shows as much: its space systems business, which designs, manufactures and sells satellite components and spacecraft, brought in over 70% of company revenue compared to launch in 2022, at $150.3 million versus $60.7 million, respectively.

The space systems business — whose products include star trackers, reaction wheels, solar power systems, separation systems and more — also saw a massive growth in revenue, increasing by 239% year-over-year. To meet this growing demand, the company further announced last year that it was building out new manufacturing capabilities for reaction wheels, in particular.

The investment is paying off: It appears that Rocket Lab has landed a contract to provide reaction wheels to an unnamed mega constellation customer. The company said as much in a February press release announcing a new 12Nms reaction wheel product, saying that the wheel is “currently planned for flight with an undisclosed large mega constellation customer.”

More recently, Rocket Lab CFO Adam Spice added more color to this statement, revealing that the deal is worth “thousands” of reaction wheels per year.

“We entered into an agreement with a mega constellation where it’s thousands of reaction wheels per year and much bigger reaction wheels,” Spice said at Cowen’s 44th Annual Aerospace/Defense and Industrials Conference in February. “What that allowed us to do is build a dedicated high-volume production facility in New Zealand and we brought the cost down by almost an order of magnitude on those wheels.”

At a Bank of America event this Tuesday, Spice reiterated the enormity of the deal: “We secured a contract with a mega constellation customer where we’ll ship two or three thousand reaction wheels per year to one customer.”

While the company has not publicly disclosed the name of this customer — and declined to comment on the matter to TechCrunch, citing commercial sensitivity — there’s only a handful of known possibilities. Amazon’s Project Kuiper is one likely candidate, and OneWeb’s growing network could plausibly be another. SpaceX has demonstrated that it wants to stay in-house as much as possible for its production stack, however, so Starlink isn’t likely.

In its data sheet on the 12Nms reaction wheel, Rocket Lab lists the base price at $100,000. Of course, on contracts of this size, the price per unit is often discounted (which Spice acknowledged, saying at the Cowen conference that the ASP for the mega constellation reaction wheels “came down quite a bit”), but it suggests a big win for Rocket Lab’s revenues and a possible source for the doubling of the company’s backlog last year: from $241 million at the end of 2021 to $503 million.

Rounds were small this week, with no round crossing the $200 million barrier. One has to wonder if we may be seeing some Silicon Valley Bank fallout, as the bank would help facilitate closing deals by providing a credit facility before VCs would actually collect money from LPs. It is important to remember that a lot of banks will provide that bridge — it’s very low risk for them — but in the immediate aftermath of SVB’s collapse, there could be some deals held up.

1. Gravie, $179M, insurance: Offering good health care benefits can be tough, even for large companies, as medical and health costs continue to spiral out of control. For small and medium-sized businesses, it can be even harder since they have more limited buying power. Employer health benefits startup Gravie is looking to help that market and raised a $179 million equity investment led by General Atlantic to do just that. The Minneapolis-based company plans to use the cash infusion to grow its flagship health plan for SMBs — called Comfort — among other expansion plans. Gravie currently works with more than 1,200 companies nationwide. Founded in 2013, Gravie has raised more than $340 million, according to Crunchbase data.

2. Character.ai, $150M, artificial intelligence: It isn’t a surprise another AI-startup raised a huge sum of cash — it is a surprise an AI startup didn’t lead this week’s list. Nevertheless, Palo Alto, California-based Character.ai is the newest unicorn in the space after closing a $150 million Series A at a $1 billion valuation led by Andreessen Horowitz. The round had been reported earlier this month. The startup allows people to create their own personalized AI chatbot using language models and deep-learning algorithms. The AI-created companions can help users draft emails, serve as a study buddy, brainstorm ideas or a variety of other activities. Character.ai joins the likes of OpenAI, Anthropic and Adept AI as startups in the AI space that have raised large rounds this year.

3. Amogy, $139M, cleantech: Cleantech and climate tech remain big among investors, who this week turned their attention to emission-free ammonia power. Amogy, which is developing just that, closed a $139 million Series B-1 fundraising led by SK Innovation. The new money will allow the Brooklyn-based startup to begin manufacturing its ammonia-to-power tech and bring its first product to market. In January, the company presented an ammonia-powered semitruck and later this year plans to show off a new ammonia-powered, zero-emission tugboat. If all goes right with that sail, the company expects its first commercial offering next year. Founded in 2020, the company has raised more than $200 million, per Crunchbase.

4. Flare Therapeutics, $123M, biotech: If you read Crunchbase News (and why wouldn’t you?), you know about how the “omics,” — genomics, metabolomics, proteomics and transcriptomics — are big right now in drug discovery. In 2021, funding in the area hit $2.5 billion. Last year, even in a downturn, omics startups still raised nearly $2.4 billion, per Crunchbase data. Flare Therapeutics will help push those numbers up this year, as the Cambridge, Massachusetts-based startup raised a $123 million Series B co-led by GordonMD Global Investments and Pfizer Venture Investments. The funding will go to push its clinical trial expected to take place later this year.

5. Artera, $90M, health care: Prostate cancer is a common cancer, especially for men as they get older. The Centers for Disease Control and Prevention estimates about 13 American men out of 100 will get prostate cancer during their lifetime, and about two to three of them will die. San Francisco-based Artera is looking to fight that. The startup uses artificial intelligence for cancer testing and personalized care. It raised a $90 million round to support the distribution of its flagship test for prostate cancer from investors that included Coatue, Johnson & Johnson Innovation, Koch Disruptive Technologies, Walden Catalyst Ventures, Time Ventures, Breyer Capital and The Factory, as well as several angel investors, including Marc Benioff. Founded in 2021, this is Artera’s first outside funding round, per Crunchbase data.

6. Cognito Therapeutics, $73M, biotech: Cambridge, Massachusetts-based Cognito Therapeutics, which is developing therapies to treat central nervous system diseases, closed a $73 million Series B led by FoundersX Ventures. Founded in 2016, Cognito has now raised $93 million, per the company.

7. Rain, $66M, fintech: Los Angeles-based financial wellness tools developer Rain locked up $116 million in funding this week — $66 million in equity and $50 million in debt — led by QED Investors and Invus Opportunities. Founded in 2019, the company has raised nearly $130 million, per Crunchbase.

8. (tied) Adeptia, $65M, data: Chicago-based data integration platform Adeptia raised a $65 million strategic growth investment round led by PSG. Founded in 2000, the company has raised just more than $70 million, per Crunchbase.

8. (tied) Apprentice.io, $65M, biotech: Jersey City, New Jersey-based Apprentice.io, creator of a drug development platform, closed a $65 million investment led by new investor Iconiq Growth. Founded in 2014, Apprentice.io has now raised $207 million, according to the company.

8. (tied) Placemakr, $65M, hospitality: Washington, D.C.-based hospitality startup Placemakr raised a $65 million round of funding from a number of VC investors including Highland Capital Partners. Founded in 2017, Placemakr says it has raised more than $350 million.

• China-based JD MRO, an industrial maintenance, repair and operations firm, raised a $300 million Series B.
• Singapore-based fintech startup Kredivo Holdings closed a $270 million Series D.
• Israel-based social trading and investment network eToro closed a $250 million venture round.

Softbank Again Saves WeWork With Another Recapitalization

With help from SoftBank, WeWork has dodged a financial crisis. WeWork is cutting debt below $2.4 billion, from $3.6 billion, and pushing the bulk of its maturities to 2027, from 2025. WeWork gets more than $1 billion of new funding and capital commitments and “cancels or equitizes” $1.5 billion of debt, including $1 billion held by SoftBank, which will be converted into equity, and $690.5 million in unsecured notes converted into debt and equity.

Piper Sandler analyst Alexander Goldfarb, who has a $5.50 target price on WeWork shares, says 42% of the debt will be converted to stock, 10% gets a haircut, and 48% gets new terms. SoftBank’s stake, he says, will rise to 72% from 57%, though the exact figure depends on the mix of debt and equity non-Softbank debtholders receive.

A person close to SoftBank says the firm isn’t committing new capital to WeWork and won’t consolidate it in its financial reporting by keeping its voting control below 50%. As Goldfarb notes, the deal avoids bankruptcy. But stockholders will be diluted; he estimates that WeWork’s share count will more than double. The shares, down 44% in 2023, fell 18.2% on the week.

One normally staid corner of the financial markets—preferred stock—has been rattled by the Silicon Valley Bank and Signature Bank seizures, and that has created opportunities for investors.

Preferreds are a senior form of equity whose dividends come before those of common stock. Preferred shares issued by banks, however, account for about two-thirds of the $400 billion market and the twin bank failures have highlighted the credit risk in these securities.

In fact, the preferreds issued by SVB Financial Group and Signature Bank, the failed banks’ parents, might have little or no recovery value. Trading in their New York Stock Exchange–listed preferred and common shares has been halted. And an unlisted SVB preferred issue aimed at institutional investors was fetching about 10 cents on the dollar late this past week over the counter.

While this is certainly worrisome, preferreds still offer a lower-risk way to invest in banks than common shares, and some pros say they now look especially appealing. After its 8.5% drop this month, the sector’s largest exchange-traded fund, the $12.4 billion iShares Preferred and Income SecuritiesPFF +0.43% (ticker: PFF), yields 6.5%. What’s more, preferreds issued by most banks now yield over 6%, a nice premium to the 3.7% on a 30-year Treasury bond.

“This is a great time to step into the market,” says Allen Hassan, head of preferred trading at Ziegler.

Preferreds have long been popular with retail investors because of their combination of relative safety, solid yields, and liquidity. Most are issued with a $25 face value and trade on the NYSE. There also are institutional preferreds, with a $1,000 face value, that mainly change hands over the counter.

Dividends on most preferreds are taxed favorably, like those on common stock. Companies are loath to miss preferred payouts because they can’t issue common dividends without first paying preferred holders. However, as equity, preferred has more risk than debt.

Newly issued preferred stock can be problematic; it can’t be redeemed at face value for five years, limiting the immediate upside, while the downside is unlimited. But now, many $25 face-value preferreds are trading under $20, making the risk/reward proposition far more appealing.

“There is uncommon value in the preferred market,” says Phil Jacoby, chief investment officer at Spectrum Asset Management, a preferred specialist. Yields are near their highest levels in more than 10 years, he observes, and spreads to yields on risk-free Treasuries are historically wide.

As for the risks, he takes comfort in federal regulatory support for banks on deposits and a new Federal Reserve program that lets banks borrow against their bond holdings.

Spectrum manages the Nuveen Preferred & Income SecuritiesJPS –3.39% closed-end fund (JPS), now trading around $6. It has an 8% yield, reflecting leverage, and changes hands at a 13% discount to net asset value.

His investment firm also runs the Principal Spectrum Preferred Securities ActivePREF –0.24% ETF (PREF), which focuses on institutional issues and yields 5%.

Individual investors might also want to consider the preferred stock of top banks, such as JPMorgan Chase (JPM), Bank of America (BAC), Wells Fargo (WFC), and Morgan Stanley (MS). These and some others are considered systemically important financial institutions by Uncle Sam, and so carry more capital and are more strictly regulated than regional banks. And, lately, they generally have benefited from deposit inflows shifted from smaller rivals.

Preferreds from the country’s biggest bank, JPMorgan, offer the lowest yields—its 4.2% series M issue yields 5.6%. Bank of America preferreds, like the 4.25% series Q, yields almost 6%, while Wells Fargo and Morgan Stanley preferreds yield close to 6.5%.

(Some investors would rather buy big-bank common shares, currently yielding 3% to 5%, because they have more upside potential.)

Regional banks can offer larger payouts, but also more danger. Investors appear unperturbed about preferreds from Fifth Third Bancorp (FITB), Regions Financial (RF), and Cullen/Frost Bankers (CFR), which yield about 6.5%, only slightly more than some of their too-big-to-fail peers. Higher yields also are available on the preferred of New York Community Bancorp (NYCB), which is buying assets of Signature Bank. Its 6.375% preferred has fallen to $19.45 from $25 and yields 8.6%.

Then there’s First Republic Bank (FRC). It has inspired some of the worst jitters, even after a $30 billion deposit infusion from JPMorgan and 10 other large banks. Its common trades at $12.50, down 90% this month, while its preferred fetches about $6, well below its $25 face value.

Although it suspended its common payout, the bank is still paying preferred dividends. There’s risk here—big risk—but investors could benefit if the big banks inject equity into First Republic or if the preferred is converted into common shares on favorable terms.

That bet is suitable only for investors with cast-iron stomachs. Everyone else should stick with the biggest banks.

Even online influencers are falling foul of changing taste in enhanced features and cosmetic treatments

Online beauty standards have developed a taste for the gothic. Pillowy faces are being replaced by a gaunt, hollowed out aesthetic. Those not blessed with the requisite bone structure have found the solution in a gruesome cosmetic procedure called buccal fat removal.

The question is what to do when sculpted faces become less popular, as they inevitably will. When cherubic cheeks are back in vogue, what then?

For years, a particular type of cosmetically-enhanced, homogenous beauty has reigned supreme for women in the western world. The big lips, contoured nose, high cheekbones and wide, uplifted eyes make up a look that writer Jia Tolentino dubbed Instagram Face — a reference to the social media platform’s ubiquity and editing tools. Like Instagram, it is now falling out of fashion.

Beauty ideals are out of reach by design. Achieve one and the next will escape you. Pencil thin 1990s eyebrows make way for fluffy laminated brows. Athletic silhouettes are replaced by curves. But it all becomes more fraught when cosmetic treatments are added to the mix, promising to help clients inch closer to the ideal — if they have the money, time and pain threshold. Following trends by swapping skinny jeans for straight legs or long hair for choppy cuts is easy enough. Reversing changes made to the shape of your face is not.

This is a problem for the influencers who make money uploading selfies. Reality TV star Kylie Jenner, one of the most famous examples of Instagram face, has made a fortune using her own image to sell her beauty products online. Earlier this month, however, the newsletter Garbage Day featured digital strategist Leila Brillson, who highlighted research in which young internet users said that they did not connect with Jenner because her face was too “millennialized”.

Brillson finds it inevitable that the cosmetic procedures used to obtain a perfect, Instagram-ready face would lose popularity. “The beauty standard for millennial women — that unobtainable, curated look — I think the generation behind us are looking at how that ages and are choosing a different path.”

Social media amplifies the effect of punishing ideals. Along with Instagram face there was the “Zoom boom” in cosmetic interventions for people unhappy with how they looked on video calls. Snapchat dysmorphia describes users who wish they could look like their online selves.

I blame filters. In 2015, social media company Snapchat bought San Francisco company Looksery, using the company’s face tracking tech to map augmented reality images on to the user’s image. Since then, social media photo filters have gone into overdrive. The earliest added dog ears and rainbows. Now they are designed to be hyper-realistic and show users what they would look like with aesthetically enhanced features. You no longer need FaceTune or other digital editing tools. Filters can give you a sharper jaw, better hairline and clearer skin in an instant.

The rise of high street clinics offering non-surgical treatments can make those digital images real. Syringes full of Juvéderm and Botox freeze and fill features, moving contours and erasing wrinkles. Thanks to injectables, you can change the entire shape of your face.

It is hard to overstate how normalised this has become. Magazines that once reviewed face creams now brief you for your first lip filler appointment. Young customers are encouraged to freeze their face now in order to prevent wrinkles later. They are indoctrinated into an expensive, never-ending habit. The American Society of Plastic Surgeons reports that in 2020, some 12,000 cosmetic botox injections were carried out on teenagers.

If they follow the trend, those numbers will rise. An annual audit by the British Association of Aesthetic Plastic Surgeons shows that cosmetic procedures doubled in 2022 compared with the year before. This is partly pent up demand thanks to Covid. But procedures are up on pre-pandemic levels. The association cites social media. “Knowledge of plastic surgery has traditionally been through word of mouth, but this has now risen exponentially through digital word of mouth via Instagram,” says former president Rajiv Grover, who compiled the audit.

Non-surgical treatments are even more popular. The International Society of Aesthetic Plastic Surgery’s Global Survey recorded some 17.5mn carried out worldwide in 2021, a third more than surgeries.

Even this does not come close to the true number. There are no reputable figures for so-called tweakments made on the high street, sometimes by practitioners with minimal training. In San Francisco, I walk past a tiny shop every day that opens straight into the street and offers on the spot injections to passers-by.

Nothing lasts. If you freeze one set of wrinkles, others appear. Filler can migrate. Lip injections can transfer above the mouth — an unfortunate phenomenon known as filler moustache. Trendsetters will turn up their identikit noses and move on. Just don’t expect them to embrace a natural look. The era of millennial face may be coming to an end but extreme beauty standards are going nowhere.

The country’s sense of self as a haven for the world’s money and a beacon of neutrality is being shaken

The country’s sense of self as a haven for the world’s money and a beacon of neutrality is being shaken