Warby Parker is a lifestyle brand with the goal to offer designer eyewear at a revolutionary price while leading the way for socially conscious businesses. By engaging directly with consumers, they’re able to offer ultra-high-quality, vintage-inspired frames for $95 including prescription lenses and shipping. Social innovation is woven into the DNA of our company, and for every pair of glasses purchased, a pair is distributed to someone in need. In 2015, Fast Company named them the #1 Most Innovative Company. We’re also a certified B Corporation, which means that we are held to the highest standards of social and environmental performance.
The brand story continues … “It turns out there was a simple explanation. The eyewear industry is dominated by a single company that has been able to keep prices artificially high while reaping huge profits from consumers who have no other options. We started Warby Parker to create an alternative. By circumventing traditional channels, designing glasses in-house, and engaging with customers directly, we’re able to provide higher-quality, better-looking prescription eyewear at a fraction of the going price.
We believe that buying glasses should be easy and fun. It should leave you happy and good-looking, with money in your pocket. We also believe that everyone has the right to see. Almost one billion people worldwide lack access to glasses, which means that 15% of the world’s population cannot effectively learn or work. To help address this problem, Warby Parker partners with non-profits like VisionSpring to ensure that for every pair of glasses sold, a pair is distributed to someone in need. There’s nothing complicated about it. Good eyewear, good outcome.”
Extract from a recent Forbes article:
Warby Parker was founded in 2010, by four friends, Neil Blumenthal, Dave Gilboa, Andy Hunt and Jeff Raider, who happened to be in business school.
The inception of the idea had taken place in a computer lab, as the four friends lamented the state of the eyeglass industry. Why are glasses so expensive?
The first Eureka moment came when investigating that very question. Dave describes: “Understanding that the same company owned LensCrafters and Pearle Vision, Ray-Ban and Oakley, and the licenses for Chanel or Prada prescription frames and sunglasses — all of a sudden, it made sense to me why glasses were so expensive.”
And with that epiphany, the idea began to take shape and the business model was born. They would create a vertically integrated company. Neil explains, “It was really about bypassing retailers, bypassing the middlemen that would mark up lenses 3-5x what they cost, so we could just transfer all of that cost directly to consumers and save them money.”
If you think that’s a mouthful, that’s just the beginning: “When you buy a Ralp Lauren -0.42% or Chanel pair of glasses, it’s actually a company called Luxottica that’s designing them and paying a licensing fee between 10 and 15% to that brand to slap that logo on there. If we did our own brand, we could give that 10-15% back to customers.”
Even with all this thought out, it still wasn’t clear what would come of the idea. As Dave Gilboa, Warby Parker’s future co-CEO, put it: “Warby Parker wasn’t the basket that I wanted to put all my eggs into.” And Neil Blumenthal, the other future co-CEO, felt no differently: “In some respects, my time in business school, I was sort of hedging my bets between 1) Would be Warby Parker take off in the startup world, or 2) Would I have an offer after [graduation.]”
After incubating the idea for a year and a half, the idea finally hatched. The launch was so successful that the team hit their first year sales targets in the first three weeks. That’s like expecting one child and instead landing with triplets.
The biggest benefit of good branding is, of course, brand loyalty. Ries writes in Positioning: “History shows that the first brand into the brain, on the average, gets twice the long-term market share of the No. 2 brand and twice again as much as the No. 3 brand.”
But being first in the brain is still only the first step. “You build brand loyalty […] the same way you build mate loyalty in a marriage. You get there first and then be careful not to give them a reason to switch.”
Soon after Warby Parker’s success, copy-cats began cropping up. But what none of these copy-cats understood was Warby Parker already occupied the No. 1 spot in the customer’s mind, and to date, had done everything in their power to keep those customers. Al Ries explains this phenomenon: “Moving up the ladder in the mind can be extremely difficult if the brands above have a strong foothold and no leverage or positioning strategy is applied.”
“What dethrones a leader, of course, is change.” As Al Ries points out, “To play the game successfully, you must make decisions on what your company will be doing not next month or next year but in 5 years, 10 years.”
The question: Can Warby Parker keep its lead?
“We’re often asked why Warby has been successful. If we sum it up in one word, it’s deliberate,” Dave says. Their passion for the idea has helped drive that meticulous mindset.
But contrary to popular belief, working harder is not what leads to success. As Al Ries writes, “The only sure way to success is to find yourself a horse to ride. It may be difficult for the ego to accept, but success in life is based more on what others can do for you than on what you can do for yourself.”
Warby Parker has built its brand to build relationships. It allows them to build meaningful relationships because it’s a brand that cares. It cares about the world, it cares about its people and it cares about its customers.
So much of success is serendipitous. And the key to serendipity is increasing the chances for a serendipitous encounter. The more relationships you build, the odds swing in your favor that that one of those relationships will help you succeed down the line that one time you need it.
Tim Riley explains Warby Parker’s marketing tactics
Here is an interesting talk by Tim Riley who heads up the online experience at Warby Parker. His job is to make the process of buying glasses online as fun and easy as possible:
Here are 7 things to take away from Tim’s talk, which is also transcribed below:
- Make Me Care … Start by putting together a fundamentally great story. Warby Parker got tremendous word-of-mouth from the get-go because their story resonated with the press, who were eager to tell their readers about it. This should work for all brands, but it should be especially powerful for lifestyle brands. (Read: It was a dark and stormy night… – 11 Examples of Storytelling in Marketing)
- Understand your brand hierarchy … What’s most critical? Warby Parker lays out its brand in a linear fashion: Lifestyle brand -> Value and Service -> Social Mission. Rather than trying to do everything at once, they focused on the most important fundamentals that would enable them to do what they really wanted to do. (Read: 30 Tips To Build Your Personal Brand From 37 Experts [Infographic])
- Steal the show! … Get your early buzz + influencer buy-in by being tastefully rebellious. Warby Parker wanted to be a part of NY Fashion Week in Fall 2011, but couldn’t afford to get involved the traditional way- so they invited 40+ editors to a ‘secret event’ at the NY Public Library. They earned buzz (without paying for it!) by creating a remarkable experience. (Read: Guerrilla Marketing Tactics Every Startup Should Know: 8 Case Studies and Examples)
- If It Ain’t Fun, Why Do It … Create content that’s legitimately fun. Warby Parker’s annual reports include things like what bagels they ate, or what were the most popular misspellings of the brand. In 2012, this led to their 3 highest consecutive sales days of the year. (Warby Barker became a standalone April Fool’s site, which got 2.5x the traffic of the actual site.) If you’re not enjoying your own content, why would anybody else?
- Figure out ways to turn mundane interactions with your brand into remarkable, social ones. Warby Parker’s team responded to questions on Twitter with quickly-shot YouTube videos, which average 120 views per video. They also provided a make-a-snowman kit with their gift cards, and added a #WarbySnowman hashtag– turning it into a fun, remarkable experience. (Read: 17 Ways That 15 Companies Got Massive Word-of-Mouth By Delighting Their Customers)
- Better Together … Partnerships make tonnes of sense for lifestyle brands. Warby Parker does partnerships with all sorts of other brands and entities. Ghostly International (music label), Man Of Steel movie (Clarke Kent as the original do-gooder and most famous glasses-wearer), DonorsChoose.org, (in line with social mission, $30 gift card allows customers to get more directly involved with projects). (Read: Examples Of Collaboration In Ecommerce – Win-Wins For Everybody)
- Create unique, memorable physical experiences. Warby Parker makes very interesting decisions: The flagship store looks like a library, and the eye exams are done with old-school railroad flipping things. When they wanted to do mobile showcases, they used bicycles, and then a repurposed schoolbus. Their first showcase had a Yurt in it. Every time they had a chance, they chose to do something unorthodox.
“Nespresso. What else?” ask George Clooney, as if you were to question his taste in coffee. In 1976, Eric Favre of Switzerland’s largest business, Nestle, invented the Nespresso system. 10 years later, Nestle remembered that it was the coffee that people really wanted, not just a great machine. It licensed out manufacturing of the hardware and created “Le Club”.
Whilst the machines are now made by others, from Alessi to Krups, the coffee is made by Nestle, with drinkers subscribing to pod refills sent directly to their homes. Over the decades, coffee culture came to dominate our towns, and people demanded better at home. Nestle, as Nespresso, was waiting.
https://www.youtube.com/watch?v=f5QdLFip8iU&list=PLQ2eIUsAVWUyoz0kY_nbMg3xUjYBjqrxF&index=3
Nespresso’s success lies in two factors – its business model, and its market strategy. The low cost machines and premium coffee is an echo of the “shaver and blades” model used so successfully by Gillette, whilst the direct to consumer channel allows the brand to build a deep understanding and relationship with its drinkers.
Nestle targeted two primary markets for growth – USA and China. However it realised it would need different strategies from what had worked in Europe. In the USA, Nespresso sought to differentiate itself by targeting women, with a more sophisticated approach, endorsed by Penelope Cruz. In China, growth is slower, taking time for people to consider the alternative to tea. Slow, but huge potential. But Nestle is playing a long-term game. “Relax, it will happen” as Clooney might say.
Read the Nespresso history: simple idea to brand experience
A snowboarder glides up-side down over a forest of trees and sticks his hand out to brush the top of a tall pine. He does it so casually, whilst a high-speed camera catches the treetop moment, just another glimpse of Red Bull action. In fact you might be forgetting that Red Bull is actually a drink. The logo is everywhere at these events, but the brand is more than an energy drink.
“Red Bull gives you wings” says the slogan, emblazoned across the sky by stunt aircraft taking part in the brand’s Air Race in front of millions of spectators crowded along the banks of the Danube in Budapest. It’s the same message at the Flugtag, when homemade aircraft take flight and flop just a quickly, of the Cliff diving, from the tall buildings into Boston Harbor, or the Soapbox race, when rickety go-karts hurtle down a mountain side. It’s all pure adrenalin, and fabulous entertainment.
In 1987 Dietrich Mateschitz was in Bangkok selling photocopiers. After a long flight he collapsed into the chair of a hotel bar. “I know exactly what you need, Sir” proposed the Thai waitress. She quickly returned with a glass of Krating Daeng (daeng means red, krating is a guar, or very large bison). Whilst the original ingredients were said to contain bull’s testicles, Mateschitz was soon energising, returning to his native Austria with a plan to modify the recipe, and launch his new brand.
Having sold 6 billion cans, the world’s largest energy drink is often called “liquid cocaine”. But the focus is not the ingredients, it’s the possibilities of the brand – how it makes you feel, not what it is. This is where the high adrenalin sports come in. Red Bull Media House makes the movies of each event, on a budget of around $2 million, but sells the movies for much more. There are a regular NBC reality TV shows featuring its stars, online communities, and Red Bulletin magazine. In fact such content is as important as the product in building the brand, so much so that Mateschitz now calls Red Bull a media company.
“At WeWork, we are committed to creating a world where people can do what they love, where they can create a life’s work and not just a living,” said Adam Neumann, WeWork’s co-founder and CEO.
WeWork began as a simple co-working space for artists, entrepreneurs, and freelancers. It has rapidly expanded to more than 150 locations in 15 countries worldwide. In 2016, the business raised $690 million at a valuation of nearly $17 billion. It charges members a subscription fee.
“When we started WeWork in 2010, we wanted to build more than beautiful, shared office spaces. We wanted to build a community. A place you join as an individual, ‘me’, but where you become part of a greater ‘we’. A place where we’re redefining success measured by personal fulfillment, not just the bottom line. Community is our catalyst.” says Neumann.
WeWork’s workspace design features private offices (for teams of 1–100+) with glass walls to maintain privacy without sacrificing transparency or natural light. Common spaces have a distinct aesthetic and vibe that will inspire your team, as well as the guests you bring into our buildings.
Typical features of a workspace include
- Super-fast Internet. Hard-wired (Ethernet) connections as well as access to Wi-Fi in all WeWork locations.
- Spacious, Unique Common Areas. WeWork spaces includes desks, chairs, desk lamps, and lockable filing cabinets.
- Business-Class Printers. Each WeWork floor has at least one multi-function copier/scanner/printer.
- Free Refreshments. Get free micro-roasted coffee, tea, fruit water, and beer at every WeWork location.
- Onsite Staff, and managers available from 9am-5pm, Mon-Fri.
- Private Phone Booths. Phone booths are available on all floors for private calls.
Events are an essential part of the WeWork experience. From regularly scheduled office hours with venture capitalists or other industry professionals, to tequila tasting happy hours with the whole community, we know how to work, and we know how to have fun. There are events, both social and professional, happening every day to help you build and maintain a strong team culture.
Here is an extract from a Forbes magazine profile:
Mort Zuckerman, the 77 year old billionaire chairman of Boston Properties, controls $19.6 billion (market cap) worth of prime office buildings in cities like New York, Washington and San Francisco, and in June 2013 he took a walk through a little real estate business called WeWork that Adam Neumann and his partner, Miguel McKelvey, were building.
Neumann, then a 34-year-old former Israeli naval officer with a thick mane of black hair, met Zuckerman at the elevator of his second WeWork office in New York’s SoHo neighborhood. “Surprise, surprise–another upstart wanted in on the office rental game,” Zuckerman remembers thinking to himself. Neumann explained the business model: WeWork takes out a cut-rate lease on a floor or two of an office building, chops it up into smaller parcels and then charges monthly memberships to startups and small companies that want to work cheek-by-jowl with each other.
Neumann led Zuckerman past WeWork’s 38,000-square-foot warren of small, glassed-in offices packed with young creative-economy types, the coffee lounge that converts into a beer-and-wine event space during happy hour, the conference rooms brimming with videoconferencing gear and the office managers smiling and taking care of package deliveries and replenishing the free coffee and laser printers. “We’ve got a waiting list months long,” Neumann told him. And the buzz in the air was going to be repeated across seven cities in a dozen new locations before 2015.
Zuckerman warmed up. Here were dozens of members with needs very different from the tenants who sign leases at Boston Properties buildings on Park Avenue. These startups need each other. They feed off each other. They want to belong to something. “Adam understood in a very serious way that we are in a new culture,” Zuckerman says. “I found it extraordinarily creative and original after being in this business for God knows how many years.” (actually, it’s around 50 years!)
Zuckerman asked Neumann to lunch. Then another. By their fourth meeting he made Neumann promise to let him invest personally in WeWork the next time it raised money. And in 2015, almost two years since that first tour, a 200,000-square-foot WeWork will be the anchor tenant of the $300 million redevelopment co-owned by Boston Properties in the Brooklyn Navy Yard. Plans are afoot for another partnership in San Francisco and perhaps Boston down the road.
WeWork’s founders have been content to stay quiet about their story until now, swearing investors to secrecy. No longer. Over the next 12 months the company expects to triple its membership from 14,000 to 46,000 and expand to 60 locations from 21 today and 9 just a year ago. WeWork’s first location four years ago was just 3,000 square feet in SoHo with creaky floorboards and walls power-washed by its founders. Now WeWork is the fastest-growing lessee of new office space in New York and next year will become the fastest-growing lessee of new space in America as it spreads to cities such as Austin and Chicago, not to mention London, Amsterdam and Tel Aviv.
WeWork will gross an estimated $150 million this year with operating margins of 30%. Current plans will push revenue to more than $400 million next year. In February JPMorgan led a massive (and secret) $150 million investment in the company along with the Harvard Corp., Zuckerman and Benchmark. The deal valued WeWork at $1.5 billion. The founders suspect they will be out raising another round next year that could easily fetch a valuation north of $6 billion. If that comes to fruition, Neumann and McKelvey, who each own an estimated 20%, would be paper billionaires.
WeWork is the leader, by far, in a surging co-working space movement. Some 5,900 shared office operations dot the globe today, compared with 300 five years ago, according to Deskmag.com, a site dedicated to tracking co-working trends. Back then there were fewer than 10,000 people working in such locations worldwide. Today that number is closer to 260,000. Niches have begun appearing: Grind caters to repeat founders and veteran professionals. Hera Hub runs three locations in California just for female entrepreneurs. “People want less stodgy offices,” says Julien Smith, CEO of Breather, a startup that takes flexible space to its extreme, offering private office rentals by the hour to members constantly on the go.
WeWork members freely acknowledge the space is scandalously priced per square foot: $350 a month for a desk and $650 per person for 64 square feet per office. But when WeWork opened its latest building in London’s South End, it was 80% full at launch and like the rest will be at near capacity in just a couple months. That’s because members can save hundreds per month when you factor in included services such as security, reception, broadband, printing–and fewer headaches.
But the real perk is having other people around. WeWorkers network at weekly bagel-and-mimosa parties, where they might find a software developer to produce an app for them. Members pitch their ideas at informal demo days and get free advice during office hours from willing outside partners like ad agency Wieden+Kennedy. Handshake agreements and job referrals are made over the wagging tails of members’ dogs.
“Other offices are just depressing compared to here,” says Nicole Halmi of Neon, an image-selection platform in the WeWork Tenderloin location in San Francisco. “The old model of office space is dead,” adds startup veteran Gary Mendel, who runs Yopine from a WeWork in the renovated Wonder Bread factory in Washington, D.C.
City governments are all-in on the benefits that such spaces can bring to the local economy. In San Francisco Mayor Ed Lee rerouted police patrols and opened a precinct outpost in the ragged Tenderloin district to keep the WeWork members there safe. Chicago Mayor Rahm Emanuel insisted on personally showing Neumann his unannounced plans for new bike paths and other startup-friendly projects to convince WeWork to move to the West Loop. New Boston Mayor Martin J. Walsh chose the new WeWork as the location for one of his first public speeches after taking office. “This is somewhat new to Boston, the innovation economy, but as more and more people see the type of idea of WeWork, more people will get interested in starting companies,” says Walsh.
“WeWork plays both sides of the coin,” says James B. Lee, Jr., the famed investor and JPMorgan Chase vice chairman who has guided the public offerings of Facebook, Alibaba and General Motors. “Institutions have space that young entrepreneurs could use, but they want to start their own business and cut their own trail. WeWork gives them a home and says, ‘We want you here, we will help you and build you.’ ”
Neumann and McKelvey, who still interview every new employee to make sure they don’t see WeWork as just another real estate play, come by their fanaticism for the power of “we” honestly. The two grew up thousands of miles apart but in their own types of communes and without fathers around. Neumann grew up the son of an Israeli single-mother doctor. He spent two early years learning English when his mom was a resident at an Indianapolis hospital. They returned to Israel and moved into the Kibbutz Nirim near the Gaza Strip. All the children lived together in their own dorm, apart from the parents. He and his little sister, Adi, learned community the hard way, as the tribal kids of the kibbutz shunned Neumann’s family for months. “That was the hardest group I ever had to enter in my life,” he says.
Severely dyslexic and an indifferent student, Neumann found acceptance as an expert windsurfer and ringleader for unapproved extracurricular activities. When it came time for mandatory military service, Neumann says he was among the slowest of the thousands of candidates for the elite naval officers’ school, many of whom had trained for their tryout camp for weeks. When the team-building missions came around, Neumann began to take charge. His was one of the last names to be called when the navy picked its 600-member class. He finished third and left the navy after five years of service.
McKelvey grew up one of six kids in a five-mother collective in Eugene, Ore. They were happy and lived simply on gardening and food stamps. Tang, with its forbidden artificial chemicals, was a special Christmas treat. “Looking back, we grew up poor, but living it then we never knew,” says McKelvey’s commune “sister” Chia O’Keefe, an early WeWork’s employee and now head of innovation.
McKelvey was a talented student, but school bored him easily. What he loved was thinking about ways to revive all the empty storefronts and closed buildings in his depressed hometown. His favorite was Lazar’s Bazar, an ugly duckling that stayed open selling a hodgepodge of items as neighbors came and went. McKelvey saved pocket change for weeks to finally buy a $7 silk skinny tie. “It was the 1980s,” he shrugs today.
After playing basketball at the University of Oregon (and earning his architecture degree), he jumped into the 1990s dot-com boom, starting a website that connected Japanese and English pen pals. Eventually he landed a job with an architecture firm in Brooklyn.
Neumann, meanwhile, had followed his sister, Adi, a Miss Teen Israel, to New York City to pursue her modeling career. He spent the next five years staying at her apartment while taking business classes at Baruch College and managing her six-figure income. Neumann tried several ventures, including selling baby overalls with built-in knee pads (a major flop). He found more success with Egg Baby, an online store for high-end baby clothes.
McKelvey and Neumann struck up a friendship at a party. Neumann asked McKelvey to design his new office space. McKelvey persuaded him to move it to Brooklyn’s Dumbo neighborhood. Their first inkling that they could make money selling shared office space came in January 2008, when Neumann began renting out a corner of his office to someone he found on Craigslist to cut costs. Weeks later Neumann’s landlord, Joshua Guttman, took him through an empty building he had just bought down the street. He was going to charge $1 per square foot for each 5,000-square-foot floor. Neumann said, “I got a better idea. Let me take over one of the floors. I’ll split it up into 15 offices, charge $1,000 each. We’ll make $15,000 a month on this floor–you can take $7,500, we’ll pay the receptionist $2,500, and I’ll keep whatever profit is left.”
Neumann told McKelvey about the idea that afternoon. A night owl, McKelvey came back the next morning with a name, a logo and a working website. The space would be called Green Desk, and it would be eco-friendly with free-trade coffee and cleaning detergent from Seventh Generation. “It seemed so obvious to us,” McKelvey says. “What was out there for office space was not good–it sucked.” Guttman finally agreed, with one condition: They save even more on operations by repeating the model on every floor.
Neumann kept operating Egg Baby as Green Desk took shape. McKelvey quit his job to renovate the building with help from Neumann’s filmmaker wife, Rebekah Paltrow Neumann (she’s a cousin of the actress). He spent his weekends driving to Ikea to fill up his Zipcar with butcher blocks to create office tables. As the deadline for their first move-in neared in 2008, the economy crashed. Guttman told them the jig was up. “He said, ‘I’m not mad at you guys, but this business is going to fail. In a down economy people don’t rent,’ ” says Neumann.
Just the opposite happened. They filled Green Desk with a mere seven Craigslist ads and word of mouth, with tenants ranging from a private equity shop to blogging website Gothamist. But Green Desk was much closer to an executive suite rental company like $2 billion (market cap) Regus than WeWork would become. It didn’t have the communal open spaces or room for programming that the founders would have liked. “We had aspirations for a global brand,” Neumann says. That would mean designing different layouts for each location and spending much more capital on events and amenities. According to Neumann, Guttman preferred to replicate the model that had already worked in more locations in Brooklyn–and it would, with seven locations today. Just not with Neumann and McKelvey on board.
The founders sold to Guttman at a $3 million valuation that netted them $300,000 in initial cash and the rest in gradual payments they’d live off of for the next two years. The lump sum went straight into a deposit for a new location in SoHo built on their community model, along with whatever they could scrounge from credit cards and friends. Israeli friends of Adam’s received free plane tickets to spend two weeks at his apartment and ended up slinging drywall and lumber. “They thought they were coming for fun, and they worked seven days a week,” says Neumann. By February 2010, just one month after launch, WeWork turned its first profit and has never stopped.
An early investor, developer Jack Schreiber, identified their second location, a cheap space across from the Empire State Building owned by three Persian brothers. But the place needed $1 million in work, money that WeWork didn’t have. Schreiber told Neumann that the brothers could be swayed if he won over the one who lived in New York before his relatives outside the country could find out.
“We sat down in the lounge at the SoHo WeWork, and he was very excited,” Neumann remembers. The Israeli and Iranian talked for hours and polished off half a bottle of whiskey, Neumann says. The brother left with a signed contract and a hazy memory. Neumann knew he would come back the next day saying his family wasn’t comfortable, and he did. “So I said, ‘I understood that Persians were men of their word.’ ” That was mostly all it took. WeWork finished preparing their first floor in the building in just 29 days.
Three more locations went up in 2012, by which time WeWork had caught the attention of Benchmark, the media-shy venture firm that had backed eBay, Twitter and Uber. Benchmark had never backed a real estate play, so a founding partner, Bruce Dunlevie, flew out to New York to see why these spaces were so different. “It reminded me a lot of eBay when I met them in 1997,” the investor says. “There was something going on at both that you couldn’t quite put your finger on.” Benchmark’s round valued the company at about $100 million, a figure that would shoot up to $450 million in 2013 when investment bank Jefferies came onboard, says Neumann. JPMorgan passed, but it would change its tune.
It’s possible to out-perk WeWork. A high-end competitor in New York, NeueHouse, co-owned by Joshua Abram and Alan Murray, has a small broadcast studio for members and a café in its New York location, with plans to open a full-service restaurant in its upcoming Los Angeles building. But NeueHouse is growing more slowly and deliberately, with plans for 20 locations by 2020. WeWork, meanwhile, is moving fast, going big and trying to learn from each building and each deal. Neumann can come across as grandiose in his pitch meetings and probably turned off a lot of developers in the early days.
“It took us a little bit to get on the same page. My first impression was they had very big ambition, but I wanted to make sure there was enough substance behind it,” says Jared Kushner, the scion of a big New York real estate family and an advisor to many startups in his brother Josh’s venture portfolio. Kushner has heard plenty of bluster. But then he sat down with McKelvey, who spent 30 minutes arguing about which coffee shop would be right for Kushner’s new $375 million complex in Brooklyn’s Dumbo district. WeWork won a prize spot as one of the project’s two anchor tenants, along with online crafts market Etsy, taking an entire building for itself. “They’ve built a good mousetrap to capture this market trend,” Kushner says. “I capitulated.”
WeWork prefers to work with new developments or in gentrifying or distressed neighborhoods, where WeWork can get space at a standard anchor-tenant discount of about 10%. Even if WeWork drives a hard bargain, its presence raises values of adjacent floors and buildings in the neighborhood. “They’re not stepping on our toes,” says Bill Rudin, whose Rudin Management is also in on the Navy Yard project and one other WeWork location on Wall Street.
WeWork’s biggest risk, founders and investors agree, is in over-extending itself. It’s at a manageable enough size that it can tend to its brand and maintain high levels of customer service. Hire the wrong community managers or automate too much and broken elevators or other snafus won’t be forgiven with free doughnuts. The former CEO of Coach is now a full-time advisor, helping the founders maintain their culture in the midst of rapid growth. New CFO Michael Gross, the former CEO of Morgans Hotel Group, brings experience at creating a hip and hospitable vibe while staying asset-light and within budget. But even they don’t know if WeWork will go over in smaller towns like Cincinnati or Bruges once it reaches the top 25 cities in the U.S. and top dozen in Europe.
Some Silicon Valley investors are skeptical that its economics can survive the inevitable real estate slump. WeWork is charging high per-square-foot prices but is also locking itself into long-term leases at today’s record rents. One investor who passed on the company was concerned not by its high valuation but by the prospect of a tenant exodus amid a recession or cheaper competition.
Neumann has heard that one before. His experience with Green Desk proved that co-working spaces are in even hotter demand when budgets tighten. WeWork’s own rental agreements with property managers can survive in a city like New York, he argues, unless rents hit unprecedented lows, and even then WeWork has millions in equity and operating cash flow that can help it weather a down cycle (and that’s without jacking up member rates).
WeWork’s member base is quite stable, and 28% of its revenue comes from smaller members who upgrade as bigger members graduate to their own spaces or move into larger, newer WeWorks. “I get so much business from being here that they could double my rent and I would still come out ahead,” says Jonathan Smalley, CEO of Brilliant Collaborations, a creative agency and a member at the Wonder Bread WeWork.
India’s existing milk delivery system is haphazardly organized and has issues around quality. Government reports suggest that as much as 68% of milk is ‘tainted.’ Typically, delivery people, whose job is extra to their daytime employment, will water their milk down in order to make greater income from their lot. Reports also suggest that to mask coloration and make their milk appear pure, they also add a range of things including detergent, caustic soda, glucose, white paint and refined oil. Now, Supr Daily is a Mumbai based startup that has digitised milk delivery.
Supr Daily delivers fresh milk to customers directly from farms, with zero additives. It works using a mobile app and WhatsApp account, making communicating with the milkman easier. There is even a vacation setting. The company also offers some everyday goods like bread, eggs, butter and coconut milk for the convenience of their customers. Currently available in 15 neighborhoods in Mumbai, Supr Daily has completed more than 500,000 deliveries over the last year.
CEO and founder, Puneet Kumar, reports that 90% of customers are repeat purchasers and it’s not hard to see why. The startup has reduced the price of delivery with many saving as much as 30-40% on purchases, and the quality of milk is significantly better because Supr Daily works directly with milk farms. The company plans to cover the entire city before the end of 2017, moving on to other tier-one cities in India after that. Milk delivery is ubiquitous across homes and offices in Indian cities, with the market worth an estimated USD 13 billion.
TechCrunch recently added to the story, with this extract:
Getting product lock-in is key in the world of startups. Your app, service or products needs a hook that brings your users back time and time again. How about a startup that hangs its hook on daily milk deliveries?
Supr Daily is that startup. Its is currently taking part in the latest program at Y Combinator, from where CEO Puneet Kumar explained more about what the Mumbai-based startup does.
The prime mission, Kumar said, is to digitize India’s existing milk delivery system, which is not only haphazardly organized but also has issues around quality. Government reports suggest that as much as 68 percent of milk is ‘tainted.’ Typically, delivery people — whose job is extra to their daytime employment — will water their milk down in order to get more bags (and income) for their lot. To mask coloration and make their milk appear pure, they’ll add a range of things including detergent, caustic soda, glucose, white paint and refined oil, according to a Times Internet report.
There are test kits to measure the purity of delivered milk, but Kumar and his team believe in being proactive. Their direct model delivers fresh milk to customers from farms with zero additives.
That’s the primary benefit for customers, but the service — which uses mobile apps and a WhatsApp account for orders — is also more organized than communicating with your milkman via notes on your door (if you are away or need more/less than usual).
“There’s no software in this market, leaving consumers to try calling their milkman if they need to change their order,” Kumar said.
Further, it also offers some every day goods like bread, eggs, butter and coconut milk to help keep households organized without requiring regular trips to the shops.
Supr Daily is currently available in 15 neighborhoods in Mumbai, and it completed more than 500,000 deliveries over the last year. Milk makes up 90 percent of its revenue right now, and Kumar said that 90 percent of customers are repeat purchasers.
More convenient and healthy — you’d assume there’s a cost to pay. But Kumar said Supr Daily has reduced the price of delivery to $0.03-$0.04 per delivery on its service, down from a roughly $0.05 standard that people are accustomed to paying for more traditional delivery. That’s because it is able to plan its routes, work directly with milk farms and generally manage the process infinite times more efficiently than past times.
“It’s sometimes lower but never higher,” Kumar explained. “In some cases people have saved 30-40 percent.”
The company currently covers around 15 percent of Mumbai, according to Kumar’s estimates, and he hopes to expand neighborhood by neighborhood to cover the entire city before the end of 2017. After that, and once the economics of the model are proven, Supr Daily will look to other tier-one cities in India.
Milk is a low cost item, but delivery is near ubiquitous across homes and offices in Indian cities that there is quite a market at scale. Kumar, who started Supr Daily with fellow IIT Bombay graduate Shreyas Nagdawane, said he believes the market in India’s top ten cities is $13 billion, with Bombay alone accounting for around $1.5 billion.
“We have been conscious [with the business so far] and want to get the blueprint right first before we expand,” he said. “We know and have pretty good confidence in it.”
As a daily consumable, milk has been a target for other companies but Kumar said he is confident that the ‘milk-first’ approach helps Supr Daily stand out.
“Grocery startups are using milk as an acquisition channel, but their strategy is that they lose on milk and try to win on groceries,” he explained. “We’ve taken a supply chain approach.”
Reflecting on his time in the U.S. at YC, Kumar said the experience has been hugely valuable.
“YC has seen so many companies that advisors are on the dot almost all the time,” he said. “People are genuinely interested in knowing about original problems In india.”
Supr Daily raised a seed funding round from a collection of angel investors in India in December. The founders of e-commerce giant Snapdeal — Kunal Bahl and Rohit Bansal — also made a previous investment.
In 2016, Goldman Sachs launched its first consumer product, a digital lending platform called Marcus that is aimed at helping people get out of debt. Though other fintech companies have forayed into making borrowing money at affordable rates more tenable, none have Goldman’s deep pockets. The financial company went public in 1999 and has weathered several tempests: insider trading, defrauding investors, and contributing to a massive financial crisis. And yet, it’s kicking off 2017 with stock prices nearing pre-crisis heights following the release of Marcus and a no-minimum savings account, making Goldman a formidable new player in the consumer banking market.
https://www.youtube.com/watch?v=oFl_4jOVskQ
This is an extract of how Forbes magazine reported the launch of Marcus:
Goldman Sachs, one of the most storied investment banks on Wall Street, is getting into the consumer finance business with the launch of an online lending platform, Marcus.
Named after one of the banks founders, Marcus Goldman, the business will offer unsecured personal loans of up to $30,000 and is targeting prime borrowers who may be looking to consolidate their credit card debt, or those that are frustrated with the fees and complexity of other lenders. The Marcus platform will offer two-to-six-year fixed rate loans at interest rates of between 5.99% to 22.99%, and is being positioned as a consumer friendly lending alternative due to a lack of origination and prepayment fees, flexible payment dates, and overall simplicity.
“For many who manage debt payments on high-interest rate credit cards, a straight-forward personal loan is a better solution,” said Harit Talwar, head of Marcus by Goldman Sachs. “Marcus offers an option for consumers who are searching for a simpler alternative to credit card borrowing, where rates can change and multiple fees can be charged,” Talwar added.
Consumer lending is new territory for Goldman Sachs, but the investment bank believes its strengths in risk management and technology have an application in Main Street finance. This is especially the case as borrowers move their banking to digital-first platforms and begin to adopt new lending models such as marketplace loans.
Goldman also sees an opportunity to enter the market as fintech firms like LendingClub struggle with operational problems and large banks rationalize brick and mortar branch networks. On one hand, Goldman has been on the forefront of this fintech revolution, seeding platforms ranging from Kensho to Symphony and training many of Wall Street’s most successful quantitative traders. But the bank also has a near $900 billion balance sheet from which it can give a lending operation heft versus standalone platforms.
“Digital technology is making large brick and mortar branches questionable… The traditional distribution strengths of of some of the large banks, in my view, have become legacy costs,” Talwar said in a recent podcast detailing Marcus by Goldman Sachs. He noted that new developments in fintech have given lenders the ability to make loans based on formulas and quantitative metrics, instead of qualitative judgement, something that plays into Goldman’s hands.
“Leveraging risk management, data analytics has always been in our DNA.,” Talwar said.
Interestingly, it is Goldman’s decision to convert into a bank holding company in 2008 to stay afloat during the crisis that laid the foundation for its consumer push. As a bank holding company Goldman now holds traditional deposits, some 3% of its balance sheet assets are wealth loans to high net worth customers, and it is regulated alongside the likes of JPMorgan, Wells Fargo, Bank of America and Citibank. Recently, the firm’s been building its consumer services by buying $16 billion in deposits from General Electric and launching an online bank, GS Bank.
Perhaps, Marcus and GS Bank’s crisis-era DNA also speak to the risks that Goldman takes in moving into consumer finance.
As Talwar noted on his podcast, Goldman is one of the most scrutinized financial institutions in the world. Left unsaid is that while Goldman is seen as a blue chip firm across Corporate America, many ordinary Americans see it as the poster-child for Wall Street excess. As such, Talwar says Goldman will grow its lending capabilities in a deliberate and careful way, mindful of the spotlight that the bank faces.
But there seems to be a quiet confidence that Goldman can win over Main Street with consumer friendly features like a lack of fees, and the ability for consistent borrowers to defer payments at no extra cost during a cash crunch. Perhaps, Goldman’s image will also be bolstered if it winds up offering a new standard of service to a wider swath of the economy.
Initially, Marcus will be made available to millions of prospective customers in an email campaign. Then the bank will make a broader rollout. The tagline for Goldman is that consumer lending will be a startup franchise within the iconic firm.
“Marcus by Goldman Sachs is a new business that benefits from the firm’s 147-year history of financial expertise, risk management and customer service,” the bank proclaims.
Ctrip CEO Jane Sun talked with Forbes magazine and China’s travel boom, and how Ctrip sees its future:
Jane Sun joined small online travel service company Ctrip as CFO in 2005 with the belief she was getting in early on a boom in China travel. The then six-year-old business had managed to list on the Nasdaq in 2003; when Sun joined two years later, its market capitalization was only about $500 million.
Today, Sun leads an industry heavyweight with 33,000 staff. Ctrip’s market valuation of $25 billion exceeds better-known U.S. rival Expedia ($17 billion). Sales grew by 75% in the third quarter as it consolidated revenue with Qunar, the pesky domestic competitor it merged with last year.
Even before that hook-up, growth and momentum had already been rapid owing in part to the expansion and alliances that Sun has helped to engineer and that led Ctrip to name her CEO in November. In the past 12 months alone, Ctrip acquired Skyscanner Holdings, a United Kingdom travel search site for 1.4 billion pounds; earlier last year, it bought two U.S. tour operators that specialize in serving Chinese travelers. And in January 2016, Ctrip invested $180 million for 15% of India’s MakeMyTrip, the country’s biggest online travel company. All in all, says an upbeat Sun, “Ctrip still has lots of room to grow.”
One of Sun’s biggest fans is Liang, Ctrip’s outgoing CEO and a co-founder. When Sun was hired in 2005, “I knew from friends that Jane was a very driven and capable individual. I’ve discovered many other good qualities. Even though she is very nice and sensitive to employees and partners, she is also decisive in action.” Among other things, Liang also respects her passion and confidence about the future: She’s hardly sold any shares since she started at Ctrip. (Sun currently holds a 1.6% stake worth $300 million.) All of that success helped Sun rank No. 15 on the 2017 Forbes China list of outstanding businesswomen in the country unveiled this week.
Shanghai-born Sun’s keen spirit of ambition is long-standing. The high achiever started her university education at Peking University, but gave it up after she won a scholarship to the University of Florida. Afterward, she worked as an audit manager for accounting firm KPMG in Silicon Valley for more than five years, followed by another eight as the head of the SEC and external reporting division of Santa Clara-headquartered semiconductor equipment supplier Applied Materials. Along the way, Sun through friends on a trip to Yosemite National Park, met another smart Shanghainese who also found success in America: John Wu, an engineer who was an early employee at Yahoo. The two went on to marry and have two daughters.
When Wu returned to China to accept a job at then fledging Alibaba Group as chief technology officer in 2000, the couple were in the difficult position of a marriage where Wu would only come home to California once a month. In 2005, Ctrip needed to replace co-founder Neil Shen as CFO after he left to start up Sequoia China. Sun’s global experience helped her land the job.
Early on at Ctrip, Sun focused on normal CFO duties: Talking to shareholders and analysts, building a team, and looking for ways to improve efficiency. ”If our staff can use 10 words to finish a sentence, we will not use 12 words to finish a sentence. Why? If every staff uses two extra words, the customers will waste a lot of time, and every minute has a cost associated with it,” she said.
Yet also behind Sun’s climb was also a willingness to push beyond her CFO role. “In addition to the normal CFO job, I would reach out to the operations team. If no one had taken care of a problem, I would reach out and fix them.” So by 2012, Sun was promoted to COO. Soon after, she was also leading the international business and international negotiation for partnerships.
By 2015, Ctrip was ready to make Sun CEO. “James talked to me and said you are ready to take on the CEO position. I talked to him and said, ‘I would be very honored,’” she recalled. But instead of jumping on the offer, she asked for time to better shape her team. Responsible for the bottom line since Nov. 16, Sun as CEO says she expects new customers at home to continue to help drive Ctrip’s future growth. “Domestically, Ctrip has a lot of room to penetrate into the second and third tier cities. The majority of people in these cities are still using traditional travel agencies to conduct their travel business.”
International business – now accounting for 20% of the company’s revenue – is also going to be critical. “A lot of Chinese people are making more money, so they can afford going abroad more. Also, visa restrictions for many Chinese travelers are being lifted, and that offers many new opportunities” for Ctrip, Sun says.
The three overseas recent investments made by Ctrip that were led by Sun indicate the widening breadth of Shanghai-based Ctrip’s interests. It bought tour operators in Las Angeles and Las Vegas that cater to Chinese to better serve the growing numbers of Chinese customers traveling to the U.S.; Ctrip also invested into Nasdaq-traded MakeMyTrip as a channel into a unique market. “We believe India has a heavy population growth and they are at the stage where China was 15 years ago,” Sun said. “Although GDP per capital is still quite low, they have the potential to grow their GDP per capita and travelers will increase. We believe that market is very unique, so we invested. “
U.K.-headquartered Skyscanner, however, may be the most telling: it puts Ctrip in the middle of a non-Chinese market in a relatively big way. “It has a price comparison model but doesn’t do any booking,” allowing Ctrip to share its experience in the air ticketing business, Sun said. “If they can make a reservation for their customers after they do price comparison, then customer satisfaction will increase. There will be a lot of synergy between Skyscanner and Ctrip.”
Those new initiatives come after a financial turbulent year that most analysts say isn’t likely to repeat in 2017. The company’s profit and its share price fell after it acquired Qunar; both improved by year-end. Longer term, Ctrip’s strengths as a brand leader will also likely help it fend off from newer, pesky rivals in China, says Deutschebank, which does business with Ctrip.
Yet it’s not entirely business and family that drive Sun and Ctrip. The company has taken an unusually high-profile role in talking about China’s ageing problem, seeing it as a threat to China’s long-term economic prospects. “We want to become a role model, and say that in order to have a healthy birthrate for the country, enterprises need to do a lot to support our working employees,” Sun says. “The government also needs to do quite a lot, for example, providing tax breaks to encourage couples to have children. And individuals also have to work on it, because China’s population birthrate is only 1.5. To stabilize the population in the country, every family has to have 2.1 children. China is way below (that),” she says. “We want to be sure that Ctrip establishes a good role model as a good corporate citizen.” Yet Ctrip isn’t entirely without a business stake in that outcome because more than half of its employees are women; more than a third of its VPs are, too.
To address the problem, Ctrip has focused how to increase childbirth among staff and create incentives to stick with the company. Among its programs: It gives an 8,000 yuan “gift” whenever a female employee has a child. It also offers free taxi rides to work for female staff that are pregnant. For mothers with preschool kids, it also runs a “summer camp” in its headquarters and an onsite nursery. If you are from outside of Shanghai and wish to return to your inland hometown to have children there, Ctrip will also let you work at home.
Sun believes having a female CEO like herself adds a further layer of good communication between female and male workers. “With me, they open their heart. When they talk to James, he’ll say, ‘This is right or wrong,’ and it’s a short conversation,” Sun laughs. “When they come to my office, they will burst out laughing or crying, they feel very natural.”
One long-termer at Ctrip is Yan Li, employee No. 16. The mother of two manages 5,000 of Ctrip’s employees that work at call centers. “The business grew fast early on, and you could get promoted because you understood the customer,” says Yan, whose responsibilities started with hotels, and moved onto to air tickets and now international reservations. A good point about working at Ctrip: “You don’t have to give up your family to advance,” she said. On the other hand, “It’s a tense work environment and you have to do a good job,” she adds.
Ctrip’s efforts, while socially noble, are nevertheless part of a larger, deepening market-driven alignment between China’s private-sector businesses and the government owing to the declining numbers of work-age citizens in the country. “The need for women to work has to be emphasized, and public policy should encourage women to work,” says Mu Guangzong, author of “The Graying of China: From the Universal Two-Child Policy to Successful Ageing.” “Companies and the government aren’t at odds with each other.”
Sun says the economics of being a good employer for women justify Ctrip’s spending and aggressive programs. “The return is very good. Because our employee retention is higher, the company’s training expenses are lower than they would otherwise be,” she says, underscoring a larger formula for her own staying power and success both in the business world of Ctrip and in life: combining passion with a broader purpose.
To identify the many ways that a doctor’s office can be improved, One Medical founder and CEO Tom X. Lee, an internist, spent the company’s early days serving in a variety of roles, from physician to accountant.
He hit on a membership model that adds tech-enabled services to a high-tech foundation—allowing him to cut the administrative costs of traditional care by two-thirds, he says.
One Medical now has 54 offices around the U.S., a 46% bump over 2015, and its model offers a template for a health care system in flux. “We’re doing more for less,” says Lee, “and always reengineering our processes.”
Business Insider describes a recent visit:
Going to the doctor’s office can be a logistical nightmare. A physician’s busy schedule doesn’t always allow you to stop in when you’re feeling worst. When you do finally get there, you wait in a fluorescent-lit, white-walled room among screaming babies and sneezing patients for what seems like an eternity.
One Medical Group, a concierge medical practice that promises high-quality care at an affordable rate, reimagines this experience.
The company oversees a networkof 250-plus primary care specialists in 40 US cities, enabling patients to book last-minute appointments on their phones, get certain prescriptions via the One Medical app, and access health records online.
The San Francisco-based company, founded in 2007, added 80,000 new patients in 2015 and brought in a number of enterprise clients.
I was one of those new patients, and it didn’t take long for me to become obsessed. Here’s what it’s like inside one of One Medical’s swanky doctor’s offices in San Francisco.
https://www.youtube.com/watch?v=CW0_DeBB774
Amber Venz Box just wanted to make more money as a fashion blogger when she and her husband started RewardStyle in 2011.
The Dallas-based company quickly grew to be the premier platform for retailers to reach social media influencers and their audiences, and for those influencers to increase their earnings through affiliate links. ShopBop, Neiman Marcus, and Net-a-Porter were among the first retailers to work with RewardStyle. By 2016, more than 4,000 stores were working with the company to reach 11,000 social influencers posting original content about 30,000 pieces each day.
RewardStyle’s most well known product is LiketoKnow.it, an online content management system that allows influencers on Instagram to determine what products sell best with their followers, and track those sales and the resulting commissions. RewardStyle vets influencers before releasing its suite of tools to them—more than 100,000 have applied to work with the company, according to Venz Box. The company negotiates commissions on their behalf and provides tools to help them track the impact of their posts. In that way, she’s an advocate for the nascent influencer industry.
RewardStyle’s footprint is growing beyond the influencer community. When Google launched its Shop the Look functionality in September 2016, it used LiketoKnow.it to surface the content and affiliate links. In 2016, RewardStyle drove more than $700 million in sales. Up next for the company: refining its digital offerings to help retailers more accurately target their ideal customers, and launching a style-centric search engine.
https://www.youtube.com/watch?v=rKT7nY5aAnM
TechCrunch takes up the story in this extract from 2016:
These days, you can’t swing a bag of cats around without hitting some sort of social influencer. But how do these people make money from their content?
RewardStyle is a Dallas-based startup, provides a platform for influencers and bloggers to get paid for all the sales they inspire out of consumers. Though the company has been operating under the radar, it has grown to generate more than $1 billion in sales for its 4,000 retailers and 575,000 brands worldwide since launching in 2011.
It all started when founder Amber Venz Box, personal shopper and jewelry maker, was running her own style blog. She started seeing loads of sales going through from her content but wasn’t getting any payout from the retailers. Effectively, she had cut herself out of her own business.
She decided to build something, with the help of her boyfriend (now husband) Baxter Box, that eventually turned into RewardStyle.
Here’s how it works:
Bloggers can create clickable links from their content (pictures, text, etc.) that lead directly to retailers and brands. When a reader clicks through and makes a purchase, both the blogger and the retailer can track that purchase and send a commission to the blogger for the lead.
For a long while, this system worked out just fine, and RewardStyle continued to grow in both influencers and retailers. Then Instagram came along.
As Instagram picked up steam as a major platform for influencers, RewardStyle was left with the challenge of connecting sales from influencers to retailers without the ability to track links — as you know, Instagram doesn’t allow links on pictures.
To overcome this obstacle, RewardStyle launched LikeToKnowIt, a platform built specifically for Instagram. Bloggers signed on to the LikeToKnowIt platform have a specific link for their profile (the only link allowed on Instagram) that takes their followers to a unique web page.
https://www.youtube.com/watch?v=GUmuou_5x_s
This page lists each item that appears in every image of the influencer’s Instagram feed, complete with shoppable, trackable links so that the influencer gets paid out.
LikeToKnowIt also lets users sign up for a newsletter, which pushes every photo they like on Instagram directly to their inbox.
In the past two years since launch, LikeToKnowIt has generated more than $100 million in revenue, with 1.5 million users subscribed to the system and more than 1,000 LTKI posts created every day.
With the fashion space relatively conquered, RewardStyle has now launched other verticals, partnering with home decor influencers and retailers like West Elm.
Best known for its ubiquitous Wanda Plazas—elaborate shopping malls with movie theaters, apartments, and office buildings—Dalian Wanda made its fortune on real estate but is now rapidly diversifying to become a major player in entertainment.
As the Chinese box office gallops to become the world’s largest, Wanda is hungry for high-quality content and IP to push through its global movie theater chains and theme parks. In 2016 it spent billions on Legendary Entertainment and Dick Clark Productions, and made a deal to co-finance and market Sony films in China.
But founder Wang Jianlin’s ambitions extend beyond just partnering with Americans. He’s intent on building his own version of Hollywood in Qingdao, where Wanda will soon open an $8 billion movie production facility.
Wang is also taking on Disney and has announced 15 new theme parks that he likens to a “pack of wolves” in comparison to the “tiger” that is Shanghai Disneyland.
In this extract from a 2016 article, Fortune magazine describes how Wang Jianlin is reinventing Dalian Wanda:
The first thing you should know about China’s richest man, Wang Jianlin, is that he’s not afraid to go big.
When his Dalian Wanda Group conglomerate opened its first “theme park city” this May, in the small Chinese city of Nanchang, it stretched across two square kilometers, doubling as China’s largest new tourist trap and ammo for Wang’s outsized ambitions for taking on Disney.
“The frenzy of Mickey Mouse and Donald Duck and the era of blindly following them have passed,” Wang told China’s CCTV the week before the Nanchang unveiling, in words that were brash even by the outspoken billionaire’s standards. Disney’s new Shanghai park was set to open the following month, but Wang said his park—along with 15 to 20 more that he plans to build—would keep it unprofitable for the next decade. Of Disney (DIS, -0.21%), he added, “They shouldn’t have entered China.”
Not that Wang himself has any trouble crossing borders. Two months later, in mid-July, Wanda was reported to be in the running for a 49% stake in Paramount Pictures, the Hollywood studio controlled by Viacom (VIAB, -1.35%) that dates back more than 100 years. The studio’s total valuation might run as high as $8 billion to $10 billion. If Wang were to win the bidding, it would be Asia’s biggest deal in Hollywood since Sony bought Columbia Pictures in the 1980s. And it would top Wang’s last Hollywood deal, which happened just six months ago. In January Wanda spent $3.5 billion on the movie production house Legendary Entertainment, the producer behind Jurassic World and the Hangover trilogy.
Even aside from its Hollywood and theme park aspirations, Wanda has been growing—and growing abroad—so fast that the world outside China has begun to pay attention. In 2015 alone, Wanda bought race organizer World Triathlon Corp.; Infront Sports & Media, which is selling Asian broadcasting rights to the next two soccer World Cups; and a stake in Spanish soccer club Atletico Madrid, for a total of $5 billion in overseas spending during the year. Back home, its sprawling web of malls and real estate generated enough cash for Wanda to make the Fortune Global 500 list for the first time this year. Wanda ranks No. 385 on the global list, with $27.4 billion in sales and $2.4 billion in profits in 2015, up 18.8% from $23 billion in 2014. If Wanda were an American company, it would rank just above Macy’s (M, +1.82%) in sales and not far behind entertainment giant Time Warner (TWX, +0.60%).
Wanda’s route to the list, however, has been anything but ordinary.
By Wanda’s own count, it is on its fourth company-wide transformation in less than three decades, having started as a small, state-owned real estate developer in the northeast coastal city of Dalian. Its ongoing rise reflects the growing clout of Wang, who has proven himself to be both an inventive businessman and a favored government friend in an economy where such ties are important. Now, he and Wanda are helping China spread its soft power abroad, through everything from stakes in foreign companies to constructions projects along the Thames in London and in downtown Chicago.
Wang, 61, was born to a father who served in Chairman Mao’s revolutionary army. Wang himself joined the People’s Liberation Army at the age of 15. But at 32, after tiring of his own officer track, he left for a government job. Wang eventually joined the Xigang Development Company, a residential developer in Dalian, a port city and trading hub near China’s border with North Korea.
Wang revived the failing state-owned builder after getting an army buddy’s help securing a loan. He changed the firm’s name from the lifeless Xigang to Wanda (which means “everything being accomplished”) after soliciting names through a newspaper contest. As China tested its first market reforms in the late 1980s and early 1990s, Wanda became one of the country’s first companies to issue shares; it privatized over the following years, with Wang becoming its largest shareholder.
Wanda expanded beyond Dalian and went national in the early 1990s, completing what became its first transformation. It then branched into commercial properties beginning in 2000, when the company’s shopping malls—called Wanda Plazas—began dotting the country. That was its second transformation; a third came as the company branched into tourist projects in the late 2000s. Wang, meanwhile, became a public figure whose slender-cut Western suits and widow’s peak gave the appearance of a leader straight from an executive MBA program, belying his relatively humble origins.
Wanda’s fourth transformation started last year, as the company began spreading its money around the world. Wang plans to flip Wanda’s focus from real estate to a few key domestic services sectors. By 2018, Wanda expects two-thirds of its sales to come from consumer services, up from about 40% last year, with an emphasis on tourism, entertainment and sports.
Those three sectors happen to be three main drivers of China’s transition into a consumer-led economy, and the government has declared that expanding them is a priority. The ruling State Council released a goal last October to nearly double the value of sports as a percentage of China’s GDP (currently 0.63%), which would make it a $775 billion sector by 2025.
“If you can leverage favorable policies, it’s good,” says Wang Xin, president of Greater China for consultancy Frost and Sullivan, of Wanda’s strategy. “In the long haul it’s not about leveraging policies alone, it’s about understanding future trends.”
Wang doesn’t hide the fact that Wanda chases government-sponsored trends. “Wanda’s transformation is consistent with China’s economic strategy,” he said in a 2015 speech in China. The State Council released guidelines several years ago encouraging private companies to expand globally: “It can be said that Wanda answered that call,” Wang told Harvard Business School students last October.
Wanda Group did not make Wang available for an interview. But Liu Mingsheng, a spokesman, said of the company’s strategy, “The entire Chinese economy is going through transitions. The main objective is to achieve a state of economic growth that is based on domestic consumption. Wanda’s transition is consistent with China’s economic strategy.”
Wang’s rise accelerated in 2007, around the time that investors related to top government officials began taking stakes in his private firm. Until then, Wanda had only one other outside shareholder. Wanda was little known, and Wang not yet a billionaire. By last year he had passed Alibaba’s Jack Ma as China’s richest man, worth $34 billion, according to the Hurun Rich List, an annual ranking of China’s wealthiest individuals.
According to a 2015 investigation by Michael Forsythe in the New York Times, stakes in Wanda were offered to business partners and relatives of two then-members of the ruling Politburo, and later to the sister of China’s now president, Xi Jinping. In one example, an investor’s stakes multiplied from the $500,000 and $200,000 they paid to more than $900 million.
There is nothing illegal about the deals, and Wang has emphasized Wanda does not pay bribes. Wang also appears to have come through Xi’s anti-corruption drive unscathed. Wang responded to the Times report in the speech at Harvard last October, saying Xi’s sister and her husband, Deng Jiagui, sold their shares in the Dalian Commercial Properties unit before it went public in 2014. “Deng sold all the shares held by his investment company and fully exited at a low price point,” Wang said.
Still, the financial interactions underscore Wanda’s closeness to Chinese leaders and state institutions and leave the impression of Wang as a favored son. When Wanda bought the U.S. theater chain AMC in 2012, beginning a string of overseas acquisitions, a group of state banks including the government’s State Export-Import Bank helped finance the $2.6 billion deal, offering aid that private-sector companies seldom get.
“China still has a long way to go to build its own soft power,” wrote state-run nationalist tabloid Global Times earlier this year. “Companies like Wanda are pioneers on the road of China’s modernization and they deserve more encouragement.”
Wanda’s latest transition into consumer services brings it even closer to the government. As part of its move, Wanda wants to reduce the need to invest huge piles of its own money in real estate development. Although it plans to expand the number Wanda Plazas—it will open 55 this year, it says, for a total of around 180—more than 20 of those will be funded by outside investors who hold the land, usually governments or government-affiliated companies. Wanda will share the rental income, but will save its capital for projects like the Nanchang theme park, overseas acquisitions, and a movie studio Wanda is building in coastal Qingdao to rival those in Hollywood.
Earlier this year, Wang laid out Wanda’s goals for the next five years. By the end of 2020, he says, the company will reach $100 billion in sales and $10 billion in profits, and overseas sales will bring in 30% of the total. The company treats the figures almost as military orders. Managers head to daily management meetings and see numbers changing from green to yellow to red on their computers, depending on their progress toward these goals.
These are audacious figures, not least because Wanda’s sales are expected to fall this year amid a real estate slowdown that has forced many department stores in its malls to close. Wanda says overall sales will fall by 12% in 2016. Unless it goes on a hyperbolic growth streak starting in 2017, expanding sales more than 25% a year, the $100 billion goal looks out of reach.
But $100 billion by 2020 is probably not Wanda’s ultimate goal, anymore than keeping Shanghai Disneyland unprofitable for a decade is a real strategic objective.
Instead, Wang wants Wanda to become an international brand, with the same name recognition as Microsoft, Apple, and Walmart. “That’s my dream,” he said at Harvard. That aligns very closely with the Chinese government’s goal: a strong Chinese private-sector presence on the world’s corporate stage, where the country now is represented only by a handful of state-owned banks and energy giants, and a couple of tech companies.
Wang is a natural spokesman for a newly assertive China: he’s savvy, sanguine, and brash. At Harvard, he opined on how long it might take for Wanda to become a real international brand. “Speaking of when I could achieve it, maybe in 4 or 5 years the fastest,” he said. “Or 7 to 8 years in a slower pace.” If Wang does reach that goal, it will be both Wanda and China sharing the international stage.
Download: The Wanda Way by Jianlin Wang