And whilst the $31 million purchase of Pier 1 might not be in everyone’s price range there are certainly some lessons that smaller companies can take from the way that REV and CEO Tai Lopez do business.
REV snap up brands
The REV group has set its stall out as a buyer of distressed brands.
Over the last two years, the group has purchased some of the best-known brands in the US including Modell’s, Dressbarn and Radio Shack.
But the important thing to note is that the group isn’t buying the company as such – just the brand.
What Tai Lopez and business partner Alex Mehr are doing is buying up the Intellectual Property (IP) of well-known businesses and then transforming them into online companies that are fit for the 2020s.
Buying the intellectual property of a company isn’t new of course but what REV is doing is to ally this with a set of modern business methods that totally transform the way that their companies go about their work.
The good news is that the size of the business doesn’t matter, in fact, smaller companies can copy the model that REV uses and develop it to suit their own situation.
If you have cash then look for bargains
In 2018 Lopez and Mehr began to raise money to form what would later come to be REV. The aim was simple; to use the cash as a lever to buy up distressed brands and turn them around.
At the start, the strategy was to look for companies that hadn’t been managed well and had not made the transition away from brick and mortar stores to internet trading.
However, with the advent of covid, more companies were couldn’t hold on and this provided a ready supply of targets.
In fact, Lopez has gone on record as saying that there are a large number of companies ready to fall into chapter 11 bankruptcy right now stating, “There’s a lot of choice [of targets] and the choice is growing”
And as Scott Stuart, CEO of the Turnaround Management Association says “The worst is yet to come. The dust has not settled on this. You think Christmas is going to save retailers? Maybe it won’t.”
For smaller companies that have access to cash, this is good news but even if you don’t have a ready war chest, with interest rates forecast to stay at 0-0.25% for the foreseeable future, the time could be right to borrow to fund an acquisition.
Smaller businesses can look for competitor brands that would suit bringing into their own stable or alternatively complementary lines that would add value.
If you haven’t moved online as a business then the message has to be; get there and get there quick. As Tai Lopez says “There’s a shift in the world and that shift is from brick and mortar to e-commerce. I’m not sure all the old guard will be able to handle the new world”.
Build a platform and not a shop.
One of the more interesting aspects of the REV buying spree has been the sorts of brands that they have bought.
At first glance, the line up may seem random with sports retailers sitting next to food home delivery outfits and even The Franklin Mint but there is a clear method in there.
What REV has been seeking to do is to start to build a sales platform rather than run the businesses as distinct and discrete enterprises.
The strategy is to buy businesses that have established customer bases and then use this as a launchpad to introduce the other sibling brands, either through mailshots using the purchased mailing lists or simply by including products in their webstore.
At the same time, the group is looking to the future and intends to make its platform available to other traders in the same way as Amazon encourages other sellers onto its storefront.
For smaller retailers, building an entire platform and inviting the world to sell isn’t going to be practicable, but there are some key points here.
The first is that it is a mistake to stick to one product, one vertical, and one sector. Think about diversifying and offering complementary products to your customers.
The second is that Lopez and Mehr bought amongst other things, the email lists of the bankrupt companies. This is because the list is a group of people that already know the brand and trust it.
You probably already have a mailing list and if this is the case then it is time to start using it effectively. And if you don’t have one then start building one right away.
In terms of operations, REV has done some interesting things.
The first is that it has built up a software agnostic trading method. Instead of investing in their own website CMS or building an ERP system to manage sales they have used already existing technologies and homogenized that across their brands.
Deliveries aren’t made from a central warehouse or localized fulfilment centres but are instead direct to consumer drop shipping from the manufacturer.
Most functions are outsourced to such an extent that the whole company runs with just 30 people from their base in Florida.
With such a lean outlook the company is able to keep its costs down and remain agile.
It is low cost and agility that marks out the competitive advantage of smaller firms against larger companies. SME’s are best when they seek to keep expenses to a minimum and capitalize on the agility that comes naturally to them.
In bad times SME’s can thrive
The agility and entrepreneurial spirit that smaller companies have can hold them in good stead and as we have seen from the REV example, there are some exceptionally exciting things that businesses can do in tough times.
Building a cash war chest is a good idea as smaller businesses can buy up distressed brands out of chapter 11 in the same way as REV do.
Developing that lean and agile outlook is vital and remembering that on the internet, small companies can look just as big as large ones is very helpful.
If you haven’t moved online do so now and look to find ways that you can introduce complementary goods and services to your valuable customer lists.
Although times may look bad now, there is significant opportunity out there for all of us.
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