The Mezzi (MZI.V) experiment has, over the last few years, at times seemed both genius and a lost cause to the average investor. Created as a vehicle to produce and sell a line of smart handbags, with GPS location and, in later versions, inside-the-lining phone and laptop chargers as standard, the brand attracted some big name celebrities and showed strong social media nous, but never proved itself to the markets.
Not that it hasn’t had wins. There have been plenty of media mentions of the Vancouver fashion play over the last few years. It just struggled to relate those wins to potential investors that understand success as anything other than revenues.
And so it sits at $0.04.
Mezzi Holdings Inc.(TSX-V: MZI) is pleased to announce that it has entered into an agreement to invest and acquire a majority stake in Mekenix Commerce Inc.
[…] a Santa Monica, CA-based management consulting firm that helps companies increase e-commerce sales, based on Business Intelligence, Influencer Marketing, Operational Support, Creative Marketing and Smart Investments. Mekenix partners with accessory brands, allowing them to focus on their product and IP in exchange for a percentage of e-commerce revenues generated through the management and implementation of strategies by Mekenix
Mezzi has retained Mekenix to manage its own brands: Mezzi Smart Luxury and Capital Eyewear, and sees this acquisition as a pivotal strategic move to improve the sales culture of the Company.
On its website, Mekenix says “Our main focus is to build and optimize e-commerce sales. We effectively maximize e-commerce sales by mixing performance marketing tools with the most advanced technology available. We have made large expensive marketing and sales engines accessible for start ups. Our success is based on your sales.”
Here’s what Mekenix does, because a lot of those words make sense to their average customer, but not necessarily in the order they’re written in.
Mekenix takes your product, which you’ve made with love and attention to detail, and is right on fleek, and uses large channels that you can’t afford to pay for, and techniques that you’re not trained in, to sell your product online. (I should note, the phrase ‘on fleek’ is not presently ‘on fleek’, but let’s not get too distracted by irony)
As an example, Mezzi has done a great job at promoting their products in social networks, but that costs a lot of money, requires specialized people on deck, and while that’s all great during high sales periods, it has drained Mezzi who haven’t been able to secure major funding the cycles between selling out of their inventory and getting the next season’s inventory produced and delivered.
If the shelves are empty, that’s great news in terms of last month’s sales, but it limits what you can do with all that social machinery for the next few months while your supplier is working at full speed.
Mekenix eases that bottleneck for Mezzi, because not only can they use it to continue building their own brands, but they can also utilize it to bring other brand inventories into the stream, to make full use out of their marketing and ecommerce heft. Genius.
This is not necessarily a unique situation. As big box retail has largely died over the past few years, small store retail has followed closely behind. Indeed, one of Mezzi’s big successes over the last few years was to move into pop-up stores, where they could show up in a mall in a given city for a limited time, and heavily market in that area to cause urgency in the consumer. That makes sense, to force the consumer into ‘appointment shopping’, rather than paying a long term lease on a store that has busy times and slow.
The new plan, to use Mekenix to open the field up and make better use of the company’s assets, is a smart one. Come for the handbags, stay for the eyewear, enjoy the scarves (of which Mezzi will get 25% of all sales), and the electronics (ditto), and the whatever else the company brings into the sales channels. This allows for cross selling and driving more lifetime value out of the customer.
This is obviously smarter than trying to lure someone to a handbag site alone. I can’t tell you how many times just today I’ve clicked on a Facebook ad for a product that looks interesting, and then clicked around to four or five others before hitting the Paypal button. If Mekenix also represents those of four brands that I clicked on, they can continue to market to me as they know what I’m interested in and what I already purchased.
This is how modern retail now works. I recently walked into a camera store expecting to pick up a bunch of lights for video production, but said camera store ‘doesn’t do video’, so I went home, swore I’d never waste time with another small retailer in the meat-space, and jumped on Amazon. While I was there, I bought a bunch of other crap.
As ever, the market doesn’t know what Mezzi is doing here, and fair enough. The concept is largely an abstract one for most potential investors, and Mezzi has a track record of floppy stockedness that it will carry with it for a while.
But picture this – Mezzi’s news move will fill its sales channel with other people’s stuff, and the 25%+ cut they’ll get on those sales isn’t far off the cut you get on fashion items, so what the company is doing here is wildly expanding what it can sell, to whom, and how often. The cost of acquisition of a client remains the same, but what the client can buy on the other end becomes way larger.
Now, there are some product aggregators out there that have failed to make this plan happen for themselves, so it’s not an automatic triple.
Locally, the guy who started Coastal Contacts sold it off for $400 million, but his next outing, a shoe-based replication of that earlier company, failed. In that case, offering consumers the ability to buy multiple pairs of shoes, try them at home, and return whatever they didn’t like for a refund (with shipping both ways covered by the company) might not have been the smartest play. $40 million and three years later, and the whole company amounted to a three-day sale at Army Navy.
Mekenix isn’t going that way. They get to sell the products but don’t have to buy them. No dough sunk into inventory or production facilities, no ShoeMe issues where you’re having to hold every size and colour just in case someone orders one… If I want the blue wingtips, Mezzi/Mekenix takes my money, keeps their cut, and has the wingtip guy send out my shoes.
No bricks, no mortar. No long leases in malls that are faltering. No warehouses full of end of the line stuff. Just quality gear, sold well, to people who want it.
So what’s the risk for Mezzi?
Well, that nobody comes. But that’s the risk in the company’s present form, so it’s no lower a downside than it was a week ago. The upside, however? That just got big.Added bonus: Mezzi gets to sell the products before they have to buy them. No dough sunk into inventory or production facilities, no ShoeMe issues where you’re having to hold every size and colour just in case someone orders one… If I want the blue wingtips, Mezzi/Mekenix takes my money, keeps their cut, and has the wingtip guy send out my shoes.
What’s going to happen to the handbag brand? With a new corporate focus, they’ll take the pressure and focus off of this brand so they can get back to product innovation and not be as forced by the panic of the market to make short sighted decisions. And their bags are still a hot ticket, if the women around me are any indication.
This isn’t the first pivot for MZI. It may not be the last. They say they have a few more moves in this current pivot to check off a few more BIG boxes. But I’ll take a company that knows where the wind is blowing over one that never changes
— Chris Parry
FULL DISCLOSURE: I own stock options in Mezzi.