Monopolies and Magnolias
A Not Boring Guest Post on a Waco Empire by Texan Ali Montag + Links & Listens
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Happy Thursday, and welcome to the first Not Boring of…July?!
Puja and I are pretty big HGTV fans. Property Brothers, House Hunters, House Hunters International, Flip or Flop. Since Fixer Upper wrapped in April 2018, though, we’ve had a Chip and Joanna Gaines-sized hole in our lives. It kinda felt like they’d abandoned us.
But while we were moving out of our apartment this week,I turned over the coffee mug I drank from every morning to see who made it so that we could buy it again.
That sounded familiar, because at the same time, Not Boring’s first two-time guest writer, Ali Montag (author of Opposites Attract: Yeezy & KKW), was hard at work on a piece called Monopolies and Magnolias, about a growing empire, that includes, among many other things… a kitchenware line.
Turns out, Chip and Joanna Gaines had been with us all along.
Monopolies and Magnolias
by Ali Montag
🎧 If you prefer listening, bring your ears over here: Monopolies & Magnolias (Audio Edition)
Close your eyes and think about the word “monopoly.” What do you see?
Maybe you see Mark Zuckerburg hunched over a laptop. Maybe you see Tim Cook inspecting a prototype. Maybe you see Jeff Bezos stroking an evil white cat.
I see Joanna Gaines. She’s spooning buttercream frosting onto a tray of warm brownies. Her kitchen is warm and white. Her five children and husband Chip scamper in for a taste. In the distance, a cow roaming their Texas ranch might moo.
What started as a TV show — Chip and Joanna Gaines rose to fame using shiplap, white paint, and bright wood floors to spruce up dilapidated farmhouses on HGTV’s ‘Fixer Upper’ — has become a sprawling business. From the start of their show in 2013 to the end of their show in 2018, Chip and Joanna elevated from reaching an audience to owning an audience.
If you’re not familiar with the Magnolia empire, let’s go through it.
A line of home goods at Target
A line of wallpaper at Home Depot
A line of pillows and rugs at Anthropologie
A brand of paint
A luxury hotel
A real estate agency with offices in seven cities
A list of properties for rent by the night (booked ad infinitum)
A best-selling book on home decorating + two cookbooks (at slots No. 1 and No. 2 on the NYT best-sellers list in May) from Joanna, a memoir from Chip, and a children’s book about gardening written by both
Soon, a cable network!!
Then, there’s Magnolia HQ in Waco. There are the restaurants: A coffee shop, Magnolia Press, a bakery, Silos Baking Co., and a full-service eatery, Magnolia Table (Average wait time for a party of two? 1 hour 45 min.)
There is the shopping center: Two historic grain silos have been turned into 12,000 square feet of showrooms for Magnolia products, with a $10 million construction project underway to add a church, a baseball stadium, and six more retail shops.
📸 Credit Magnolia: Rendering images provided by David Nisbet, AIA with CP&Y Architecture
1.7 million people went to Waco to shop at Magnolia in just the first few months of 2018. Visitors can sip an iced latte, shop for throw pillows, and purchase a buttery biscuit in one spot.
So how did Magnolia get so big? Why am I calling it a monopoly?
First, let’s start with definitions. I’m not using the FTC’s anti-competition, bad-for-consumers, Microsoft-is-the-worst definition of monopoly. I’m using this definition of a monopoly, which is much simpler: A company that is the only seller in a market with no other close substitutes.
There are two ways to build a monopoly. One is the traditional way we think of, build a product with such a high barrier to entry that no competitor can catch you. The other? Just pay attention to an audience everyone else is ignoring.
This is the Magnolia strategy. Their brand connects with an audience often ignored: Middle-aged, middle-class, middle-American women.
Brands and what they signal
Many of us who work at startups own a bunch of the same brands: Allbirds sneakers, Outdoor Voices leggings, Everlane wide-leg pants, Great Jones skillets, Parachute sheets, Swell water bottles, AirPods, memberships at Equinox, etc.
Owning these brands told the world a few things about us: We shopped on Instagram. We knew lots of acronyms: MVP, CAC, LTV, CPC. We had an opinion on using Roam vs. Notion. We valued sustainability and disruption. In a certain coastal ecosystem, these products are status symbols.
Historically, status symbols have been Veblen goods. “A Veblen good is a good where its demand is a function of its price. As the price of the good goes up, the demand for the good increases too,” Author Elizabeth Currid-Halkett says.
Veblen goods put wealth on display. Silver spoons are a classic example, Currid-Halkett explains: “A silver spoon is not valuable because it’s more functional than an aluminum one. In fact, it doesn’t look that different than all of these other metals. It is valuable because it is silver, and it is rare, and it costs more.”
In the 18th century, if you wanted to signal status among the aristocracy, real silverware was a must-purchase. Corsets are another example. Want to show the world you’re rich and enjoying a life of leisure? Strap yourself into a torture chamber that proves you couldn’t possibly be doing any labor.
But today, Veblen goods—which strictly derive their value from their price—are out of favor. It’s unpopular to show off wealth for wealth’s sake.
Instead, our modern status symbols signal our social capital.
“This razor is more sustainable,” signals that you care about the environment. “This candle brand is women-owned,” signals you care about supporting women in business. “This bag of spinach is organic,” signals you care about eating healthy.
Consumers pay a premium to signal that they care. Currid-Halkett calls this “conscious consumerism,” a practice of purchasing goods to reveal a set of shared values in order to earn social capital among a peer group.
Here’s an example of my own conscious consumerism: I spent $100 on a pair of Allbirds this year. Sustainable shoes sounded nice. A neutral carbon footprint is great. (And everyone else had them.) I wore them at project management meetings and on coffee dates in SoHo.
But there’s a catch with this new twist on Veblen goods: If you change the peer group, you change the value of the signal.
Back home with my family in Texas, my Allbirds are useless. I can’t wear them to dig around in the dirt in the backyard. I can’t wear them to go running. I probably can’t wear them to lunch with my grandmother. Here, Allbirds provide neither increased utility nor signal for social capital.
In short, different audiences put a premium on different signals.
Warby Parker, Casper, and Bonobos led a wave of sweeping disruption for consumer brands in the early 2010s. There’s an exciting new brand for every product category from toothpaste to air conditioners.
But most of these emerging brands began by targeting young, high-earning knowledge workers in cities—audiences seeking one particular sort of signal. (Yoga, green smoothies, optimization, “peak performance,” disruption, wellness, sustainability, etc.)
What about audiences with different social capital? What about plumbers in Detroit? What about school teachers in Arkansas? What about the elderly in New Orleans? What about veterans in Miami?
What about your mom? When was the last time your mom discovered a brand that she felt truly connected to?
Unlike SoulCycle, Soylent, Peloton, Goop, Whole Foods, Reformation, or dozens of other top lifestyle brands, Magnolia isn’t about optimization. It isn’t about improvement. There is no intermittent fasting in Waco, Texas. (No one is skipping ANY meals here.)
Magnolia is about slowing down. It’s about watching the sunset and enjoying a plate of chocolate chip cookies with your family. It’s about using real, full fat butter. That’s a signal many American women are eager to open their pocketbooks to share.
“I think people relate because her food is not pretentious, it’s not for the elites, it just brings people together,” one superfan told the New York Times about buying Joanna Gaines’ latest cookbook.
It’s also an accessible luxury. “Destination shopping — think buying an Hermes bag in Paris or splurging on a bespoke suit in Italy — has always been a thing for the rich,” writes Vox’s The Goods. “It’s much more affordable for most people to road-trip to Waco to spend $10, or even $1,000, on trendy housewares.”
But signaling social values is a fraught endeavor. In the case of Magnolia, it is critical to raise questions about who is included in the aspirational messaging and who isn’t: “The Gaineses are often cited as a prime force in the revitalization of Waco’s downtown over the last decade, and (more rarely) criticized as serial gentrifiers who have made home prices and real estate taxes unaffordable for longtime locals,” The New York Times reports. “They have never stated their personal views on the matter, but their shows — unlike many other home makeover programs — have yet to feature a gay couple or family.”
(Chip Gaines responded to these criticisms in 2017, writing, “We care about you for the simple fact that you are a person, our neighbor on planet earth. It’s not about what color your skin is, how much money you have in the bank, your political affiliation, sexual orientation, gender, nationality or faith. That’s all fascinating, but it cannot add or take away from the reality that we’re already pulling for you.”)
Whether aspirational brands are based in Manhattan or Waco, selling a signal is easier than delivering the change behind it. Still, consumers continue to line up for brands with big promises. We’re desperate to care about something. We’re desperate to be understood. Mostly, we’re desperate to fit in.
Magnolia is a monopoly because it serves an audience with few other exciting options. Women from Dallas to Tulsa rave about Joanna’s banana bread, her penchant for choosing just the right paint color, and the loving relationship she has with her husband and five children. Lighting a $28 valencia orange scented candle from Magnolia sends a signal to houseguests, family members, and to yourself: Home is important.
Five seasons of ‘Fixer Upper’ on HGTV allowed Chip and Joanna Gaines to reach an untapped audience. The next step, developing product lines, cookbooks, restaurants, and a magazine specifically for that audience, is a page right out of the linear commerce playbook.
“They have the best timing of anyone I've ever worked with," Meredith Magazines President Doug Olson said about the launch of Magnolia Journal. “They were going to launch a magazine when no one was doing magazines."
Consider this stat from Fast Company: “In 2012, when Fixer Upper started, the company's business was 100 percent construction. By 2016, it was 80 percent retail.” Today, the company employs 500 people. Magnolia is private, so it doesn’t disclose revenue, but Growjo estimates that it generates $68 million in annual revenue (Growjo typically undershoots).
Magnolia could supersede its initial audience and explode in 2020.
Signals for living a slower life, taking pleasure in the little things, and enjoying a home cooked dinner are now appealing to a much broader population than they once were. 40 million Americans are unemployed. The signals that were once so important — performance, optimization, success — now seem a bit silly. (It also doesn’t hurt to be selling a line of housewares and home improvement products when everyone is moving out of the city to buy a home.)
Consumers have big questions to contend with without our offices, haircuts, and commutes: Who are we? Where do we fit in? What communities do we belong to? What identities do we cherish? Who is being listened to, and who is being ignored?
The brands that can help answer those questions—honestly, without false promises, and with a focus on serving populations at the margins—will be best poised to succeed.
Follow Ali on Twitter for more insights and opportunities in places you might not be looking. If you loved Monopolies and Magnolias as much as I did, you can remind your friends that there are business opportunities everywhere by clicking the Share button.
Links & Listens
🤓 Why Masterclass Isn’t Really About Mastery | Adam Keesling
Keesling does an great job explaining what Masterclass, an “edutainment” startup on pace to make >$200 million this year, got right that other EdTech startups haven’t:
Borrowed social capital from stars.
Built small bets into bigger bets (like true Worldbuilders).
Thought about advertisements as part of the product.
The future of education is a subject that’s fascinated me for a long time, and Masterclass is closest to what I think it will look like. More on Monday 👀
Leon combines three of my favorite things: Kurt Vonnegut, stocks, and startups and highlights something I’ve written about before: stocks trade on their stories.
🍋 Is Lemonade more than another SoftBank growth-machine? | The S-1 Club
Lemonade, the insurance startup, not the Beyoncé song, priced its IPO yesterday at $29, and starts trading today. Get smart on it by reading this deep dive by the S-1 Club.
🤩 Hamilton is on Disney+ Tomorrow
I’ve listened to the Hamilton soundtrack more than I’ve listened to anything else since seeing the play in 2015, and now Disney is bringing that magic to the world.
You’ll want to watch this one in preparation for Monday’s email (and subscribe here):
The Road to 10,000
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Be like Dan:
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Thanks for reading, Happy 4th to the Americans, and see you on Monday!