Using Commerce to Understand Everything

Welcome to Free Radicals — a collaboration between Everything and Sherrell Dorsey, founder of The Plug. Free Radicals is a limited series celebrating those who embody lleadership in this moment. Each edition features a conversation between Sherrell and a leader in tech, focusing on equity, advancement, and progress. This is the second edition, featuring Web Smith.

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Enjoy.

“Everything we do revolves around consumption and selling,” says Web Smith, founder of the commerce newsletter and community 2PM. 

“It’s the foremost American expression.” 

This is not a cultural critique as much as a framing for Smith’s insights into how the retail world operates, and why it matters. Commerce is not just about commerce. It’s about race, class, technology, opportunity, family — everything.

At 2PM, Smith doesn’t just dig into the numbers. He looks at what leaders are doing, and what they’re thinking about doing next. And he connects today’s circumstances to the history that led us here.

One of the most compelling aspects of 2PM is the deft way Smith mingles deep data sets with historical narrative context, using thrice-weekly essays to explain not just what Americans are consuming, but how and why. He’s as much a sociologist as a trend forecaster. Smith has a way of moving seamlessly from retail and entrepreneurship, to access to capital and real estate, to the social forces, particularly race, that shape the market. A conversation with him might leap from retail square footage in the U.S. to Brown v. Board of Education to the current pandemic. Makes you understand why he chose the name “2PM”—“to polymaths.” 

Nothing about Smith’s delivery or his approach is dry. “I clearly take the writing aspect of my job very seriously,” he says. “I do want to be taken seriously as someone who is putting in the work journalistically; but I want people to know that when I write something, it’s as an operator, not merely an observer. If I put numbers or a thought on paper, there’s someone behind it, doing that or about doing that—there are no takes or opinions. I’m doing my best to tell you what’s going on behind closed doors, without breaking non-disclosures or breaching trust.” 

In this second edition of Free Radicals, Sherrell Dorsey speaks with Smith about the future of retail, the intersection of race and commerce, why how and where we buy things matters, and what it’s like to be a Black founder on the internet.

You write about trends in commerce and business and the future of employment, sometimes in the context of your experience as a Black person. What is it like talking about race and culture with CEOs and entrepreneurs?

It’s always scary for me because I know that when I ruffle some feathers, it’s likely to have at least some negative outcome. But especially at this juncture in time, I feel I have to do my best to authentically represent what I am. I can’t set aside some parts of me for the sake of economics. 

For example, I wrote a piece about my grandmother and Juneteenth. I realized I had to write it when I was being interviewed by Modern Retail, and they asked me to name folks who are direct-to-consumer founders of color. I couldn’t do it. There’s Tristan Walker, of course, but outside of him it was really difficult to think of names. 

This made me upset. I have to keep in mind that I’m probably the closest that a lot of folks have to that voice, that Black founder voice, in their circles. I’m typically the only one in the room, right? If I don’t say something, then they’re not going to hear it. 

Not long after that piece — which is about Black people waiting to be recognized as humans, as citizens, as entrepreneurs — was published, you tweeted that it had resulted in unsubscribes because members felt it was outside the bounds of 2PM. How do you manage that? Does chip away at you a little bit?

It hurts. It hurts me a lot. I take everything personally and I can get really bent out of shape.

How does that affect the way you show up on social media? How do you balance these kinds of difficult but important conversations with the regular insider, ‘business expert’ tweets most people in tech respond best to? 

I don’t have a strategy on Twitter. What people see on Twitter is that I’m in this all day, every day. I’m thinking through problems, trying to solve issues, obsessing over data, working on new insights seven days a week, 24 hours a day. I sleep maybe five hours, or four-and-a-half a night if I’m having a bad day. And so people recognize that my mind is always there and I’m publishing from a passion perspective and not merely an economic one.

Twitter’s not the best platform to have nuanced dialogue. Where are you having those conversations, where there are maybe opposing viewpoints on difficult questions?

I have a lot of great discussions like that in Polymathic [2PM’s membership community for commerce and media leaders]. It’s a confidential community. I try to invite people that I believe are capable of nuance. We keep it civil, but we have in-depth conversations that can be very complex. I’ve taken pride in the community that I’ve built there, and I hope that I can continue to scale it in that form. 

Are questions of race and equity coming up organically there?

I think people mistakenly believe that my industry isn’t shaded by issues of sociology, politics, and race. The truth is, commerce and race are inseparable.

For example, America is way over-retailed — by a factor of seven when compared to China — and the reason why is directly connected to the white flight that occured in the 1950s.

What I mean by “over-retailed” is, America has 23 square feet of retail space per person. China’s at 6. Canada’s at 16. Most of Europe is at 12. We just have a tremendous amount of commercial real estate in the suburbs, and it is going to be a problem.

The reason America has so much retail space is directly linked to white flight in the 1950s and the tax incentives that followed. I’ve written in the past that in this era, malls went from 1  to 25 in one year, and from 25 to 1,000 in about seven years. All that development was outside the city. 

To think that had nothing to do with Brown v. Board of Education in 1954 is insane. When I link those things I’m doing so carefully, I’m doing so tactfully, but the facts are the facts. You can look at the timeline and you can see that tax incentives opened the door to a mass movement of commercial development outside of American cities, and all this was approved three to six weeks after certain Supreme Court decisions came down. 

Are smart leaders having these discussions, connecting race and commerce? 

Behind the scenes, at 2PM, I advise a lot of businesses, both private and public. Some of those have been very, very large commercial real estate development companies. And getting them to understand that a course correction now is better than a course correction later is like a moot point. So I don’t know if they’re willing to sort of come to terms with what’s going to happen in the next five to ten years, but I’ve been writing this stuff about over-retailing and about the impending implosion of commercial real estate for the past four years. 

I think that numerical data is often the easiest data to come by. It’s the other markers that are a little bit harder. And those are the ones that I focus on.

What are some of those other markers?

If you studied Chinese e-commerce in 2003, the data was subjective and opaque. You looked at SARS and Jack Ma’s innovation around Alibaba moving from a pure B2C standpoint to B2B, allowing companies to sell as if they were at tradeshows. The reason why he did that was because of their government shutdown in response to their particular epidemic. 

China went from far behind us in e-commerce adoption to dwarfing us in e-commerce adoption in two years. Looking at their commercial real estate, they have six square feet per consumer versus our 23.5 square feet. All those data points suggest to me that as e-commerce continues to become the prevalent form of retail, commercial real estate has to dwindle.

I’ve been saying this for three or four years. And now what you’re seeing is e-commerce is getting closer to breaking 30% of all of retail. That will correspond with a surplus in inventory by about 10 to 15 square feet per consumer, and we’re seeing that play out in commercial real estate.

I wonder how those numbers have fluctuated through the pandemic. 

I think we went from 11.9% e-commerce as a percentage of retail in Q4 of 2019 to conservatively 23% in April of 2020. With the economy opening up in May in June that number fell by a little bit to 16%. 

But now you’re seeing an uptick again because reopening has become a threat to the remaining healthy cities. So you’re seeing measures being taken at stores or governments shutting stores down, you’re seeing indoor dining shut down in certain metropolitan areas. The fall is going to be way worse, way worse. My earlier projections forecast suggests that we’re going to see e-commerce sitting at close to 30% this fall. 

If there’s a shift to online, do we still have to be open for in-person business, even during a pandemic, because retail is the backbone of income for a whole class of people who have not been onboarded into the future of work?

For the people that you’re talking about, the people who have relied on retail as entry-level jobs, if we don’t find a way to onboard these folks into other formats of similar types of work, then we’re gonna be permanently at 20% unemployment for the foreseeable future.

Retail is 29 million American jobs. The workforce is close to 156 million people. So without those jobs, what do you do?

There’s a similar dynamic here to what you were saying about why there’s so much retail space in the suburbs — I feel like our industry is not connecting the dots between race, class, and commerce enough. We’re not having these conversations enough. 

What is your take on the media coverage of commerce and retail?

Here’s what typically happens: I’ll talk about it for about six months to a year, and then The New York Times or CNBC will cover it. And it’ll appear as if it’s a novel thing that no one’s ever talked about.

The problem is they’re going to cover it when it’s too late. And I’ve never seen people discuss the sociological aspects of a lot of these decisions. 

Here’s a great example. Will the president or will Congress bail out the retail sector when it completely crashes? By my best estimation, the answer is probably no. No one is talking about retail in the context of whether retail will recover thanks to government aid. 

Why are we missing this from a news coverage standpoint?

Because not enough journalists read 2PM. 

That’s the best answer. 

I actually credit Central Ohio’s commercial economic development arm. They reached out to me because I proposed that we retrain a lot of hourly retail workers into last-mile delivery folks or warehouse workers in the short term. I presented a plan to establish partnerships with Doordash, Postmates, and a lot of mom and pop shops to help them digitize their last-mile services and their businesses all together. 

So, some public and private partnerships are beginning to at least think about the issue. But frankly, I don’t think you’re going to see anything in the media about it, because it’s hard to talk about retail at this point without talking about other aspects of society that, frankly, CNBC is not gonna have a great time covering. Lauren Thomas is not going to talk about the racial aspects of the retail industry. It’s just not going to happen. So, we’re seeing the symptoms and not the disease. And that’s not fair to anyone, especially when they’re trying to make decisions about the future.

Are there any direct-to-consumer brands that you admire right now?

A few in my portfolio—I’m proud of Huron for continuing to grow. Rowing Blazers is doing amazing things. Haus found a way to innovate despite the lack of in-person interactions that were propelling their business early on. 

External to my portfolio, one of my favorite direct-consumer brands of all time is probably my former employer, Rogue Fitness. They’ve grown from I think 600 employees in December to 1,000 in July. They’re operating out of 900,000 square feet in Columbus, Ohio, manufacturing almost everything domestically. No one talks about them, but they’re probably one of the most voluminous DTC brands in the entire e-commerce space. And there are tremendous lessons that a lot of retail founders and executives can learn from them.

Like what?

You don’t have to raise venture capital to do what they did, number one. Number two, you don’t need PR splash and personal brand building to build a successful business. And then number three, if you make the numbers work, domestic manufacturing can be your primary means of generation.

What’s inspiring you in the industry, as it continues to change and evolve?

I like to study the 1900s and the 1920s when it comes to brand development, and all the companies that were built in that time that still exist today. I believe that the brands that are being built right now are going to be the brands our children and our grandchildren will talk about 100 years from now. I think the brands we joke around about now are the brands that are going to replace the ones that are dying. And so I look forward to seeing how these companies continue to grow over the next 10 to 15 years, as some of them become generational companies.

The industry is changing. Our entire economy is moving toward an e-commerce-first economy. I’m excited that 2PM is helping people make important tactical decisions that will affect that future. Hopefully journalists start listening too.  

When I was talking about America being over-retailed, I’ve written extensively about the history of that development. It’s a 65-year history, and I need people to understand how much of these elements of humanity and politics and sociology are connected to how we consume and where we consume. That consumerism—e-commerce, retail, however you want to phrase it—is just a leading indicator. I use it as a platform to discuss everything else.

This was a conversation between Sherrell Dorsey and Web Smith, edited for length and clarity by Annaliese Griffin and Rachel Jepsen.

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