June 30, 2022

“We started with a simple question, ‘What if the best of the retail store experience could come to you?’”

So reads the prospectus Enjoy Technology issued last year around the issue of millions of new shares of stock, following a merger with a special purpose acquisition company, or SPAC.

Founded by Ron Johnson, who spearheaded Apple’s lauded retail business before leading a famously disastrous transformation as chief of J.C. Penney roughly a decade ago, Enjoy has tried to do nothing less than build out a new channel of retail by filling a vacuum between e-commerce and stores. 

“[T]he current e-commerce experience has one fundamental flaw: It ends with a package at the door,” the company says, describing its positioning in the market. “Brands lose the personal connection to their customers, their ability to provide in-person advice and support, and their ability to upsell products and services as online retail continues to gain share.”

Enjoy’s answer to this is the mobile store: roving trucks with salespeople and inventory, with expert staff who can sell, advise and install, all in customers’ homes. In a video, Johnson says that, “we have invented the next disruption in commerce.”

There’s one big problem though: Those stores meant to disrupt the industry are hemorrhaging money at an accelerated rate. And the company is running out of cash to fill the gap.

Product shortfalls

The company launched operations in 2015. Today the company has roughly 650 mobile stores in North America that in Q1 generated an average of $355 in revenue a day, down from $404 last year. As of the second half of 2020, Enjoy was profitable in 18 of its U.S. markets, according to its S-1.

Rather than buy inventory and sell it to customers, as most retailers do, Enjoy brings in revenue by contracting with brands and suppliers for services, and taking inventory on consignment. 

Its partners have included AT&T, Apple and other electronics makers. In its filings, the company has said it sees opportunities for itself in other categories, including fitness, luxury apparel, beauty and automotive. As for those who would want a “commerce-at-home” service, Enjoy sees its consumer as “almost everyone,” pointing to younger consumers (millennials and Gen Z), busy parents, remote workers, “demanding pros,” and “the not-so-tech-savvy.”

The model may work at scale, but, as Lamont Williams, an assistant vice president at investment bank Stifel’s equity research unit, said in an interview, “What’s not attractive at a certain scale?”

Williams pointed to densely populated areas where Enjoy’s model did best. “There were some markets that they were where the unit economics work,” Williams said. “At scale, it can work. But anything really can work at a certain scale. It’s just a matter of if you can get to that scale and when.”

Last October, Enjoy debuted on the Nasdaq public stock market after merging with Marquee Raine Acquisition Corp., a SPAC formed in fall 2020 and incorporated in the Cayman Islands as a “blank check” buyer of operating companies. It was headed by CEOs Crane Kenney, president of the Chicago Cubs baseball organization, and Brett Varsov, who heads M&A for the merchant bank Raine Group. 

Less than a month later, Enjoy reported total sales growth of 13.4% for the third quarter, which fell short of analyst estimates. Slowing the company’s top-line growth were supply constraints around the latest Apple products, which at the time knocked off up to $2.5 million from the company’s weekly revenue. 

The losses on the company’s mobile stores for Q3 came in more than four times higher than estimates from Telsey Advisory Group analysts at the time. The analysts said then that the constraints on Apple products and other issues “masked Enjoy’s long-term story and progress on key initiatives, including accelerated mobile store growth, expansion of the Apple relationship, and the newly launched Smart Last Mile solution — all supporting the favorable industry shift to Quick Commerce.”

In its 10-K for 2021, Enjoy noted that it had built up its field teams, anticipating increased demand for the back half of the year. “However, due to product availability delays due to supply chain issues, our gross margins were worse compared to the first half of the year,” the company said. 

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