What the Dickens is Cettire up to
And a last chance for redemption
In this post I’m going to call out why this is the point in time where every single investor, defender, tout, analyst, investor relations person or anyone who is even mildly associated with Cettire should look at themselves and work out which side of history they’d like to be on, and which allocators they’d like to speak to about Cettire if they ever mention this company again. But first some context.
Great Expectations
The buzz around the market last week was that the Australian had sent a list of questions to Cettire and boy were they juicy! Strippers! Fake products! Regulator investigations! Combined with a near doubling in the short interest over the prior two weeks, this created something of a breathless anticipation of a new short entering the fray with a one shot kill, and the stock fell -23% in those two weeks.
The Australian articles hit over the weekend and inevitably the reality of a heavily legalled article fell short of the more fanciful expectations of the market and a late drop (post opening auction 🚨) of a highly aggressive denial from the company sparked a 10% relief rally today.
Hard Times
Just another day on the ASX of course. However this episode has furnished us with a veritable treasure trove of new comment from the company - and the more this company talks the more it stinks.
The most egregiously misleading denial was:
Since commercial launch in 2017, Cettire has handled more than 2 million individual orders. There is not a single confirmed case of a non-genuine item being sold on Cettire’s platform. None of the examples presented to Cettire by The Australian contain any verifiable evidence that a non-genuine item had been purchased via Cettire. Based on information provided by The Australian, the items used as examples have not been inspected by either Cettire or the relevant manufacturer to verify their authenticity.
This is a company that not even three weeks ago at the Macquarie conference was priding itself that not a single Cettire employed hand touched a returned item.
The whole flow backwards, forwards and back again – there’s no human intervention for us … There’s not a single Cettire employee doing anything there
How would Cettire reasonably expect to identify a counterfeit product if - in the unlikely event it accepted a return - it would never even see the product? What steps would it take to verify that this product was genuine with brands it has no direct relationship with? The disingenuity of the statement is breathtaking.
Please Sir, can I have some more?
Why of course child! The company claims that the supplier who ships the product and marks their own homework on the return is bound by contract and reputation to only ever provide genuine products, and this is called “governance”.
There are multiple layers of governance in Cettire’s supply relationships:
• Cettire only works with established distributors in the luxury supply chain. All of Cettire’s suppliers source products directly from luxury brands and are a core part of brands’ distribution channels.
• All of Cettire’s supply arrangements are individually underpinned by legal contracts which contain strict and enforceable contractual terms, ensuring all goods sold via Cettire are genuine.
• In Cettire’s business model, the supplier assumes the risk on a product return. Moreover, if a supplier became known as participating in non-genuine products, that supplier would risk severe reputational exposure in the supply chain.
The supplier who assumes the risk on a product return is the arbiter of what is fake and what is not, and if it identifies a fake it is contractually in breach with Cettire - whilst Cettire apparently has no obligation to take any steps to verify anyone’s compliance with this. “Not a single Cettire employee doing anything there”.
Ever so ‘umble … business model
This is where the fragility of Cettire’s business model is evident. They claim only 70 full time equivalent employees, the vast majority of which work in engineering. It’s open to them to have a proper returns and verification system, but as Bell Potter pointed out today without any supporting evidence, they’re “a younger company …[continuing] to prioritise investing into technology solutions & customer service to improve the returns experience related to first time customers”. This is Bell Potter playing Esther Summerson to Cettire’s Mr. Skimpole; that Cettire is a mere child in such matters as returns and customer service, and as disingenuous as Skimpole was in Bleak House1.
A Tale of Two Hoodies
So what of the actual proof of a counterfeit product sold by Cettire that the Australian provided? This was provided by a charming gentleman by the name of Daniel Berman, who is quite open about his autism. I’d encourage everyone to watch his video wherein he explains why he wanted to buy a Polo Ralph Lauren hoodie, even at a premium to retail. Because Daniel likes the red polo logo!
It’s impossible not to be struck by Daniel’s genuine sense of injustice at how he was shafted by Cettire. He just wanted a PRL top with a red logo.
So Daniel initiated a chargeback with Wells Fargo who asked for two sources of proof that this was a counterfeit item. One was the QR code that failed to scan in the video above, and the other was his beautiful seamstress mother who pointed out at great length all the things that were wrong with the fake hoodie that Cettire sold him.
This evidence was enough for Wells Fargo to reverse the transaction and give Daniel his money back, with no involvement from Cettire hands - because why would there be? It’s not in their business model. It’s open to the reader to conclude that Cettire’s business model is to screw people like Daniel, who just wanted a PRL top with a red logo.
Let’s hope we have a Mutual Friend
So how should a company react to a customer that has had a bad experience with them? Should they just ship them some new boots like Valentino did for Samantha Todd who got some dodgy ones from Cettire, even if they appear to be longer than her torso?
Well perhaps. But one thing no company should ever do is to sue a vulnerable person to protect its business model. One thing a company should never do is - as has been confirmed to me by multiple sources - insist that their quote in the paper includes that they are going to sue that vulnerable person.
To do so would be to show that the company cares more about its pitiful profits than about that person’s wellbeing. To do so would be to show that their business model is so fragile that it is dependent on refusing returns of obviously fake goods. To do so would show that the company is so focused on defending its share price that it has lost all sense of what is right and what is seriously wrong.
And this speaks to the entire point. If as an investor in this company you can watch that video and go - I want to sue the guy who wanted a red logo because it hurts my investment! - you’ve lost every single part of yourself that makes you a worthwhile human being.
This is the last point at which any allocator should ever accept an excuse about why you owned Cettire. Because they said they would do this to Daniel and his mother instead of just being decent. It’s not that hard.
The last word has to go to Daniel.
“I don’t care (about the threatened legal action) because I know I did the right thing,”
How many others can say the same?2
Note for WAM - it’s a book. You probably haven’t read it.
not you rat cock