Enjoy: The Uber Of Retail

Summary

• Enjoy has a novel experiential retail offering with no direct competition.
• The market is potentially very large, although Enjoy has only proven its business model in the mobile phone market at present.
• There are clear first mover advantages that would enable significant growth if Enjoy succeeds in creating this new market.

Photo by AdrianHancu/iStock Editorial via Getty Images

Introduction

On 4/28/2021, Enjoy Technology announced that it would be going public via SPAC merger with Marquee Raine Acquisition Corp (MRAC). The combined company has an enterprise value of $1.2B and will eventually trade under the ticker ENJY.

Enjoy is in the early stages of creating a new retail model in which "mobile stores" (i.e. think Uber meets Apple Store) bring high end retail experiences directly to an end customer's home. Enjoy has no direct competitors and the market is potentially very large, but at the same time, the idea is unproven and quite frankly sounds a little strange. On that note, this company reminds me a lot of Uber (UBER) in the early days and this recent SPAC merger gives investors a chance to invest in this company in what would be roughly equivalent to Uber's Series C funding round.

Business Overview

Enjoy describes itself as a "technology-powered service platform reinventing 'Commerce at Home'". The basic idea is that Enjoy works with large consumer goods sellers (e.g. Apple) to provide last mile product delivery by a technology "Expert" who can provide the end customer a white glove unboxing experience. This Expert helps the end customer to set up the product, learn product features, and also acts as a salesperson to upsell additional services or products. This process is outlined in the slide below, which shows the basic steps: (1) the end customer places an order at a partner website and has the option to add on Enjoy's service, (2) the last mile fulfillment is achieved with the same level of transparency as one might expect from Uber or DoorDash (DASH), and (3) the at-home experience is delivered by a trained Expert.

Source: Enjoy Investor Presentation

Enjoy refers to this new retail concept as the "mobile store". As described further in the Enjoy Investor Presentation Enjoy carries inventory on consignment that is delivered by trained employees (i.e. not gig workers). In geographies where Enjoy has enough scale, this type of model can enable same-day delivery. Underlying this delivery model, Enjoy has developed a technology platform that helps to manage the backend logistics (e.g. inventory, routing, etc).

One of Enjoy's key selling points is that they are able to enhance the consumer experience by providing Expert assistance during unboxing. Enjoy measures this using Net Promoter Score, which they report to be 88. For those unfamiliar with NPS, 88 is considered a high score which indicates a high level of customer satisfaction. For reference, this score puts Enjoy's customer experience somewhere in between Apple and Tesla. Enjoy specifically lists target customer personas that Enjoy believes will have high value for their services: millennials and gen Z, busy parents, work from home, demanding pros, and the not-so tech savvy.

Source: Enjoy Investor Presentation

Enjoy refers to the vendors whose products Enjoy is delivering to end customers as "partners". So far, Enjoy has focused primarily on mobile phone vendors. They started with AT&T (T) in 2015, added EE in 2018, and Rogers and Apple (AAPL) in 2019. Enjoy points out that these are the market leaders in their respective categories / geographies: AT&T in the US by revenue, EE in the UK by subscribers, Rogers in Canada by wireless, and Apple in the US by mobile devices.

Source: Enjoy Investor Presentation

The choice of consumer electronics partners as Enjoy's initial market is strategic. Consumer electronics are a natural fit for Enjoy's business model because they are compact (i.e. easy to maintain inventory in a delivery vehicle), high value (i.e. margin), complex (i.e. benefits from their Expert service), and have a lot of potential for add on services or accessories (i.e. additional revenue streams for Enjoy). Enjoy's business model is (1) Enjoy earns a fee for the delivery and setup of the product with the end customer, and (2) Enjoy earns revenue for incremental hardware, services, etc. sold during the visit.

Source: Enjoy Investor Presentation

Key People & Investors

Enjoy's founder and CEO is Ron Johnson, who is credited with founding the Apple Store and positioning Target as a more hip retailer (e.g. through the introduction of the Michael Graves product lines). The Enjoy Investor Presentation emphasizes this as a key selling point. It should be noted that Ron Johnson was CEO at JC Penney for 18 months before being fired over a failed turnaround attempt.

Enjoy also boasts some notable investors, including Andreesen Horowitz, Kleiner Perkins, Google, and two of Enjoy's partners BT and Rogers. It is unclear whether if any of these investors participated in the PIPE for the SPAC merger.

Financials

Unlike many SPAC presentations, Enjoy presents metrics going back to 2018. One can see that Enjoy has been steadily growing revenue since 2018. This includes growing revenue year over year during COVID, which is impressive for a company whose business model is based on in-person interaction.

Looking forward, management expects revenue to reach $1B by 2025, which is an ambitious growth strategy. However, management believes that the addressable market for just expanding with its current partners into new regions is $48B. Furthermore, Enjoy has no direct competitors in this space.

At $10/share, the transaction gives Enjoy a total equity value of $1.6B and an enterprise value of $1.2B. Enjoy provides some useful valuation comparisons in the slide below. If one believes the growth projections provided by Enjoy, then the current valuation is quite attractive.

Conclusion: Investment Thesis & Risks

Thesis

• The market for mobile stores is potentially very large.
• Enjoy has a very low valuation relative to the size of the potential market.
• Enjoy has no direct competition for this type of in-home experiential retail.
• Scale in both large customer partnerships and geographic presence is required for the unit economics of this business model to be profitable. This creates a barrier to entry that could give Enjoy a significant first mover advantage.
• Early growth is a proof point that there is consumer demand for this type of retail experience.
• Enjoy has a highly qualified founder / CEO and well-known investors.

Risks

• It is unclear how large the market is for customers that would value this experience. Enjoy has demonstrated that it is larger than 0, but it is unlikely that 100% of consumers would value this service.
• It is unclear if this service would be useful for products beyond mobile phones (Enjoy's first market). Enjoy has a relatively strong value proposition for phones because they have many features / complexities such that consumers could benefit from expert consultation.
• It is unclear if this business model would be profitable for other products beyond mobile phones. Mobile phones are an ideal product because they are small but high value, which enables positive unit economics for a mobile store that is limited in the number of transactions per day and inventory that can be carried). Furthermore, phones have the potential for many add-on services that create additional revenue for Enjoy.

Recommendation

The biggest risk facing Enjoy is how much of the retail market will actually adopt this type of experiential retail approach. Enjoy has made a strong case that Enjoy's mobile store concept has value in mobile phones, but has yet to demonstrate the ability to extend across other products. Nevertheless, the potential market is very large, Enjoy has no direct competitors, and there is a compelling first mover advantage to this business model. Given that Enjoy's valuation is relatively low even on a near term basis (i.e. vs. 2023 gross profit), I believe the upside is worth this risk.

Additional Resources

Below are some additional resources that I found helpful in preparing this article to show the evolution of this company over time and some additional perspective.

• 2020 9to5Mac article on Apple delivery offering
• 2020 Builtin article
• 2020 Forbes article
• 2019 TechCrunch article
• 2015 CNBC article

Analyst’s Disclosure: I am/we are long MRAC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Comments

[Epicontact2]

Ron Johnson hasn't had the best record since his days at Apple. I suspect his interests are now elsewhere since the company hasn't recovered from pandemic. I guess nobody had any bright ideas how to adapt or make changes to thrive in the new normal. GLTA

[conchrist89]

well this didn't age well

[crazylikebudfox]

Not often you see a stock recommendation this bad, but here it is. Might need to frame this one.

[Bodipb]

@crazylikebudfox I have been following, absolutely no buyers to be found, just sellers.

[User 51668522]

This might win the award for "most heinous SPAC." That's saying something given 2021's SPAC combination record.

[Epicontact2]

@BetOnRed Why do you judge so harshly?
They had this in the works prepandemic. Brutal for all businesses at that stage of development. Amazingly well managed to have survived. I have no skin in game...yet...

[User 51668522]

@Epicontact2

It is not amaziningly well managed. The only reason they are not bankrupt is because the SPAC just threw a lot of money at it to take care of the near term maturities. The company will still hemorrhage money.

[NotAnInfluencer]

@BetOnRed You have absolutely no idea what you're talking about. Couldn't be more wrong if you tried. Clueless.

[ron49er]

How much extra must I pay to prevent a salesperson from coming to my home to upsell me? That's the next idea from this. I loved buying my phone online and not going to a phone store. Didnt realize so many boomers were paying for "white glove" service for geek squad to open the box and press power on.

[Gains on Gains]

@ron49er The social media sentiment for enjoy is as bad as you will ever see on anything because none of the people active on twitter/here/substack whatever will ever use it. But their net promoter score is off the charts if you put any faith in that. QVC is still pretty big business and now that crowd gets to basically 'rent a grandchild' who helps them set up their phone.

[Bodipb]

@ron49er less tech savy generation, data transfer, set up, new features. Not just power on.

[User 51668522]

@Gains on Gains Part of what skews their promoter score is they are measuring it since inception. Look at all the services and products they helped with between 2016-2019 and compare it to now. They were hemorrhaging money with whiteglove services and upselling mid-range "techy" products, and now transitioned to only selling phones for telecoms.

Ask yourself, why would a company expand internationally while its domestic operations are still a mess and "underpenetrated" if its reputation was so good? It makes no strategic sense.

[bazooooka]

Yup; trading at only four times fwd 2023 revenues of if all goes well. Otherwise its more like double that multiple if topline growth falls to around thirty percent cagr over next few years.

>>""If one believes the growth projections provided by Enjoy, then the current valuation is quite attractive.""

[Chestrkwll]

So basically they are pitching a door to door sales service?

[Bodipb]

loupventures.com/...
Gene Munster has a solid track record.

[Rob K12]

Kinda get the idea this is a new take on the Fuller Brush man door to door sales.

[Amstragram]

if only they were doing a direct listing instead of a SPAC ...

[Lounging in the dry heat...]

Thanks for the article! Could you explain the difference in MRAC and MRACU?

[Gains on Gains]

@Lounging in the dry heat... mrac is a common share. mracu is a common share plus one fourth of a warrant. seeking alpha lists the warrants as mracw.

[Epicontact2]

@Gains on Gains Just curious, and realizing every investor has to do their own due diligence, would you buy any of these listings or wait for the change to Enjoy?

[Gains on Gains]

@Epicontact2 100% wait if you're doing common shares. They are going to get redeemed to death and even though sometimes that means a squeeze it will almost always lead to a dump. check out the MKTW chart for a comparison assuming I'm right on the redemptions. The wishy washy reopening is hurting these guys per the recent quarter. They're still only getting 'through the door' on like 50% of trips vs 90ish prior. I dumped my warrants at a loss although down here they're not a terrible gamble.

[NotAnInfluencer]

Kinda interesting, but what's to stop Apple and everyone else from implementing a similar in-home delivery service in the future? Apple could do this very easily.

[Gains on Gains]

@NotAnInfluencer I wonder if each individual company doesn't have enough demand on their own to be able to justify full time employment of quality people. Sort of like restaurants using delivery services instead of having their own drivers. I'm interest in the warrants here under $1.

[NotAnInfluencer]

@Gains on Gains I would think Apple could justify the demand. Their stores are always packed. Always. Trillion dollar company that doesn't offer in home delivery service by a trained employee is actually sort of amazing. I'm looking at the warrants myself, very strong indicator is the fact that Ron Johnson is the founder. That's very interesting. I hadn't heard of Enjoy prior to this article.

[Bodipb]

@NotAnInfluencer Enjoy probably has a 3 yr early mover advantage. A lot of cross over between Ex Apple and Enjoy employees.

[Owen213]

Thanks for doing the homework on this. If the spac commons drop after ticker change, might be a nice buying opp.

[Epicontact2]

@Owen213 Great point! Just circling back to see if how business is progressing. Planning to start a position.

[Owen213]

@Epicontact2 staying away for now

[Investment Observer]

@Epicontact2 I recently upgraded my Samsung phone through AT&T.. They didn't have it in stock, but they made me an appointment to have a specialist deliver my phone to my home the next day... ON A SUNDAY. The delivery guy gave me his card and he works for Enjoy. Told me how they were going public opening the NASDAQ the next day. He delivered it, activated it, and was off. I've been watching ever since but think this $10-$11 range may be worth a small initial position.