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Aug. 14 2015 4:04 PM

Zirtual Fired 400 Employees Right Before It Was Acquired. Now They’re Suing.

This post originally appeared on Business Insider.

Zirtual may have been saved by an acquisition, but its 400 or so former employees are still left picking up the pieces.

The virtual assistant company dissolved overnight on Monday and fired its entire workforce with an e-mail at 1:34 a.m. Within the next 48 hours, its CEO Maren Kate Donovan apologized for the last-minute shutdown and said the company has found an acquirer, Startups.Co.

Donovan, in an interview with Fortune, insisted that she was working hard to save the company until the last minute and that an external CFO firm made an error with projecting payroll in April. (The same CFO firm told Fortune that they are not to blame for any of this).

It's clear Donovan knew she needed more funding, but it appears she was counting on a round that never came through.

"We thought we were going to pull through until Sunday because things kept lining up," Donovan told Fortune. The funding fell through after an investor pulled out, and the company was forced to close its doors.

But a lot of former employees are saying that things had soured long before Sunday.

The company's HR chief had quit abruptly a week before, allegedly posting in a Facebook group that she didn't want to be party to doing anything illegal. (Donovan told Fortune that the HR chief's departure was because she wanted to let the employees go and Donovan wasn't ready to give up on securing the funding.)

But former employees say that Zirtual had already stopped paying for benefits in July even though it charged employees for this month. Insurance coverage had stopped July 31. 

"Anyone who went to the doctor in August won’t have it covered," said Katy Boyle, a former Zirtual Assistant or "ZA". Her visit to the doctor on August 3, while still employed with the company, now has to come out of her own pocket.

Moreover, employees were only paid through August 7—but they didn't know this until the email arrived in the early morning of August 11.

The acquisition by Startups.Co won't be a saving grace for many employees, either. While Zirtual is scheduled to turn its lights back on Monday, its new workforce will be made up of independent contractors, not full-time employees, according to an announcement on the site. This means they will not be eligible to receive benefits like health insurance or paid time off, like they were in their old positions. 

Re-hiring all 400 ex-Zirtual employees is also unrealistic, especially since burn was a problem to begin with. "Ideally we’d like to keep everyone, but given that the previous state of the company was unsustainable, it’s not reasonable to think we can continue to do so. Prior to the announcement, the company had employed over 400 professionals, so we have a lot of work to do to determine how many we can retain," the acquisition announcement said.

While there are some Zirtual assistants who are interested in returning to the company, many like Boyle have said they've opted to leave or sign their own contracts directly with their clients. By signing their own contracts without the Zirtual middleman, they can keep 100 percent of the money themselves, said Daniell Wells, another contractor who is not returning to the company either.

Those who have applied to return will be accepted based on client demand, and they're already trying to re-book clients—although some assistants on Twitter are claiming that the company is also going about that in a dishonest way.

In an e-mail sent to Zirtual Assistants on Thursday night, Wil Schroter, CEO of Startups.Co, apologized if he had stepped on any toes while trying to reestablish the business and that it was an honest mistake.

"Our team on Tuesday began reaching out to clients to see who still needed support and to match them back with ZA’s.  If you were already working with your client or in the process, we obviously didn’t know that.  We should have been more specific in our outbound messaging to read 'If you are already working directly with your ZA then ignore this message.' That was my fault for overlooking that and I sincerely apologize," the e-mail from Schroter said. 

Even once it reboots, Zirtual has a new hurdle to face: a class-action lawsuit. Business Insider has a copy of a lawsuit filed in Delaware—where Zirtual is incorporated—alleging that the company violated the WARN act (short for Worker Adjustment and Retraining Notification) by not giving employees enough notice. The WARN act is supposed to protect workers from sudden shutdown by requiring a 60 days notice if its reasonably foreseeable.

If Zirtual is found to have violated it, the company would be responsible for 60 days of backpay and benefits. Schroter had no comment on the lawsuit. Whether or not the layoffs violated federal law will be an issue left up for the courts, but in the hearts of Zirtual Assistants, many are left feeling betrayed and blind-sided.

"You knew long ago it was not going to be able to be sustained and you did nothing morally and ethically responsible toward fixing it," one anonymous ex-Zirtual Assistant said on Medium. "If you had only been fair and honest with us all along, as you said you were being, things could have been so much different."

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Aug. 13 2015 12:02 PM

Apple to Third-Party Accessories Vendors: Look More Like Apple!

This post originally appeared on Business Insider.

Apple has required that all its third-party accessory vendors redesign the packaging for all their products so that everything looks more like an Apple product, according to an internal company document leaked to Business Insider.

A report in July said the move was coming. All suppliers of bags, cases, and other knick-knacks in the accessories section of Apple stores will only be allowed to sell products if the boxes they come in feature a white background, with typefaces approved by Apple, and product shots that conform to Apple's preferred angles, the memo says. The policy affects Incase, Tech21, LifeProof, Sena, Logitech, and Mophie, the memo says. Apple even sent back to the companies boxes it didn't like, insisting that they use "better quality packaging material." Apple did not respond to a request for comment.

While a package redesign for iPhone case suppliers might not sound like much, the move is probably regarded as a huge victory inside Apple. The company is famously fussy and careful over the look and design of its products. Accessories from non-Apple suppliers often look chaotic and cheap by comparison. It is not easy to persuade companies to downgrade their own branding in favour of another's. The move contains some advantages for these firms, however: Their products will now look more like Apple products, which may make consumers feel more comfortable buying them.

Here is a summary of the text of the Apple memo describing the change. We have changed the wording of the memo slightly to protect our source, after we learned that Apple has begun sewing codes and grammar changes into its internal communications in order to identify the source of leaks to the media. Business Insider recently received internal information from Apple on difficulties the company has had launching Apple Watch and its discussions with wireless network providers over whether Apple might become its own mobile virtual network operator (MVNO)

As a result, the quotes accurately reflect the memo, which Business Insider has read, but do not quote it exactly: 

Over the past six months Apple has worked closely with partners to redesign packaging. When customers come into stores, "we want them to have the same great experience."
The new designs bring an elevated look and feel to our third-party bags and cases while creating consistency across the brands to make our Accessory walls more visually appealing and easier to navigate. Old packages will be returned to the warehouse.
"Don't forget to share your favorite accessories with your customers in their new look."
What's changed:
Uniform white background
Consistent placement of logo and icons
Consistent product shot photo angles
Simplified typography
Better quality packaging material.

Aug. 12 2015 2:43 PM

Traffic From Google to Wikipedia Is Dropping. Why?

This post originally appeared on Business Insider.

The amount of traffic that Google sends to Wikipedia has declined by more than 250 million visits per month, according to SimilarWeb, the traffic measurement company.* Roy Hinkis, SW's head of SEO, says the downgrade is a genuine mystery:

What I saw shocked me. Wikipedia lost an insane amount of traffic in the past 3 months. And by insane I mean that the free encyclopedia site lost more than 250 million desktop visits in just 3 months!

Here are the most recent numbers, in visits, per SimilarWeb:

  • May: 2.7 billion
  • July: 2.4 billion
screen_shot_20150812_at_14.23.06

Hinkis suspects that Google has changed its search algorithm to favour actual brands and company web sites over the Wikipedia entries that are about them:

Wikipedia has long since been a huge competitor for brands in terms of website traffic. SEO’s aren’t crazy about it, because it takes a huge chunk of our traffic.

However, what Wikipedia taketh from other sites' traffic, Wikipedia also giveth: The site is so massive that it also drives a fair amount of traffic onward to other sites. But the less traffic Wikipedia gets, the less it can give.

Business Insider asked Google for comment but we have not heard back yet, so let's speculate. One of the major trends happening at Google is the company's preference for inserting its own content above the content of other non-Google web sites, even when those sites may be better resources than Google itself. Here is an example. If you're trying to remember who won the World Cup last year, you might get this Google result:

screen_shot_20150812_at_14_29_14

If you click on that down-arrow that Google provides for the "roster and overview," you get a capsule on the German team. That might be all you need, and Google believes this is so useful it might save you a click. The problem is that a few months ago that click might have gone to Wikipedia.

Several information aggregation companies are suffering from this, most notably Yelp. Yelp has repeatedly and loudly complained that Google's own promo boxes on the top of search engine results pages are siphoning traffic from better-quality sites that normally would have come top of the results. The issue is at the heart of the EU's investigation into whether Google is abusing its monopoly in Europe to favour its own properties and distort the market for search traffic on competing sites.

We're not saying that's what is happening to Wikipedia. But it's certainly an unfortunate coincidence.

*Update: Since this post was published, Wikipedia founder Jimmy Wales has contested Similar Web's statistics on the "sudden" loss of traffic from Google to Wikipedia. Read the update here. 

Aug. 11 2015 5:18 PM

This Million-Dollar Startup Shut Down Overnight—and Fired 400 Employees Over Email

This post originally appeared on Business Insider.

In the middle of the night, a startup that had raised $5.5 million dissolved and disappeared. It deleted its Twitter accounts, Facebook pages, and Google+ profile. It changed its website to say it was "pausing operations."

At 1:34 a.m. PT on Monday, Zirtual, a virtual-assistant company, sent an email to all of its employees saying it had ceased operations, effective immediately. A follow-up note to its clients said it was "pausing operations" to reorganize its structure. The news stung because there was no warning from the company, according to several former employees who spoke with Business Insider. The company and its CEO, Maren Kate Donovan, did not respond to requests for comment on this article.

Even 13 hours before it shut down, Zirtual was still accepting sign ups and the money that came with them, according to Aaron Weber, who posted photos of his short-lived run with Zirtual on Twitter.

Donovan, the company's CEO and co-founder, had just written three weeks ago in Fortune about the need for transparency during a company shift, saying employees needed time to adjust:

Because what my employees don't know could ultimately hurt the entire business. The sooner your team knows about upcoming shifts in the company—the better.
Additionally, give your employees ample time to adjust, as change in a company can often lead to people feeling unstable in their positions. And be transparent.

Yet Monday's email was not a warning to employees, but a door slammed in their face. Employees said they felt blindsided and not prepared for the news, according to the employees Business Insider spoke with and the outpouring of shock on Twitter.

"I woke up this morning thinking it was a normal Monday morning. I was going to wake up, have my coffee, and have my weekly morning call with my client," Carol Murrah, who had worked for Zirtual for two and a half years, told Business Insider. Before Murrah had a chance to read the email, the client broke the news over the phone as Murrah tried to fire up her computer and found herself locked out. "I always knew I was going to get my paycheck, until today," Murrah said. "I expected to get paid this Friday, and that's not happening."

Former employees told Business Insider the company had been on a rapid hiring spree during the past 18 months, ballooning its numbers from around 150 to the 400 employees it laid off Monday. 

In an interview on Friday with Jason Calacanis—who is also an investor in the company—on "This Week in Startups," Donovan said the hardest part of scaling Zirtual was "growth capital.”

"Since we're employees versus contractors, it's hiring ahead, building out this stuff," Donovan said of the challenges, just three days before the startup shut down. "It's seeing the future and playing the game right now.” 

Over the past few months, work had slowed from some of its virtual assistants, but many thought it was because of the summer vacation season. "In the last two months or so, work has slowed down significantly," Murrah said. "We were pretty confused as to why. We weren't having client cancellations. We were never once told that was something to worry about."

For employees, it seemed as if growth was on the up-and-up, according to several virtual assistants we spoke with. Donovan's monthly "state of the union" emails never hinted at problems, and there was even talk of gradually raising the minimum wage of virtual assistants to $15 an hour from $11. Zirtual was beta-testing a teams product that could allow whole teams to sign up.

"We were looking at it as, 'Oh, there's progression, we're growing,'" Daniell Wells, a virtual assistant who was with the company since February, told Business Insider.

In the end, it's unclear why Zirtual has shut down, though it's clear it was in haste. While the company had raised $5.5 million, all of its rounds after seed funding were debt rounds, including one at the end of July. 

When it started, Zirtual was a personal, virtual concierge service that charged only $99 a month for unlimited tasks, Donovan said on the show. The company has been loyal to some of those plans, though, and that may have cost it. "A completely unsustainable business model, but we still have some legacy plans that are sticking around," Donovan told Calacanis. "We grandfathered a crap-ton of stuff."

Calacanis, who had interviewed Donovan on Friday, said on Twitter he found out as an investor that there were problems only on Saturday, though he hopes it can make a comeback. Calacanis did not immediately respond to requests for comment.

While some may be more positive about a restart, the shock is still fresh for those who lost their jobs. Wells said they had received only the notice of the company ceasing operations, but no other massive direct communication from leadership. Important information regarding things such as severance and health insurance is still unresolved. Former employees said they didn't know whether Zirtual would even be able to make this Friday's paycheck for the employees' last week of work.

Despite the lack of communication from leadership, former employees have created a Facebook group and a Slack team so they can stay in touch and share what little information they have received. They are scrambling to educate themselves on how to be come 1099 contractors, how to get in touch with old clients and how to rebuild their careers.

"There are 400 employees who were given the notice this morning," Wells said. "They are all available for work. It was a really poor move. I'm at a loss for words.”

Aug. 10 2015 1:41 PM

Android Phone Manufacturer HTC Is Collapsing, and This Stat Is All You Need to Understand Why

This post originally appeared on Business Insider.

HTC's stock has sunk so low that its entire market capitalization is now worth less than the cash it has in the bank. In layman's terms, that means that if you could theoretically acquire all the shares of HTC, it would cost you less than the cash HTC holds—meaning HTC would effectively be paying you to acquire the entire company. In investors' terms, it means people think the company is essentially worthless.

That seems counterintuitive. Back in 2008, HTC sold more smartphones worldwide than Samsung did. It was the biggest Android seller on the planet. HTC isn't a leader now by any stretch, but it still makes one of the best Android phones on the market, the HTC One M9, which has gotten across-the-board good reviews. It has a 3.4 percent market share in the US. Again, not massive, but the phone business is huge, and 3.4 percent is a decent enough chunk to build a business with.

So why has HTC's stock crashed so low that the company now looks ripe for a hostile takeover by investors who simply want that cash? This one statistic tells you all you need to know about why the Android business is so brutal: The Android manufacturer LG makes an average profit of only 1.2 cents per phone. A penny per phone!

That number comes from LG, which reported results in July. HTC's numbers will be slightly different, but they will not be much different. HTC runs at a loss, which means HTC spends more to make a single phone than it can get by selling it. HTC is basically paying people to take its phones right now. That has had this effect on HTC stock:

screen_shot_20150810_at_10_54_18

Yahoo

It won't get better soon, either. Android manufacturers are in a price war against one another. Androids are only getting cheaper. Google for instance is relaunching Android One in India at just $50. Samsung has the exact same problem as HTC. The Galaxy S6 (and S6 Edge) and its coming Note 5 look like some of the best phones ever made. Yet Samsung's second-quarter results looked like this: Sales dropped 7% from 52.35 trillion won in Q2 2014 to 48.54 trillion won today.

All the Android makers are struggling with the basic problem seen in the below graphic showing the various Android phones on the market:

screen_shot_20150807_at_09.04.34

OpenSignal

That is a ridiculous number of different Android devices. Nobody needs that level of choice. 

If you go to OpenSignal, the site that published this chart, you'll find it is interactive. Wave your mouse over the little squares and it will tell you which device each square represents. Some of these units are bonkers: HTC sells the HTC One, HTC One M8, HTC One X, HTC One XL, HTC One Mini, and so on and so forth. Nearly 50 different models, of which 49 are also-rans. And it's competing against Samsung, which has even more models you've never heard of.

Android makers seem to think the best way to succeed is just to make as many different types of slightly incrementally different devices as possible and hope for the best. So one way to interpret HTC's fortunes is to say there is an obvious level of overcapacity in the Android business, and it is time to see some consolidation. Some of these companies need to die. About 90 percent of all their brands need to be killed. Android companies need to concentrate on making one or two really excellent phones and tablets and let the devil take the hindmost.

It looks as if HTC may be the first to go.

Aug. 6 2015 4:27 PM

Is Tesla Shooting Itself in the Foot by Refusing to Raise More Capital?

This post originally appeared in Business Insider.

Tesla is unlike any other car company on Earth. It's much closer to being a technology company, and not just because it's based in Silicon Valley and has a member of the PayPal mafia in Elon Musk as its CEO. 

Tesla-as-a-tech-company has always been a big part of the company's story, but there's one way that Tesla doesn't want to be like a tech company. This came to head when the electric car maker reported second-quarter earnings on Wednesday.

Tesla doesn't want to raise money by selling shares. There's a mounting sense among analysts that Tesla will have to do an equity raise, given the rate at which it's burning through cash. This from the company's Q2 investor letter:

Cash and cash equivalents were $1.15 billion at the end of the quarter, down $359 million sequentially, as capital expenditures were $405 million in the quarter. Capital expenditures were primarily for the capacity expansion and tooling associated with Model X and all-wheel drive vehicles, as well as for the construction of the Gigafactory. We have historically been frugal with our capital spending, and our most recent capital spend per unit of incremental capacity is significantly more efficient than even our prior performance. In Q2, we closed a $500 million asset based credit line that can be expanded to $750 million. This line is collateralized by selected inventory, equipment and accounts receivable, and is specifically designed to provide us both increased liquidity as we ramp Model X deliveries and operating flexibility to expand all aspects of our business. We drew $50 million under this line in Q2.

Tesla executives expressed a lot of confidence that the cash position won't be a problem in 2015, but it's important to remember that this is a company that's aiming to build close to twice as may cars as it did in 2014, and that will be launching a new vehicle, the Model X SUV, in the next two months.

A lot of people think that Tesla should do an equity raise now, while the stock is still trading at stratospheric levels (even though it's getting crushed in trading on Thursday, due to lower guidance on 2015 vehicle deliveries, it's still up monumentally over the past two years).

The idea is that with shares near historic highs—and with some analysts arguing that Tesla's future growth is baked into the current price levels—the stock is poised for a slide as the business gets tougher to manage over the next 18 months and executing on the master plan runs into speedbumps. 

Many tech companies obviously love to raise money. But Tesla is both a maturing operation and one that already staged its major "equity event"—its 2010 IPO. Anyone who bought in back then has seen a return of over 1,000 percent on their initial appetite for risk (assuming they hung onto the stock). But this isn't an early stage tech company anymore.

Tesla did a secondary offering in 2013, when the company was just beginning to roll out the Model S sedan and was still paying off a $465-million loan from the Department of Energy. But that was a period when cash flowing into the company was uncertain.

Selling a $100,000 luxury sedan has enabled Tesla to improve revenues substantially, but the company has upped the ante on its ambitions at the same time. For example, back in 2013, there wasn't a $5-billion Gigafactory under construction in Nevada. Tesla is now constructing that facility to provide enough lithium-ion battery cells to power 500,000 cars by 2020.

Over the past year, Tesla has repeatedly declared that it doesn't see the need to sell shares to raise money. However, on Thursday's earnings call, Musk softened that position a bit in an exchange with Bank of America Merrill Lynch auto analyst John Murphy (thanks to Seeking Alpha for the transcript). 

"[W]hen you look at the cash burn and how the capital market sometimes shift very quickly, it just seems like an opportune time to take advantage of what you might need in the future, so that's why we're asking," Murphy said. "[W]e're in the same sort of mind frame as you are," Musk responded. 

But Musk only wants to raise capital as a "risk reduction measure," as he put it. Both he and outgoing CFO Deepak Ahuja stressed that they expect Tesla to end 2015 with $1 billion in the bank. That said, no one is more aware of Tesla's stock value than Musk, who owns a huge amount of it.

Not everyone thinks a capital raise is warranted. Jefferies analyst Dan Dolev published a research note after Tesla earnings in which he observed that "[c]ash flow from operations was once again sharply negative in 2Q for the fifth consecutive quarter" and pointed out that this "once again raised concerns that Tesla may need to raise equity." But he added that Tesla hasn't yet cut into its credit line very much and anticipated that the company's cash position would improve meaningfully in 2016 as it picks up the pace of Model X deliveries.

Dolev's expectations align with Musk and his management team's. The Tesla story is changing and has been changing since last year. Musk wants to run the company less like a fast-growth tech company and more like a game-changing automaker that happens to be very, very good at integrating state-of-the-art technology into its vehicles. 

In that sense, it's symbolically and practically essential that Tesla manages its cash and debt without relying on high-flying equity lifelines. The need to be government-supported is in Tesla's past. The early investors have collected their reward. Now Tesla needs to build cars, sell cars, and become a company that's funded by its satisfied customers.

Aug. 5 2015 4:20 PM

Uber Is Losing Lots and Lots of Money, Leaked Documents Show. Shocker.

This post originally appeared on Business Insider.

Uber has traditionally been tight-lipped about its finances, but a new leaked document obtained by Gawker's Sam Biddle suggests the $50 billion company is wildly unprofitable.

That's not exactly surprising. And it certainly doesn't mean the company is in any grave danger. Many tech companies that raise a lot of money aren't profitable, and many go public while they're in the red. Just look at Amazon.

But the documents Biddle obtained, which seem to show Uber's profits and losses for 2012, 2013 and some of 2014, suggest the company is losing a significant amount per year.

“Shock, horror, Uber makes a loss. This is hardly news and old news at that," Uber told Business Insider in a statement. "It’s the case of business 101: you raise money, you invest money, you grow (hopefully), you make a profit and that generates a return for investors."

Uber's net revenue in the first and second quarters of 2013 was a combined $32 million, according to the document, and its numbers for the second half of the year were about $72 million, bringing its 2013 annual revenue to $104 million in total. In this case, Uber's net revenue is the amount the company keeps from each ride, not how much each ride actually costs with the driver's cut in it.

In the first and second quarters of 2014, the documents show Uber generating about $102 million, nearly as much as the entire year prior. Gawker's documents also show that while the company's revenue has been growing quarter over quarter, its losses are also increasing. Its losses in 2012, according to Biddle, totaled $20.4 million. In the first half of 2013 the company lost more than $15 million. 

A lot of the operational costs come from marketing, research and development, and administrative services. The company has raised more than $6 billion from investors to compete in international markets like India and China and to push new products like its carpooling service, Uber Pool.

Another internal Uber document obtained by Business Insider from early 2014 suggested that an annual run rate for Uber's top five markets (NYC, D.C., San Francisco, Chicago, and Los Angeles) would generate about $1 billion a year for the company in 2014. And in some of those cities, Uber is profitable. 

Revenue estimates for Uber suggested Uber could generate $1.5 billion to $2 billion of gross revenue this year. There is no 2015 financial information in the documents Gawker obtained, so the data is a bit out of date.

Aug. 4 2015 4:37 PM

Sears Is Losing Its Dominance Over American Retail. Does It Have a Hope of Regaining It?

This post originally appeared on Business Insider.

Sears used to rule American retail. But the troubled retailer's sales are continuing to decline, falling nearly 14 percent in the most recent quarter. Shares at Sears Holding Corp. are at a multiyear low, and the brand is continuing to close stores.

The most troubling sign of all? Sears isn't trying to get better, Steven Azarbad, chief investment officer at Maglan Capital and an expert in distressed retail companies, told Business Insider.

"How many more quarters of negative sales can you handle as a business without being forced to close?" Azarbad said. "They're not pumping cash into turning this into a real retailer or business, and merchandise looks sparse for the most part."

The company, which also includes Kmart stores, has lost more than $6 billion since 2012. "It's hard to come up with a reason why Sears and Kmart need to exist in today's environment," Azarbad said. "It's hard to imagine them ever being a destination retailer."

The collapse of Sears and Kmart is "inevitable" and could happen by the year 2016, retail analyst and author Robin Lewis writes on his blog. "These two retail brands are dead men walking," Lewis writes. Lewis believes Sears Holdings' inevitable decline started decades ago. 

He says executives spent too much time investing in side businesses and ignored the competition. "This did not have to be fatal; however, it actually starved those resources (capital and management) from the retail business, leaving it unable to respond and adapt to the needs of the evolving consumer and marketplace," Lewis writes.

To offset losses in the retail department, the company is planning to build up its e-commerce and make the most of its extensive real-estate properties. The company raised $3 billion this year by spinning off some of its real-estate properties.

But Azarbad said the company would most likely burn through the cash quickly. "The lack of investments into the business is troubling for the future," he said. We've reached out to Sears for comment and will update if we hear back.

Aug. 3 2015 4:44 PM

Abercrombie’s Trying to Ditch Its Preppy Image. That May Not Fix Its Problems.

This post originally appeared on Business Insider.

Being nice isn't always a good thing. As teen customers continue to flee the brand, Abercrombie has taken several steps to change its image and tone down its sexy advertisements. The company has been criticized in the past for its promiscuous ads and excluding customers who weren't toned and preppy. Former CEO Mike Jeffries gained widespread attention when he said he only wanted the "cool kids" to shop at Abercrombie. Since then, the company has made strides by advocating anti-bullying campaigns and offering larger sizes.

But Abercrombie's all-important teen customers may be bored by the brand as a result, and according to one brand expert the company's attempts to become nicer may be more detrimental than beneficial.

"Abercrombie has removed their brand differentiation from what it used to be, and by trying to be nice—or maybe, more kosher—[concerned with the] sensitivity of the Americans," Erich Joachimsthaler, CEO and founder of Vivaldi Partners, told Business Insider. "I think that has made Abercrombie bland."

Not everyone liked Abercrombie, but one thing was certain about the brand: It had a target customer. "Abercrombie & Fitch had built on [a] particular customer, a particular consumer ... they didn't like anybody ... [former CEO Mike Jeffries] said he [didn't] want to market to everyone," he said. "So I think that's very important—if you don't stand for something, you fall for anything. And what you see right now ... Abercrombie, what they've done, is they're in eternal drift mode."

Abercrombie's lack of a brand identity is evident on its website, too, with dresses that resemble those from its fast-fashion competitors, components of athleisure, and its namesake shirts with the company name emblazoned across the chest. This alleged lack of brand identity could confuse customers, Joachimsthaler said.

Abercrombie's notorious "look" policy forced upon employees has landed the company a class-action lawsuit and a lost Supreme Court case. Earlier this year, Abercrombie softened its "look" policy.

So while the brand may no longer be offending people as frequently as it used to, it's not doing anything at all—which might be worse, as Joachimsthaler hugely advocates brand differentiation. "If you think about it, everything that made them different, they have removed," he said. "But they haven't replaced it with anything.”

July 31 2015 3:57 PM

Housing in San Francisco Is So Expensive, This Guy Is Now Renting Out Shipping Containers

This post originally appeared on Business Insider.

It’s no secret that San Francisco housing prices have shot through the roof. A home with a mummified corpse in it sold for over a million dollars. And real-estate marketplace Zumper rates San Francisco as officially the most expensive rental market in the country. Last month, there was even a listing for a tent going for $899 (or $46 per day) per month in Silicon Valley.

But this might be the surest sign of all that the Bay Area housing market has gone completely haywire: a Wharton grad is trying to get people to live (illegally) in converted shipping containers. Luke Iseman, 31, leases a 17,000-square-foot warehouse in Oakland in which he has built 11 micro residences out of cargo containers, Bloomberg reports. He charges $1,000 per months for each of the makeshift homes, which aren’t legal, strictly speaking. Iseman and his “cargotopia” (as he calls it) have been chased from two other locations by the authorities. But that hasn’t dampened his spirit.

“It’s not making us much money yet, but it allows us to live in the Bay Area, which is a feat,” Iseman told Bloomberg. “We have an opportunity here to create a new model for urban development that’s more sustainable, more affordable and more enjoyable.” On Iseman’s website, he lays out the cargotopia manifesto: “We're living in a solar-powered, sustainable home we built for less than the cost of a car. Chickens in the yard, fast internet, occasionally-alive gardens, and providing affordable homes for our friends: it's getting harder and harder to consider our sustainability a sacrifice.”

Compared to paying $4,200 a month in San Francisco for a lousy two-bedroom apartment, which Iseman told Bloomberg used to be his abode, cargotopia does sound like a certain type of dream. And who are the tenants that share in this dream? According to Bloomberg, the residents of Iseman’s bohemian village range from a Facebook engineer to a bicycle messenger.

Iseman has plans to monetize his adventure through his website, Boxouse. On Boxouse, he sells fully furnished box houses (for $20,000), DIY kits, and building plans. Now he just needs the box living revolution to catch on. And as to getting approval from the government for cargotopia: “I’d rather ask forgiveness than ask permission,” he told Bloomberg.

Watch a film about the project by Kirsten Dirksen below:

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