How would you react to losing up to 50% of your pay from your employer? And paying it to your employer!
Welcome to the insane world of RedBubble.
RedBubble is an extremely poorly managed company from Australia. This penny stock enterprise has seen its market valuation drop a staggering 95 percent in value and the best end game scenario is likely a bankruptcy sale of the company to competent owners.
RedBubble is an online marketplace of products. Third party artists create designs which are placed on products such as mugs and shirts which are made and shipped by other companies. RedBubble sets a base price, guaranteeing its profit from every sale. The artists add their margin and that is the price the customer pays. Customer buys a product, RedBubble profits, and its costs are sending the design to the production and shipping company and paying the artist their margin. Easy money, right? Not if you’re RedBubble.
Repeatedly battered in the courts for illegal practices, in early 2023 RedBubble fired 1 in 7 (14 percent) of its employees. Then it cut in half how many designs an artist could create each day. One would think if a company needs more revenue it would seek more designs and sales, or increase prices. Instead, management came up with the new and wonderful reverse Robinhood strategy of stealing from the artists it depends on.
Here is how it works …
Instead of raising its base product prices which should guarantee the company a profit on every sale, RedBubble instituted a “tiered” program for artists which imposes a fee starting at an incredible 50 percent of the artists profits. If an artist can generate more sales the fee gradually declines to about 18.5 percent.
To be clear, how this works is if RedBubble’s base price for a product is $10.00 (which again, presumably is profitable with RedBubble only paying 4 dollars for its manufacture) and an artist adding their 20% margin for creating the design and marketing material to sell the product, then from the $12 paid by the consumer the artist receives $2.00. With the new Reverse Robinhood Strategy RedBubble is now taking up to a half, or $1 away from the artist and giving it to itself. So instead of the artist receiving $2, they only get $1.
The vague “tiers” mean if an artist sells enough, and becomes a rockstar, then can move up a “tier” and eventually not have to pay any fee.
There is no standard for who pays a fee or not. RedBubble makes clear it is at their discretion and there are no standards. Basically, RedBubble is just stealing up to half of the artists profits – taking money from the artists and putting it in its pocket.
How does one know what tier they will be in? LOL. RedBubble says artists have to accept new legal terms agreeing not to sue the company just to find out! Run that sentence back in your brain a few times. Yes, it is like the infamous Obamacare reference to needing to pass the law to find out what is in it.
Commonly, when a business needs more money they increase prices paid by consumers. When the government needs more money it taxes the rich. There is little purpose in taxing the poor because the poor don’t have the money.
Here, RedBubble is taxing the poor, up to 50 percent of their earnings. Ouch.
But if you’re a Rock Star that RedBubble does not want to piss off and drive away, then there is no fee.
Ultimately, RedBubble’s service is going to keep dwindling as artists leave, decide not to submit new designs to the service, and future Rock Stars never materialize because of the new fee.
If you are wondering if this is a tried and true strategy for businesses to follow when they are in financial distress – it is not. I cannot think of any company who has ever done this. It’s bonkers.
Ironically, there are many marketplaces similar to RedBubble and their number keeps increasing. It’s not like artists are trapped into using RedBubble because of its overwhelming marketplace clout. Rather, RedBubble is getting clobbered by Amazon and upstart print on demand companies.
If you are an artist considering Redbubble just stop. Don’t. Go anywhere else.
If you are an investor thinking the stock can only go up after dropping 95% and suddenly the company’s bank account will be juiced from stealing money from artists, think again. There are no dividends being paid. Nothing the company is doing will increase sales. Instead, sales will drop. This is a desperate and incredibly ill-conceived idea from a poorly managed company. If management were better it would be seeking a sale and that could be a reason to get in a low price. Frankly, it wouldn’t surprise me if the company was shopped for a sale after the initial juice of stolen artist money makes the books temporarily look better, but I wouldn’t expect a premium value to be paid to this mess of a company that is circling the drain.
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