The retail landscape continues to shift, evolve, and transform. As brands began launching solely with e-commerce — and without opening physical storefronts — and large retailers closed doors of flagship stores, consumers wondered if e-tail was the future and would replace bricks & mortar stores altogether.
And, this shift in strategy isn’t just occurring in apparel and retail; according to a New Hope survey among 300 brands, 50% of natural & organic food and beverage brands entering the market in 2015-2018 started in e-commerce. This shift shows the launch power that e-commerce has gained vs. brick and mortar.
What busts the myth of the “Retail Apocalypse” is that many successful direct to consumer (DTC) brands that start with e-commerce are later leaning into brick & mortar, leveraging the data and learnings they receive through e-commerce to develop a more integrated experience. The value of a DTC business model is that the barriers to entry are lower and they can build, test, and learn from the onset and then apply the learnings from their tests strategically and profitably.
Michael Preysman, The CEO of Everlane, recently shared that the clothing retailer has used its DTC business model to learn from its core customers and figure out where and how to best meet their needs.
“With retail, when we move to customer first, we get to figure out which channel is right and do the right thing for the customer and be profitable,” he said in the CNBC article.
Preysman shared that the “dirty secret” of e-commerce is that the costs are higher than people think. While there are savings in not having to pay rent or buy real estate, acquiring customers does cost money. Without a physical space to draw them in, online ads and social media product placements are essential. And, customers have come to expect free shipping and generous return policies from online retailers, which also adds expense and makes it challenging for e-commerce to be profitable. Everlane launched online in 2010 has since strategically opened four stores and has plans to set up shop in eight additional locations in 2020, meeting customers where they are which Everlane has discovered from the online relationships it has developed with them.
Other examples no doubt include Warby Parker and Casper — brands that launched with DTC business models — disrupted the eyewear and mattress industries respectively. These digitally-native brands quickly developed connections with their consumers as they were engaged in communication with them throughout the shopping journey.
Their digital platforms lent themselves to gathering relevant consumer data and garnering customer reviews swiftly. The relationships often extended beyond the brand website to other social media platforms where consumers were invited to share their experiences with others. As they scaled their businesses, these digital natives leveraged their consumer relationships and added touchpoints to drive traffic into subsequent bricks & mortar store locations. Today, Warby Parker has over 100 storefronts and Casper has its own branded stores plus a partnership which sells Casper products in an additional 1,000 Target locations.
We’ve seen more and more traditional BigCos take a DTC, e-commerce first approach to launching new products. Just recently, Nestle announced that they are launching a luxury Kit Kat, available only online and at specialty pop up stores. What can you learn from digital natives? How can you apply it to the way you test and learn on your products in the pipeline? How can you continue to learn from consumers even after you’ve “launched” your idea before scaling in traditional retail?