Retail reckoning, playbooks—and hello again.

Back at it after a busy season.

DTC Recalibration, Reckoning and Rightsizing

Those of you who are new here–welcome! You should know that I publish sporadically; you know, in my free time (ha!). And sometimes when a topic becomes so noisy for the brands we work with at rekon Retail™ and in the DTC zeitgeist as a whole, it can’t be ignored. I’ve been ruminating on this one for a while now, and apparently have a lot to say, so please enjoy!

It feels like every other week some DTC darling of yesteryear is announcing bankruptcies, layoffs, and store closures. Outdoor Voices, Lunya, and Allbirds all recently made such announcements. Growth-at-all-costs is out—profitability and sustainability are in—or are they? 

If you feel like you’ve heard this number before—you have. Check out these articles from yesteryear:

From 2018: “The challenge for DTC brands is to figure out a path to profitability”

From 2020: “Warby Parker, Allbirds and Why DTC Brands Still Can’t Scale Profitably”

What’s going on here? Are our memories really so short? Well, sort of. I believe that back in 2018 investors, VC firms, analysts, and savvy consumers were on their way to concluding that profitability > topline (read: hockey stick) growth. 

Then we had this bizarre time where consumers turned their attention to sourdough starter, Tiger Kings, and more athleisure than a single person should ever own. Ecommerce soared. Physical retail was pronounced dead (again–heard that one before). Consumer spending habits were forever changed. There’s no way they’d trade shopping from their sofas for shopping in a store again. 

But they did. By late 2021-early 2022 opportunistic brands were executing aggressive retail expansions. Brands like Tecovas, Faherty, Untuckit and Alo Yoga all took advantage of favorable lease terms during this timeframe. Meanwhile, the aforementioned DTC brands that had paid a premium for space were HODL hoping consumers would return to their stores.

Which brings us to the current situation in the DTC physical retail cycle. Brands that over extended, over paid, and/or lacked the infrastructure to support physical retail in a scalable way are now out of time and out of capital. 

This is not a referendum on physical retail as a viable growth channel, but rather a validation protocol to test a brand’s infrastructure and agility.

Profitability and sustainability > than topline growth. 

Let’s see how long it takes to forget this time.

Curious if retail stores are right for you?

ICYMI

I’m hosting a webinar with my friends at Quirk Creative and Media Design Group on Thursday June 20th! In it we will discuss how brands can evolve advertising and media strategies to ensure growth. Register here.

I had the pleasure of contributing to Shops Around The Corner’s Shopkeeper Chronicles series. I highlighted one of rekon’s tastiest clients: Bloomy Cheese and Provisions. Read the article and be sure to visit if you are ever in the Dobbs Ferry area!

Though it was a while ago, I’d be remiss if I didn’t mention my friend Nate Rosen and our co-written article in his newsletter Express Checkout (be sure to subscribe). We teamed up to write about Bloomingdales’ iconic brown bag turning 50! Some really interesting history in this one for all of us retail enthusiasts.  

Rekon Operations Partner, Libby Shani, spoke with our friends at Endear about best in class retail tech for DTC and growing brands. Get the guide here.

Is there actually a DTC Retail Entry Playbook? 

“We want to be the Warby Parker of insert industry ripe for disruption here” or “Apple does xyz thing in their stores, so we should too.” 

“We just need their Playbook.”

I hear various versions of the above A LOT.

These statements are totally understandable coming from brands that have never had stores before. Of course the success of Warby Parker as one of the first DTC brands is worthy of admiration (though it is worth noting the brand is still not profitable). And who wouldn’t want to imitate the exceptional design and customer service one experiences at an Apple store? It is logical and even prudent to want to imitate in order to replicate the success of others.

But let’s get a few things straight—there is no retail entry Playbook that guarantees success if followed to the letter.

There. I said it. Don’t shoot the messenger.

While this notion is really appealing, it’s simply not a thing. Here’s why:

These brands came up in a different time. In 2001, when Apple launched its first store (actually there were twin openings on the same day—both in suburban malls) consumer behavior was very different. There was no iPhone, no app store, no facebook/meta, insta, snap, or tiktoc. The reason why Apple has continued to thrive–largely in part due to the success of its retail stores–is because it has allowed itself to evolve over time. The “Playbook” has evolved, but the principles have not.

But Apple isn’t a DTC brand you might say. Okay. Let’s look at Warby Parker–arguably the quintessential disruptor DTC brand. Warby Parker opened its first permanent store in NYC on Greene Street in 2013. This, however, was preceded by the Class Trip, which was preceded by the Holiday Spectacle Bazaar, which was preceded by Neil Blumenthal literally inviting customers to his Boston flat to peruse glasses at his dining room table. 

The same argument applies here. Nearly a decade ago, less than 1% of eyewear sales were made online, retail leases were structured differently, and facebook ads were cheap and incredibly effective.

This “Playbook” would not work today. 

So, what’s an emerging DTC brand to do?

Instead of looking at replicating the specific “plays”, let’s instead look at retail entry Principles. 

Think of these as truisms. They are not rigid, but rather should guide new-to-retail brands on their expansion journey. Use these to build your “Playbook” if you must, but beware of becoming overly enamored with running the perfect plays.

Principle #1: Listening is more valuable than telling.

Brands born online are great at telling. It’s all they’ve ever done, really. They tell their story though a website, hire influencers to reinforce that story on social media, and place digital ads on various platforms—all with important brand-building messaging. But it isn’t until they have a physical place where customers can visit, experience and interact, that they are actually able to listen.

Yes, the store needs to be a continuation of that brand story, but the real power of retail doesn’t come from the brand—it comes from the customers. The store is the most valuable customer focus group a brand has if it has the fortitude to use it as such. Visiting stores to observe customer interactions, speak with frontline team members, and talk directly with customers will have a higher yield than any Forrester Research deck will.

Principle #2: Don’t let perfect be the enemy of good.

Whether a brand is going from zero to one, or from 100 to 101, outside forces are always thrusting change into any organization. Once a brand has moved into the physical realm, its ability to remain agile and react quickly becomes just a little harder. Instead of changing a line of code or an image in an ad, now an entire system needs to be ripped and replaced, or the whole store team needs to be retrained. In order to remain adaptable and move fast, things get a little blurry–and that’s okay.

I’ll tell you a secret that you already know: no one will notice as long as the overall experience—which is 90% human interaction—is great. Which brings me to my next principle…

Principle #3: A team is the sum of its parts.

Should a new-to-retail brand hire an ultra experienced former multi-unit leader from Nike to run its first store? Should it go with the long-time store manager with a proven track record of successful stores who is ready for their next step? 

A lot of emphasis is placed on the initial retail leadership hire–for good reason. This person will set the tone and hopefully grow with the brand’s retail channel as both a leader and strategist. But there’s one thing that’s true no matter what: they are still just one person. Which is why the frontline team and key HQ support is critical to the success of the retail store–even with the most seasoned retail leader at the helm.

The composition of the retail team shouldn't just be based on which brands candidates worked for previously, but also on how the individual’s skillset is additive to the team as a whole. For example, if the first general manager hire has a deep background in operations, logistics and inventory management, the other critical skill sets like grassroots marketing, customer service/clienteling, visual merchandising, and team leadership should be rounded out in the rest of the team. Of course everyone does a bit of everything, but typically people have one or two areas where they are particularly strong. 

To think that hiring the right leader automatically leads to the success of the store is a fallacy. It is a strong team as a whole that leads to success.

Principle #4: Failure is inevitable—then what?

What?! (clutches pearls)

I’m supposed to tell you that if you do all of the above, your stores will always be successful, right? If that were the case there would be far less main street vacancies and I would be on a permanent vacation.

But the truth is, even when a brand has done its homework, knows (or thinks it knows) its customer, gets the best leasing deal, and hires an experienced team, sometimes things don’t go as planned. Story time:

I worked with a brand several years ago to open a store in a new market. It was a tertiary market for them, but they already had successful locations in their top 10 markets. They found a great space in the neighborhood where the data said their customers were—rent wasn’t terrible as it was just off of the main high street. They also transplanted an experienced store manager from an existing store and hired a team with great customer service.

But it was still an untested market. And it failed. Foot traffic was abysmal and no amount of marketing efforts seemed to make a material difference. So we pivoted. We overhauled the labor model, changed store hours, and made huge efforts to get out into the community to drive traffic. The store became barely profitable and stayed that way until the lease was up. Then it closed.

I’m not telling this story to scare anyone. I’m telling it to say that if you open enough stores, some will inevitably be duds. Hopefully not the first one–but it will happen eventually.

This doesn’t mean retail as a channel is a failure or doesn’t work. It simply means we’re not magicians or mediums. We cannot predict the future or make people shop where they don’t want to.

I learned so much from that failed store. How to make operations tight. How to adjust labor spend while still giving a great customer experience every time. How to quickly enact field marketing and community engagement efforts.

And when the store reopened on a better trafficked street, all of those learnings came into play.

Because: Evaluated failure is far more valuable than accidental success.

And because Retail is Alive®

Curious about opening stores?

Considering opening or expanding owned stores? Book a brand needs consultation here.

We have a few spots left this year for our Retail Readiness Audit and Roadmap offering. If you’re on the fence about retail or aren’t sure if you’re ready, this is for you! Book time with me to learn more.

Recent Press and Appearances 

Why Direct-To-Consumer Companies Like Casper, Allbirds And Peloton Are All Struggling–CNBC Digital

Building Retail Right–Future Commerce (Podcast)

Retail Therapy: The 'Verses' - Exploring AR, VR, and Everything in Between–Retail Cloud Alliance (Audio Podcast)