Direct-to-consumer (DTC) brands have disrupted retail by slashing traditional overheads such as rent, expensive store fit-outs, marketing and salespeople to provide customers with higher quality product at a fraction of the price.
The strategy worked, and many have become multibillion-dollar companies. But, believe it or not, the most vexing problem keeping every DTC entrepreneur awake at night is finding customers. As DTC startups have proliferated in every category imaginable, the costs of marketing via Facebook and Google have risen exponentially. I’ve met with e-commerce brands who are currently spending hundreds of dollars on advertising to make a single sale, and the situation is only likely to worsen. As a consequence of sky-high customer acquisition costs, astronomical retail rents that are out of the range of most businesses now look too good to pass up for venture-backed startups with cash to throw around. The industry leaders have decided to do something that was totally unimaginable just a few years ago: They're opening physical stores at the exact moment retailers, both large and small, are struggling to survive.
Brands that don't innovate will not succeed in retail.
But here’s the problem: While physical stores are a step in the right direction, the way a lot of online-first brands are approaching retail feels awfully familiar. Retail has always meant lining the store walls with everything you sell. Stores are called “stores” because they were literally places where goods were kept for sale. Your store was created and centered around your products. You paid rent for access to a popular location. The concept has barely changed in centuries, and the DTC stores popping up all over our cities appear to be no exception. In my opinion, if DTC startups stick to the old retail playbook and don’t innovate, the physical store will be the place their thriving brands go to die. I’ve worked with countless legacy retail brands, and they’re all telling me the same thing: There’s no way to make the numbers work if you’re just treating your store as a sales point. You have to give as much value as possible to attract a customer and earn a sale, and the conventional retail model just doesn't do that anymore. Something needs to change if physical stores are to become a long-term source of growth for online-first brands.
Your store needs to be about your customer, not your product. It must become a popular location, not piggyback off one. Give without expectation, and your customers will recognize it and respond. Ask yourself if your store is really giving your customers something they can’t already get from their screens and devices. A physical store isn’t a billboard; it’s a place designed to provide real value to your customers an — experience that will make them want to talk about the brand. In order to illustrate what a unique store concept would look like for a leading DTC brand, let’s take Dollar Shave Club, the well-known DTC brand that delivers subscription razors. Moving into a retail space could mean that the brand becomes more than a place where customers can see the products before they buy them — more than where you go to see a razor, pick it up and look at it sitting coolly on the shelves. What if the store included a barbershop, where customers could meet up with friends, have a haircut and a shave with the very products they would be buying and chat with the people who were selling them the products? Maybe it could include a free beer on the first cut. There might not even be sales of the product in-store; it could literally just be a barbershop. Here’s the really exciting thing. The function of the store today isn’t actually retailing at all. It’s about activating people’s belief in the product and trust in the people behind it. It’s about explaining your product without pushing a sale, entertaining your customers, communicating your brand values efficiently with a one-on-one conversation and providing an experience. Through providing experiences for your customers, you’re designing the story you’d like them to share about your brand, not a place where you must sell a certain number of items every day to meet your quota. It requires trust and generosity, the essence of great customer service — going out of the way for your customers and developing genuine relationships without thinking about the payout. The store is the only place where your customers can meet face to face with the people working for the brand. If the brand’s message is clear throughout its workforce, each employee will be able to transmit it directly to the customers. A store is the perfect place for all this to happen. This idea is radical, but we need to provide what your website and Instagram can’t, which is the human side of your brand. What other way is there moving forward?
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