Of course not (for now). But for VC-funded D2C brands, there are divergent paths being walked in plain sight.
Path one: The Shave
Tristan Walker, owner of Walker and Company, is much savvier than the hardcore tech press gives him credit for. And I think he is building a billion dollar company (sorry Richie). One thing that he understands is that to build a D2C brand in this decade: scarcity and data are key components of the strategy.
Target currently sells Harry’s and Bevel, two early DNVB’s that are wholly considered D2C despite what appears to be a diminished sense of scarcity. I’ll go out on a limb here and say that the customer data that Target provides will more than justify the slimmer margins. The data that Target provides may also make up for that just-average brand impression that can only be perfectly cultivated by an online-only customer service process or brand-owned storefront (thinkMinistry of Supply, Allbirds, or early-Bonobos).
The con: risk of under-scaling
The pro: data, brand mystique, and the tech valuation multiple.
Walker is currently cloning this strategy for his new brand (Form Beauty) by launching the brand’s retail presence in Sephora. By emphasizing data collection, he will own consumer tendencies, email, and product association habits that will influence the brand for years to come.
This is all consequential as narrowing the sales channels and maintaining a focus on data science will ultimately increase the valuation of the company over time.
Path two: The Pants
There is another approach for D2C brands and it is more common in fashion retail than CPG retail. A successful eCommerce mentor of mine used to emphasize the following: “an eCommerce company has no salespeople.” But by de-emphasizing the longterm potential of data-driven eCommerce ops, D2C brands are able to generate working capital by selling into any channel that fits the character of the brand. The model emphasizes wholesaling products with the hope of driving consumers to the web store for their following purchases.
The con: little to no consumer purchase data to direct that follow up purchase, risk of over-scaling, slimmer margins, retail valuation multiple.
The pro: consumers can touch the products, scale, cash flow, ground troops (store owners), the longterm build to becoming a luxury brand needs this approach.
You will see this with brands like Herschel, Shinola, and Greats. Ralph Lifshitz pioneered this approach nearly 50 years ago. In Columbus, Ohio: you can experience Shinola in Nordstrom, The Ohio State bookstore, Peabody Papers, and the Columbus Museum of Art. This keeps the brand at the top of the mind, even when you may not be looking to buy.
Two vastly different yet effective approaches to retail can only mean that retail isn’t dead, per se. There will always be urban menswear and women’s wear shops, museums, country clubs, etc. But long gone is the game when big box malls and strip mall developments were enough to keep a brand alive.
This is the opinion of Web Smith.
See more of the issue here.