How d-to-c retailers can scale their businesses
Direct-to-consumer retailers have said it before and they’ll say it again—one of the biggest obstacles to the startup model is scaling the business. While brands have adopted a variety of strategies to grow, including diversifying into new marketing channels and taking on a brick-and-mortar location, there is no secret playbook to follow. This was clear at a Reinventing Retail panel Monday afternoon at Advertising Week, during which d-to-c brands hashed out the pros and cons of performance and brand marketing, and discussed when physical retail enters the equation.
“There’s a low moat—anyone can jump in and start a brand,” said Nate Checketts, co-founder and CEO of Rhone, a performance menswear brand, to the packed audience. “It’s easier than ever before to build a $5 million, $10 million business. But it’s harder to go from there to a billion-dollar brand for the same reason.”
It’s a topic that was explored at Ad Age’s own d-to-c-focused conference earlier this month, as brands such as Boll & Branch discussed a diverse marketing mix.
Similarly, Bombas, a sock brand with a charitable component, has found success by growing into TV advertising, according to Co-founder and CEO David Heath, who also noted that Facebook still represents 40 percent of the brand’s media mix. Until now, all marketing has been performance-based—Bombas plans to grow into brand marketing next year but only because there is enough cash on the balance sheet to do so, Heath said.
“Early stage should be 100 percent performance marketing,” he noted. “I wouldn’t risk early capital on stuff [like brand marketing.]”
Melissa Mash, co-founder and CEO of Dagne Dover, a brand that sells functional accessories, said a SoHo pop-up helped scale the six-year-old business, which has since expanded to wholesale at Nordstrom. The shop serves a variety of functions—it’s a testing ground for how to merchandize, it’s a billboard for passersby, and it’s a point-of-sale. A quarter of the traffic that visits the store converts to sales, Mash said.
Similarly, Checketts said that even if only a small percentage of people who visit a brand’s store buy the product, the brand can still benefit from such visits by collecting data and learning more about its customers.
“Two things that drive retail success are location and the people in the store,” he said.