DTC

Tapped Out: What It Takes for DTCs to Thrive Now
Tapped Out: What It Takes for DTCs to Thrive Now 1440 428 ASG

At first, the DTC model seemed unstoppable.

Companies found they could cut out intermediaries like retailers and distributors to offer their products at lower prices. With greater control over their brand and product offerings, DTC companies could provide a personalized and convenient shopping experience. With a sea of customer data, DTCs have valuable insights into customer preferences, allowing them to also optimize product offerings and marketing strategies.

But now, the DTC model is coming into question. Let’s dig into what has changed for DTCs and learn why it’s not so easy to thrive now.

Stiffer competition: As the DTC model found its footing during the pandemic, more brands jumped into the game. But this crowded marketplace has made it difficult to stand out and new entrants have difficulty differentiating themselves enough to capture market share.

Scaling is tough: Whether the DTC is a slow burn or an overnight success, scaling the brand can be an impossible balance between speed to consumer and maintaining the level of product quality and customer experience that got the brand there in the first place.

Continued rising CAC: The cost of customer acquisition has continued to increase with the increases in marketing costs. CPC is often too high to reduce the cost of acquisition. According to a new study, CAC has risen 60% in the last five years.

Supply chain issues: DTCs, like every other retailer, rely on a myriad of solutions to move their products through production and into the hands of consumers. Every step along the way can be costly, with disruptions that can swiftly cause trouble for the brand.

Profitability Is elusive: The DTC model demands a lot of upfront investment – in product development, marketing, and customer acquisition as well as supply chain. Profitability can be slow to achieve, making it difficult for the brand to sustain long enough to get there.

How DTCs Can Strengthen their Brands

Building and scaling a strong brand and delivering an exceptional experience is the goal, but achieving profitability requires addressing challenges in new and innovative ways. Yes, DTCs need differentiation and cost control; they need operational excellence and agility; and they need to deliver an unmatched customer experience. But these are the results, not the actions.

What actions can DTCs take to improve viability?

As the market contracts and more DTCs are going under, the ones who are determined to survive will need to become experts in diversification, pivoting to in-person, embracing wholesale, right sizing their brand, and repositioning with agility.

How DTCs Can Strengthen their Brands

“I remember there was a time where we used to acquire customers for $16 per customer — I mean, it was kind of crazy,” Sara LaFleur explained in an interview in Modern Retail. “We always thought of the subscription box as the acquisition channel, and then our customers would find themselves in either our showrooms or our e-comm channel shopping for themselves. And so that’s how customers were being pathed. And I think with the change in performance marketing and realizing just subscription was no longer working as an acquisition channel, the thought there was let’s shift our acquisition channel to now be from something else, and [using] our stores [as] a source of acquisition. And it actually absolutely has been. So rather than thinking of showrooms and retail as a retention channel, we’re now playing around with it also being an acquisition channel.”

Pivot to In-Person

For many DTCs, the best way to attain profitability and longevity is to make the move to in-person. Strategically opening physical stores can help raise brand awareness, attracting customers who were not already aware of the brand and increasing loyalty from existing customers.

“Consumers inherently trust brands that have a physical presence over those based solely online. In a recent report by global data intelligence company Morning Consult, roughly one-third (34%) of US consumers surveyed stated they don’t trust retailers with just an online presence. Meanwhile, 68% trusted retailers with just a physical store, and 73% trusted retailers with both a physical and online store.” – Chute Gerdeman

Embrace Wholesale (Again)

From partnering with larger online marketplaces to getting the DTC brand featured in a store like Target and other retailers, partnerships allow the brand to gain visibility while reducing marketing and customer acquisition costs. Two major sneaker companies – Adidas and Nike – were all in on DTC just a few years ago; now, in the face of ongoing struggles to maintain profitability, both brands are regrouping with a new love for wholesale. Another DTC sneaker company, Allbirds, reported a 40% decline in stock value. Their CEO, along with Nike and Adidas executives, all explained their plans to slow down on store openings and increase wholesale partnerships.

Compare those results to Skechers, who are on the path to achieving $10 billion in sales by 2026 by focusing on a true omnichannel, integrated experience for customers.

“We want to get the product to wherever the consumer is going to be.” – Skechers CFO John Vandemore.

Social Selling and Influencer Marketing

Social selling and influencer marketing is undergoing seismic shifts. DTC brands want to reach consumers where they are, when they’re ready to buy. But it’s much harder to gain traction as a new brand or an existing DTC with new privacy laws coming into effect. HBR recommends focusing on the 4 Cs of manufacturing organic marketing (content, consumers, creators, and celebrities).

“…between privacy concerns and Apple’s iOS 14 changes, Facebook has become much less effective in targeting customers, reducing the overall efficiency of digital customer acquisition. These changes have led brands to search for ways to manufacture organic marketing again. Faced with these challenges in 2023, new DTC brands, as well as existing incumbent brands, have to develop strategies that will allow them to generate organic attention and marketing.”

Pop-Ups

Pop-ups give DTCs the chance to test out the world of in-person retail without a huge commitment to a lease or a location. The amount of data the brand can collect from a pop-up location is immeasurable and can help define next steps.

“The pop-up is the equivalent of a fancy customer intercept survey. You can gather a lot of customer data with very little investment to determine whether or not it’s a good location, what kind of traffic you can expect, and what your product mix should look like, explains Carrie Barclay, President, ASG – Chute Gerdeman in ASG’s Path to In-Person Guide. “Pop-ups have increasingly become an effective way to test a market and make sure it’s a good fit for your brand before getting too heavily invested in the location.”

Right Sized

The goal of being right-sized is to achieve growth without sacrificing quality and experience. But for DTC brands, being right sized can have layers of meaning, from the kind of packaging being used to the number of showrooms, popups, and retail stores are opened. It can influence product mix, number of staff, and more. So what does it mean to be “right sized”? Right sized is the magic of finding the perfect balance between growth and profitability, operating at that point where their ability to scale is both sustainable and cost-effective.

Repositioning

While repositioning is always a part of retail strategy, when the market is contracting it is more important than ever for DTCs to use relevant and current consumer data to tighten their focus on meeting the need and wants of their customers, adjusting product mix quickly with marketing and customer experiences that reflect the quick response. It’s more than just being out there; it’s telling the story that connects the brand to the consumer in a way that shifts their behavior. As Matt Charlton writes in The Drum,

“The whole point of marketing, insights into the irrationality of people, real creativity, clever media, and brilliant product and experience is to allow brands to not have to wait around for consumers to organically adopt stuff. Anyone can do that, but to find ways of opening up awareness, desire, and validation to get people to change what they think they like and believe you have to make everything you can truly memorable. If I don’t remember much then you have to hope I buy because I’ve got no other choices and that is not what most D2C is about.”

What’s Next for DTC?

In an interview with Forbes, Bryan Mahoney, co-founder & CEO of Chord, a Commerce Platform-as-a-Service for fast growing D2C and omnichannel brands, explained the concept of DTC 3.0:

“DTC 3.0 is defined by a more substantial connection to customers, and a real reliance on first-party data. It’s almost as if we’re going back to basics: the focus is on getting close to consumers, understanding what they need, and offering them a unique experience that includes community. That’s what this new iteration of DTC is proving itself to be: a more collaborative, brand-building relationship between businesses and consumers.”

DTCs are facing sometimes insurmountable challenges, with more players going out of business. To survive and thrive, it will be necessary to make changes to strategy.

Designed for Versatility: Q&A w/ Ben Checketts of Rhone
Designed for Versatility: Q&A w/ Ben Checketts of Rhone 1440 428 ASG

In just eight short years, Rhone has carved out a space for itself in men’s apparel with a focus on luxury materials and versatile products. We sat down with Co-Founder and Creative Director, Ben Checketts to talk about the brand’s expanding vision, intentional restraint, and knowledge gained along their journey.

Q: Ben, thank you for spending some time with us. First of all, “Creative Director” can encompass a number of things, so start by telling us about your focus at Rhone.

Ben: I am split between two teams, product and brand marketing, and we recently adjusted to bring product under one creative direction.

On the product side, I try and stay current on trends. I look at our positioning in the product category and what stories we can explore. In brand marketing, I explore larger seasonal themes and how they translate into individual campaigns and product marketing. On the brand marketing side, we are finding ways to show that we are a little bit more sophisticated and a little bit different than anything they’ve seen.

I obsess about how we talk to our customers, whether that’s in product or whether that’s directly through messaging and brand marketing. My obsession is understanding our customer better—the psychology behind why he makes certain decisions on his daily journey and how we can serve his needs better. The better I do that, the better the entire business is— both on the product and on the marketing side.

Q: Give us a little background on why you and your brother, Nate started Rhone and what you hoped to accomplish in the retail space.

Ben: When we started Rhone, we were one of the only brands focused on men and athleisure, although we prefer the term “work-leisure,” and we have a robust active performance side as well. We knew we had to be a brand that spoke to men of a certain age and demographic because at some point you graduate from wearing Nike and Under Armor. You want something a little sleeker and more sophisticated. ASG really did a fantastic job of helping us bring those concepts into our stores in a way that wasn’t heavy-handed. You know when you walk into stores and there are words plastered on the wall? We didn’t want that. We wanted something more elevated. Something that matched our brand.

Q: When you started thinking about Rhone’s ideal store, what was most important?

Ben: I wanted to create a space where men of all sizes, shapes, backgrounds, etc. would feel comfortable shopping. Our staff is committed to creating a place that’s safe for all men. Shopping is not the easiest thing for men. So how do we make it as comfortable and as inclusive as possible?

If we create a product that people love and create spaces that are safe for them, those are really our main objectives in terms of an in-person brand experience.

Q: Is there any correlation between bringing product under a single creative view and Rhone’s transition to physical retail?

Ben: Definitely. As we grew our retail presence, it became increasingly clear to us that our product was a little bit all over the place. We were hard to understand as a brand, mostly because of the variety of our products. A lot of brands get into this trap. We started out with four styles, and we had tremendous success, and we thought, you know what’s better than four styles, like 300 styles.

But the art of essentialism is doing less but better—and that was kind of the transition. So as we went into retail, we knew we needed to simplify in order to better serve our customers. Shoppers are just now starting to see some of the changes that we made to condense product as well as the execution of certain creative ideas and themes that make us easier to digest and easier to understand as a brand.

Rhone: Q&A with Ben Checketts

Q: How has your approach changed since opening the first store?

Ben: We incorporated storytelling (where appropriate) and let the product be the star. We are also educating on the products. Other brands call in-store associates “Educators.” We wanted an element of that, but honestly, for us, especially as men, we almost want to discover that for ourselves.

Our main objective is to just get guys to try on. There is this crazy stat we discovered that 83% of people who try on our clothing, buy it. Usually, in retail, it’s much lower than that. Our objective is to create curiosity and educate so that all they really want to do is just try it.

Q: Digitally native brands often feel like they have to bring technology into the stores. How does Rhone think about digital as part of the in-store experience?

Ben: We believe our product is the best statement of who we are as a brand and what we believe in. Even something such as a simple TV screen that shows videos of your campaign can distract from the product.

We want people to get off their phones and experience the story. We had people come in and tell us, you need a statement wall so people can post on Instagram. What 37-year-old man, who’s in the exact middle of our target demo, do you know that’s looking for a statement wall to take a picture with? I know of none.

But we do need new technology to make it convenient for our guy, to make it so that if he orders online, he can pick it up easily. If he has a discount that can apply online, it can carry through to the point of sale. But we don’t want anything that’s going to detract from their experience and that first interaction with the product or trying it on. If we can get him to that point in the customer journey, we know that more than likely, he is going to convert.

 Q: Rhone has worked with ASG now for over a year now. I would be foolish if I didn’t ask how the partnership has been for you and your team.

Ben: In a word, it’s been fantastic. It’s been transformative for our business. We had some initial calls and the ASG team fell in love with the way we talked about and positioned the brand and our values but they said, “look, we love this—but we don’t see this translating in any of your stores.”

ASG helped us see that not only is the in-person experience a statement about your brand in new and different markets, but it’s also an opportunity to inform about why we’re different from other options. They taught us that the physical store is really about the personal connection and the opportunity to speak about your brand.

Path to In-Person: A DTC Guide for Physical Retail

See the Guide >

Q: So, what’s next for Rhone?

Ben: We want to have a real community space. This is one of the areas in which I believe Lululemon got it right. They deserve all the credit for being an innovator and using their spaces for their community.

We have had groups of men come in for what we call Mind and Muscle. There’s a little workout or a breathwork class for 20 to 30 minutes. Then it’s 20 minutes of, essentially, group therapy. The format is men talking and responding to prompts and sharing their feelings, and it’s remarkable to watch. Especially within the world of physical fitness influencers, you see these guys who look like their body is Photoshopped—they don’t look real. And suddenly their walls come tumbling down. They tell you about the issues they’ve had with their father, issues they had growing up, the fears, and the anxiety they have as fathers themselves. We want to create these safe spaces, where men can come in and shop, but also where we could hold these community events.

We’re also looking at active. During the pandemic, people really fell in love with the idea of getting good at something specific. They started running marathons, started cycling, weightlifting, or powerlifting, trail running as opposed to distance running. We are creating products that are a little bit more specific on the fitness performance side—an active refresh that will sit perfectly alongside our work leisure apparel.

And then, it’s just all about expansion—finding the cities and the areas where we fit in best.

This interview is part of our continuous DTC series, Path to In-Person: A DTC Guide to Physical Retail

See the Full DTC Guide >

Operational Translation: Q&A with Rachel Williamson
Operational Translation: Q&A with Rachel Williamson 1440 428 ASG

DTC operations details are crucial but an often overlooked part of creating a great in-store experience. Seasoned retail advisor, Rachel Williamson of Running Great Stores, shares operational insights on helping DTC brands find success going from clicks to bricks.

Q: How did you get into the retail industry and why did you decide to make retail consulting your career?

Rachel: Retail was an “accidental” career. I was working my way through college, and I did what lots of other students do; I got a job in retail. I realized I was pretty good at it and I really enjoyed it. I decided to take time off before pursuing law school to see if retail was going to be my career.

I had a great role as a men’s buyer for a small company, and my career took off from there. If we fast forward over the last 30 years or so, I spent time working for iconic brands and I’m so grateful for that. They taught me lessons both on how to be an operator, and also on how to be flexible and resilient because those are, I think, characteristics that are vital to being successful in retail.

Q: Retail trends come and go, and over the past 30 years in retail, I’m sure you’ve seen quite a few. What trends are you seeing in the retail industry at the moment?

Rachel: The direct-to-consumer (DTC) customer is absolutely expanding the most right now. They are looking for guidance from people that have been working in brick and mortar because that is where they are growing.

My strategy is not a magic pill, but let’s say all things are equal: you have a great product and enough of it. You know how merchandising works. Your customer understands your message, your story, and your brand. Then we look at operations; the fundamentals of operations are always going to move you ahead from a financial point of view.

The biggest reason why businesses aren’t working or running the way they should be and having the output that they should have is that there’s such a lack of clarity.

Q: How do you help retailers on the store side gain the clarity necessary to be successful?

Rachel: We start by understanding the desired store experience and work back from there to clarify roles and responsibilities. We help them define what success looks like for each role. That is how we tackle it from the store side, but we often also need to look at the business operations side. We help them to be more strategic and prioritize. How a store operates and how the business operates are umbilically connected.

Q: When working with a DTC brand, how early in the process do you engage with them? What does the process entail?

Rachel: Typically, by the time I get brought in, the DTC brand is working with someone like Asset Strategies Group (ASG) to help them find the right physical space. As the location decisions are made, I begin to help them think through the customer journey and the experience that their stores will deliver. This is the starting point. The experience online is very different than the experience in brick and mortar. We help them think through this creatively, then it becomes more tactical. DTC brands know their product and their consumers love them. They have a great online customer experience, but they admit they feel overwhelmed about running great stores. We can help them address every aspect of running a store through our Retail Playbook™. Once retailers see this tool, their mind is eased.

Q: What do stores need to do after opening day to ensure operational excellence?

Rachel: Once the store has been opened, we train the team on what running a great store looks like. We implement the Retail Playbook™ with the store teams. The Retail Playbook™ answers questions like, how do I hire talent? How do I onboard them? How do I develop them? How do I deliver effective one-on-ones? What is my review process? What happens if somebody isn’t performing? It’s everything around the people pieces but also goes deep into how to engage the customer and KPIs to focus on as levers to pull to impact sales results. It is about helping teams understand the behaviors that deliver results.

The final piece of the Playbook is around operational excellence. This includes the operational components for keeping the store filled in, managing inventory levels, loss prevention, health and safety, and more. So every single process you can imagine for running their specific brand is now all in one place, in the customized digital Retail Playbook™.

For DTCs, their sense of relief when we get to this point is incredible. It is perfect for helping a generation of digital natives learn how to operate in brick and mortar. We are seeing amazing success with this formula.

Q: So, is the benefit of the Retail Playbook™ for DTC retailers that it includes a lot of things they just haven’t thought about?

Rachel: Yes. An example is inventory management. Sure, they’ve got a way that inventory is managed on their e-commerce site, but they haven’t thought about whether the same system can manage brick-and-mortar sales. They often haven’t thought about injuries and incident reports. How do we recycle here, and what does the city require? They don’t know what they need to be worried about and what they do not need to worry about.

The Retail Playbook™ also helps retailers understand the fundamentals of running great stores so they can operate consistently across locations.

Whether you started as an e-commerce business or as a brick-and-mortar store, the fundamentals are the same. Once they understand the fundamentals of running a store, they must execute consistently.

The problem is that fundamentals are not sexy, right? It’s boring to do the same thing over and over. As humans, we like to invent; we like to create. And some people are just wired that way. They don’t want to execute something that’s already been figured out for them. They want to tweak it and create a new way of doing it.

When this happens, the brand standards can be desecrated as the brand becomes defined by the manager who runs that specific location. If you have 50 locations with 50 managers doing it 50 different ways, you no longer have a brand. What you have is a bunch of stores that all run differently. A true brand wants consistency from location to location. Imagine how you would feel if you went into Mcdonald’s and your fries tasted differently than you were expecting. It isn’t a good brand experience. Those fundamentals are really where the excellence lies.

Q: In some ways, DTCs have a lot to learn about selling in a physical space, but are there advantages you see for DTCs moving to brick and mortar?

Rachel: The biggest advantages are that they have a product, they know what their customers want, and they have data to prove it. I could open a store tomorrow, but I don’t have a product to sell. I’ve got all the knowledge to run a great store, but I have no product. Am I going to be successful? Of course not. Likewise, you can have an e-commerce site today and the product is great. You’ve got a steady flow of inventory and everything you need to be confident in what you’re selling now. You’re moving into brick and mortar and don’t know the first thing. But is that something you can learn? Yes, easily.

It makes so much sense for direct-to-consumer businesses to move into the brick space because they already have the most important things–a great product and a business plan. Everything else is easy, and we can help them get that figured out. But if you don’t have the product, we can’t even have this conversation.

Path to In-Person: A DTC Guide for Physical Retail

See the Guide >

Q: You seem to love working with DTC brands. Why is that?

Rachel: The really cool thing about working with digitally native brands is they’re not saddled with “the way it’s always been done.” That thinking gets in the way of many companies and limits them unnecessarily. And even experienced retail managers say, “we can’t do it that way,” whereas DTCs have no baggage. They say, “let’s try it.” I think it has helped DTCs move into the brick-and-mortar space and be successful so much more easily than other retailers.

The other thing about direct-to-consumer brands is that they’re good at using design thinking as it relates to the customer. They are quite open about the customer and their challenges. They can evaluate how their business addresses those challenges and how they make the customer experience the center of everything they do. They have a more innate sense of how to use empathy to understand their customer’s pain points. I find that a very open way of thinking is beneficial to the DTC customer, and it makes the transition into brick and mortar super easy.

Q: What do you say to the people who proclaimed retail was dead during the height of COVID?

Rachel: While we were going through COVID, the media narrative was that brick and mortar was dead. I don’t have a crystal ball, but I have been in retail a long time, and the truth is, It’s never going to die. Sure, there are things we choose to have delivered to our doorstep, commodity items. But nothing replaces the fun of going out and having an experience and visiting retail locations and meeting and falling in love with brands.

This interview is part of our continuous DTC series, Path to In-Person: A DTC Guide to Physical Retail

See the Full DTC Guide >

Connected Wellness: Healthcare as a Retail Opportunity
Connected Wellness: Healthcare as a Retail Opportunity 1440 428 ASG

The pandemic impacted the healthcare industry much the way it did education and retail; it helped accelerate technology out of necessity. Not only did the wearable device industry grow, but our idea of what health care can look like has changed considerably too. 

Now, we log in to our computers to talk to our doctors rather than spending time in waiting rooms; we upload our own health stats from our wearable devices rather than having a nurse take our blood pressure and pulse. In a world now reliant on self-service connected wellness, the healthcare industry is ripe for evolution. Here’s a look at how retailers can take part in the health revolution and what is driving changes in the industry.

What’s Reshaping Healthcare?

An aging population – According to SeniorLiving.org, “From now until 2030, 10,000 Baby Boomers each day will hit retirement age. Millions will begin to officially retire, collect social security checks and go on Medicare. Other Boomers will keep on working either out of financial necessity or out of some less tangible need like identity and self-worth.”

Telehealth convenience – Due to the pandemic, technology has advanced rapidly in the healthcare space out of necessity. 

“While the surge in telehealth has been driven by the immediate goal to avoid exposure to COVID-19, with more than 70 percent of in-person visits cancelled, 76 percent of survey respondents indicated they were highly or moderately likely to use telehealth going forward, and 74 percent of telehealth users reported high satisfaction,” according to McKinsey’s 2020 Healthcare Report.

The wearable trend – It isn’t so much about the wearables as the data. Consumers have access to their own medical data more than ever, which allows them to be more proactive in caring for themselves.

“With 76% of adults age 50 and older indicating a desire to age in place, voice-activated tools, such as home assistants and home health-care technology (emergency or virtual care) are relevant potential purchases for them. If offered a choice, over half (53%) would prefer to have their health-care needs managed by a mix of medical professionals and health-care technology,” according to AARP.

Creating New Health and Wellness Experiences

Today’s retail consumers want personalization and convenience, and health and wellness retailers have an incredible opportunity to deliver high-quality, personalized, and convenient care to consumers. Doctors’ offices can learn how to create a patient experience that earns loyalty and satisfaction by looking to retailers’ offerings. 

Like retail, medical providers must customize the entire experience—patients want to have access to information, manage their own care, choose whether they come in to see the doctor or have an online appointment.

Think of patients as customers who want to have a consistent experience no matter how they choose to engage. If they chat online with a nurse, they expect the nurse to have the same information the doctor would if they were in the room with the patient’s medical file. But more than just consistency, patients are looking for ways to be more proactive in managing their own health.

Retail Health Clinics

Since the early ‘90s, when retail health clinics began opening, consumers have benefited from—and come to expect—the ability to seek non-emergency medical care outside of business hours. It’s clear that consumers want the same kind of convenience with their medical care that they receive in other areas of their lives. Healthcare providers who offer convenient, local care are not only popular among consumers but also are expected to see major growth. 

Self-Service Healthcare

As a multitude of wellness wearables, connected health devices and apps are developed, there could be space for an Apple Store-like offering for a health-care device shopping experience akin to the Genius Bar. 

Empowering consumers to manage and monitor their own health could eventually mean they can use a wearable to obtain information, like an EKG on the go. That could free physicians to focus on treating patients in need while simultaneously giving more people the power to be proactive about their own health.

Health Meta—Taking Telemedicine to the Next Level

Industry watchers’ speculation about potential partnerships between retail and medicine is exciting. Think about existing retailers like CVS and Walgreens, who already provide vaccines, fill prescriptions, and offer blood pressure screenings. What if they were able to extend those medical partnerships to create a one-stop telehealth shop? The future could see patients who meet with telehealth doctors in Walgreens or CVS for proactive screenings, upload their data from their wearable devices and do a little shopping while their prescriptions are filled. 

Incorporating Health and Wellness into Retail Design

Incorporating health and wellness into retail spaces can also enhance the consumer experience. Healthcare retailers can win customers by offering wellness products in-store and providing wellness experiences, such as massage chairs, meditation rooms, or spaces to host conversations on wellness topics.

“It’s not just about a breadth of product options, it’s about continuous wellness support for the consumer’s home, workplace, workouts and lifestyle. Create dedicated sections for healthy morning rituals (smoothie makers, lunch boxes, yoga mats), daytime products (working, running errands, exercising) and evening needs (sleep aids, organic cotton sheets, dream journals),” according to Medallion Retail.

As innovation drives the health and wellness revolution, design will take center stage. Design impacts the patient experience, drives patient retention, and enables health providers to empower patients to be more proactive about their health. 

The possibilities are endless.

Layered Construction: The Challenges in Retail Design
Layered Construction: The Challenges in Retail Design 1440 428 ASG

Opening a new store is essential, whether a brand is opening their first or their hundredth. A new store builds excitement, embodies the relationship between the brand and their customer, and showcases what’s new.  Those brands that choose design-driven concepts have the advantage to ensure a unique experience that also performs in the marketplace. So imagine the frustration and expense, both in capital and sales, that occurs when store openings become stalled at every turn. 

The World Has Changed.  

The variables that drive retail design have changed dramatically. And it’s not just labor shortages and supply chain issues; every step, from location decisions, lease negotiation, early concept design, through to how one structures the build team can now be a challenge and needs to be considered more thoughtfully as a whole than ever before. 

“The complexity of the system eats itself alive if one part fails,

explains Ed Hofmann, Partner of Design and Strategy at ASG-Chute Gerdeman. “We find ourselves navigating decisions that spread across multiple layers and choices – literally as an extension of the Brand’s in-house group.  For instance, the ability to move with real ‘speed’ is now contingent on the ability to navigate thru 10 – 12 decisions at once, supported by only partial information.  You don’t know everything you need to know, so we are more and more relying on instinct, strong back up plans, and our relationships to move at pace.

Vendors are wanting more up front, work is taking longer, so we are value-adding where we can, for instance, helping clients on the tenant negotiation side to suspend leases or postpone payments due to uncontrollable delays. We place a lot more emphasis on streamlining the work leading up to the construction so that the build can go as efficiently as possible, such as separating the interior and exterior builds if we must – it creates 2 permitting tracks, but it allows work to continuously move forward, rather than being totally stalled.”  

Clients Crave Control

Clients know what they want for their store designs, but they are frustrated, simply by the lack of control. Delays are increasing due to factors out of the control of both the agency and the client. These delays don’t just add to frustration but increase spending on construction and payroll. Delays in opening lead to lost revenues. 

Neither clients nor agencies can defeat the supply chain, but the situation is causing clients to lose confidence not only in the agencies with whom they work but with their own internal teams and their vendors as well. And vendors, who are either protecting themselves or simply unable to move quickly enough due to the supply chain, are driving up wait times and increasing costs.

“It used to be you got to choose 2: good, fast, or cheap….but now it includes a 4th variable: just getting it done, and you’re allowed only one mistake,” says Hofmann.

Layered Construction in Design

On the execution side, layered construction is becoming more common to help overcome the challenges of supply chain and labor issues. But these challenges aren’t just happening with the storefront. A retailer may not be able to get the correct fixtures or all of the fixtures they need, so a layered approach is being used to help keep the client moving toward opening. 

Clients may be able to have some of the fixtures installed and use alternates for the rest while they wait for the remaining fixtures. They’re making do with what they can get – literally buying things off the shelf, at second-hand stores, or recycled from other locations as placeholders until the real elements arrive. 

For example, if the space has been designed with certain color-themed rugs that you can’t get right away, they find something that works, place it in the store, open the store, and then replace it when the actual items arrive. And it’s not just rugs – it’s light fixtures, window glass, paint colors, display tables, shelving – it could be anything. Now imagine the scale of that when it is multiple locations or multiple elements. Just to get the store open, the design team might have had to get fixtures at West Elm, Arhaus® Outlet, Wal-Mart, or even Amazon, as the first layer and then later, come back and add in the desired elements. 

Managing the Customer’s Experience 

This obviously isn’t the optimal approach, because the design is part of the experience for customers walking into a newly-opened location. In order to manage this “layered” experience will require finesse and transparency. So how the retailer positions the design choices they make will influence how it is received by consumers. 

The key to a successful layered construction approach comes down to closely following the brand intent, that powerful story, with thoughtful, perhaps temporary substitutions, back up plans and complete transparency with the client and often the end consumer.  The relationship between Brand and the people that love them is paramount – it’s our job to protect that and find a way to go above and beyond, delivering unique and powerful connections, sales, and memorable experiences. 

An Era of Layered Construction
An Era of Layered Construction 1440 428 ASG

It’s tough to be a retailer trying to open new stores right now. Everyone is experiencing high costs, lack of materials, logistical issues, and labor issues. One of the hot topics at the ICSC convention this year was the idea of layered construction. Layered construction allows the retailer to open sooner, albeit not in the ideal state. Layered construction is the outcome of more than two years of pandemic-related supply chain and labor shortage issues that show no real signs of letting up any time soon, which have only been exacerbated by the war in Ukraine.

What Is Layered Construction?

Layered construction is an approach to launching a new location in the midst of all the construction industry challenges currently besetting the industry. It can take much too long for a brand to realize the ideal design for a new location due to shortages or wait times for materials, labor, and partner resources, so they sacrifice or alter the design to help facilitate progress towards opening. This can look like many things, but basically, it means implementing a new prototype in layers. For example, a store has a new, beautiful storefront design, but the design requires certain materials which are not accessible for 22 weeks, despite sourcing locally or looking for custom-made solutions. Waiting 22 weeks for the materials isn’t feasible when the store needs to be open for customers now, so the design is built in layers. Often, this means creating an alternative to the prototype that can be built immediately, then returning later to update with the correct materials when they’re finally available.

Drawbacks of Layered Construction

For retailers, the design of a location is a significant piece of the branding. By opening without having the design elements in place, they risk losing that all-important customer experience element that drives loyalty and return visits. However, this is the world everyone is living in right now. While it adds complexity to the construction and design build, it’s important to move forward, even though there may be a slower response to what should be a great store experience.

Even with these drawbacks, because labor and supply chain issues are having such a significant impact on construction schedules, retailers who want to open more quickly are using a layered construction approach to be able to open their doors to consumers even before the elements of their retail design are complete. It’s not a perfect solution, but when handled properly, it can be a way for retailers to more quickly.

Processed Have Changed

Processes have changed dramatically, and because most of these things are completely outside the control of the agency and the client, it becomes a matter of adjusting to the changes, communicating them effectively, and adjusting internal processes to accommodate the changes. For example, permit times have doubled in the last year.

“Speed is no one’s ally”

explains Liz Seitz, ASG’s Store Planning and Construction Leader. “What used to be a 6-8-week timeline, is now 20 weeks in some scenarios.” What agencies must do to help assuage the frustration for clients is to perform due diligence and organize everything prior to construction to make the process quicker and more efficient to execute.

Agencies must be vigilant, keeping their eye on the swiftly changing environment. “As soon as one lever opens up, another one, down the road we never expected, shuts,” says Seitz. Sometimes, Liz explains, it’s important pump the brakes earlier- talk to vendors and ensure construction schedule will align for everything to come along as scheduled.

“Companies will do anything to get into their space,” says Seitz. “They will literally rig their HVAC to make it into their space quicker.”

Globalization is Challenged

For years, the industry has relied on globalization as a solution that delivered cost-effective materials. Now, sourcing materials are part of the challenge. Could anyone have possibly predicted that just as we were coming out of the worst part of the global pandemic that a war would break out? Ukraine may be a small country, but it is pivotal politically and geographically for both food (Ukraine is a major wheat supplier) and oil (most of Europe imported oil from Russia and have stopped because of the invasion.

“None of us expected that after covid, another massive global crisis would emerge,” says Seitz.

Global struggles have a direct effect on US construction in some fashion, and all these factors make it more difficult to consider offshore manufacturing, at least in the short term. Complicating matters is that fewer and fewer people in America can actually put things together.

It’s the agency’s responsibility to have everything organized, to simplify the process and make the job simpler for vendors, contractors, and partners, but that’s far more difficult to do when everything is so much more unpredictable.

Supply Chain Woes

As with so many other industries, the construction industry has been plagued with supply chain issues. These issues are now compounded by a backlog of projects, a new infrastructure bill, and pent up demand for projects that were put on hold during the pandemic. These supply chain issues are impacting every phase of construction, and lead times are growing, exacerbated by the labor shortage in the trucking industry that moves the materials.

Labor Shortage

According to the Associated Builders and Contractors (ABC) organization, the construction industry needs 650,000 additional workers on top of the normal pace of hiring in 2022 to meet the demand for labor. In 2023, ABC says the industry will need to bring in nearly 590,000 new workers on top of normal hiring to meet industry demand. The labor shortage is compounded by a tattered supply chain. It’s not just that there are labor shortages in general. It’s that the labor shortages are hitting blue-collar jobs, so even when the store is finally able to get the materials, they may not be able to find enough people to do the work, whether it’s installing fixtures or painting, or specialized services like plumbing and electric.

Alternative Buildout Matters

One of the wonderful specters we see in retail over and over again is a willingness to be flexible, to switch gears, and to change directions in order to keep moving forward. It’s one of the most invigorating reasons to be in this industry. There are many creative and innovative options rising to the forefront to make it easier to complete construction as expected.

“Just as we’ve seen new store formats or logistics solutions in response to the pandemic, businesses are becoming more adaptable and flexible overall in response to a new normal. Those that are prepared to make the most of this will benefit in the long run if any other supply chain issues arise.” said Tom McGee, president and CEO of ICSC, in an interview with Costar.

Some of the alternatives being considered include:

3D Printing

3D printing is becoming an innovative way forward in retail design construction. There have been entire buildings manufactured from 3D printing, and it’s offering retailers who need to open sooner a way of moving forward without losing all the elements of their design. According to Construction Dive, 3D printing is more cost-effective and projects can be completed much more quickly.

Using Different Materials

Even though lumber prices are starting to fall, the overall cost of construction remains higher than expected. Many retailers are seeking out alternative materials to be able to complete their projects, whether for construction or for interior design elements.

Local Sourcing

There has been an increase in demand for materials manufactured in the U.S. in order to shorten the supply chain. While this may not be a permanent solution to the issue, in the short-term, it allows construction to move forward with both construction.

Prefab

Robins & Morton makes the argument for prefabrication to ease the supply chain issues, reduce costs, and overcome labor shortages: “Once dismissed by skeptics as a risky idea destined to diminish construction quality, prefabrication is now universally embraced as an industry best practice. Companies in all building sectors are investing in it, clients are intrigued by its savings potential, and the field staff is integrating it in ways that will forever change the traditional supply chain in construction.”

Using Existing Construction

Not only can it be cost-effective to use an existing building and transform it for your brand, but it can ensure you get the location you want. Demand for prime locations is growing rapidly but given the cost and delay in constructing an entire storefront, the investment in retrofitting an existing location can be worthwhile. It can even be inspiring.

At the end of the day, suggests Seitz, you have to set the tone early and understand the client’s priorities. Then use your experience to develop forward-thinking design that is flexible enough to withstand the current industry climate.

Social Segmentation: Connecting & Marketing in Modern Retail
Social Segmentation: Connecting & Marketing in Modern Retail 1440 428 ASG

The data every retailer relied on to connect with consumers before the pandemic must be reevaluated. Today’s consumer – the post-pandemic consumer who was isolated at home for several months, learned to rely on others to choose their groceries and deliver them, and refurbished their homes while shopping online – are not the same consumer they were before the pandemic. And more than ever, demographics are no longer an accurate predictor of consumer behavior on their own. Consumer behavior crosses gender and generational lines in ways retailers have never seen before. As we think about analytics and strategy, fully understanding a consumer requires demographic, psychographic, and social analytics. In fact, social segmentation has become an influential piece of the puzzle.

According to Synchrony, “In a world where consumer behaviors have been turned upside down, businesses have to rethink what loyalty looks like — and create new paths for building and maintaining customer loyalty for the long term. Smart brands are on it: finding ways to adapt technology, social media and other tools for the current environment while still leaning into the human elements of incentives, rewards and personal connections that sustain loyalty over time.”

Social as Part of the Shopper Journey

Rachel Lloyd of Green Room discussed the social retail trend in Retail TouchPoints:

“…despite the fact that most customer journeys start on social media through product discovery, there will always be a huge desire for people to experience brands in real life. Humans have an inherent desire to come together and connect in social settings. Yes, the rules of retail are changing, but the human needs and desires that retail fulfils are not.

But in order to survive, the store’s connection to the brand’s wider digital ecosystem is now absolutely vital to ensure that a dialogue is maintained long before a customer goes in-store and continued long after they leave.”

So as retailers find new ways to “adapt technology … while still leaning into the human elements…” social media rises to the forefront of the new way to not only connect with customers but learn about them. Consumers are turning to social media more than ever to explore and connect with brands. The search for and discover of products online fulfills a sense of adventure for consumers – it’s like being on a quest. And consumers are eager to share their discoveries and take pride in being the first to know about an unknown brand.

So while most consumers still want that in-store experience, for brands to get consumers to walk through the doors, they need to be accessible on social and paying attention to what their customers want. In other words, even as retail continues to change, the need for human connection and in-store shopping isn’t going away. Social retail is the connection brands need – and the way forward for more intelligent marketing.

The Need to Move from Demographics to Social Segmentation

Retailers currently have an enormous opportunity to connect more authentically and more effectively with their customers. In combination with actual physical shopping behavior and historical data, brands have an opportunity to leverage social sentiment to guide how they move forward. In fact, a social view is critical now to form a complete picture and guide retail strategy. By incorporating social listening and social segmentation, it’s possible to gain a more holistic picture of today’s consumer and how they’re interacting with your brand.

Moving Beyond Demographics

Retailers have historically lumped customers into targeting groups based on demographics. Messaging and advertising, maybe even product mix, became based on age and generational characteristics. People of a certain age were in specific stages of life. 20-somethings were starting families and buying homes. 30-somethings were making home improvements and raising families. 40-somethings were thinking about things like investing and insurance. 50-somethings were becoming empty nesters, focusing on travel and retirement planning. It was concrete, and everyone was following along with their age group in terms of life stages. Now, we have 80-year-olds graduating from college and 40-year-olds having their first child. Millennials aren’t even thinking about buying a home until they’re in their late 30s – if at all – and consumers across all demographics are spending their dollars with brands and companies whose beliefs and behaviors align with their own.

Benefits of Social Segmentation

In building the case for social segmentation as a strategy for better consumer engagement, consider these statistics:

  • 77% of consumers say they are more likely to buy from a brand they follow on social media over one they do not (Social Media Today)
  • In 2020, over 3.6 billion people were using social media worldwide, a number projected to increase to almost 4.41 billion in 2025. (Statista)
  • 71% of consumers say it’s important for brands to raise awareness and take a stand on social issues. (Sprout Social)
  • Half of worldwide marketers have turned to social listening to understand consumers’ changing preferences during the pandemic. (eMarketer)

In the past few years, retailers have learned to be quick to pivot because of how rapidly consumer sentiment can change. Using social signals gives retailers a deeper understanding of what consumers want – and how they want to buy. Instead of relying on what has happened in the past, a social view provides context around what is influencing buyer behaviors in real-time. Benefits include:

  • Increase Customer Lifetime Value
  • Improved customer engagement
  • More cost-effective customer acquisition
  • Improved omnichannel/integrated experience
  • Significant improvement in anticipating customer needs, wants, and behaviors

How Can Retailers Use Social Segmentation?

Customers are more than their demographics. Social listening allows brands to identify not only consumer sentiment – toward brands and toward social issues they care about – but also can help brands measure what consumers say online against their actual behavior as consumers. And it allows brands to customize and personalize their messaging. For example, if consumers are talking about sustainability, a brand can tailor messaging with social segmentation around sustainability efforts. If they’re concerned with diversity and inclusion, the brand could then create content around the efforts they’re making in DEI. Knowing what is important to customers is crucial to building and maintaining loyalty for every brand.

Brands Doing It Right: Leveraging a Social View to Create Better Experiences

Understanding customers in real-time through social listening and targeting customers based on social segmentation rather than demographics can help brands connect more authentically with their consumers.

Target

Target is so good at attracting customers to their stores that they have their own entry in Urban Dictionary. They incorporate a variety of marketing strategies, an in-store shopping experience that makes people want to be in their stores, and partnerships with brands people love but in limited quantities that create FOMO – the “fear of missing out.” Their social media effectively connects them to their customers and explain that they try to post what their customers want, not what they think they should post. They incorporate user-generated content in their social media and website, from sharing shopping experiences posted by customers to reviews to answers about products on their website provided by users.

Sephora

Sephora uses a variety of social listening tools and social segmentation to reach their customers. They’ve recently been highlighted by Wall Street Journal for how they are using social media to share their purpose. In the interview, Suzanne Kounkel, CMO of Deloitte US says, “Organizations are seeking to demonstrate to all stakeholders—from customers and employees to partners and investors—why their companies exist and how they make an impact beyond profit.”

Gymshark

Gymshark, which we recently named a DTC brand to watch, is in part having success because of their approach to social retail. Not only are they leveraging influencer marketing to turn their brand into a household name, but they are using social listening to more accurately target their customers. Giraffe explains, “Gymshark is a key player in knowing your audience and using social media channels in a hyper-targeted way. For instance, Gymshark owns 3 different Instagram accounts (@gymshark, @gymsharkwomen and @gymsharktrain) all with different goals and purposes.” Maybe conducted an in-depth analysis of how Gymshark used social media to listen and connect with consumers here.


Social Retail Connects You with Your Customers

Social listening provides more accurate and up-to-date information than typical historical data and forecasting. And by using social signals, retailers can more quickly adapt to changing sentiments. Most importantly, however, social signals provide a cross-section of data that moves beyond generational demographics and allows a brand to align with consumers and use social segmentation to deliver more impactful experiences. With the great wealth transfer well underway, there are invaluable opportunities for companies to listen and learn from their customers in new ways.

The Rise of Lease Management Outsourcing
The Rise of Lease Management Outsourcing 1440 428 ASG

A Decline in Institutional Knowledge is Leading to an Increase in Lease Management Outsourcing

Before the pandemic, there were 10,000 boomers retiring every day, taking an enormous amount of institutional knowledge with them. While this has been most noticeable in the healthcare and insurance industries, over the next decade, we’re going to feel it in every industry.

In an article written in 2013 by Dr. Andrew M. Pena, SHRM, he sounded an alarm about the loss of institutional knowledge and its impact on businesses.

“Today, as Baby Boomers prepare for retirement, some Gen. X’ers and many Millennials are not remaining employed in one organization long enough to learn from their older colleagues. As a result, the institutional knowledge, history, and business continuity possessed by the veterans and Boomers might vanish with little or no knowledge being retained by the Gen. X’ers and Millennials. The failure to retain and transfer institutional knowledge could result in a steady increase in employee turnover and further loss of institutional knowledge, translating into higher costs and lower institutional efficiency.”

Fast forward eight years, factor in a pandemic, a significant labor shortage, and more than a year of “The Great Resignation,” and the threat of institutional knowledge losses have increased substantially.

The Generational Divide

Because Boomers have worked longer and are retiring later, Gen X and Millennial employees, in many cases, have not had the opportunity to rise through the ranks as quickly. As Boomers now begin to disappear at an alarming rate, they are leaving behind very inexperienced replacements who have had much less time and opportunity to enter leadership positions. Consequently, these replacements have limited high-level work experience, creating a giant skills gap. The choice to delay having children quickly enough to create future replacements, combined with the shift in attitude about staying with the same company longer than a few years, and the gap and skills shortage will continue to widen.

What Does This Have to Do with Retail?

Retailers often benefit from younger generations working in their stores. Digitally native brands inherently understand what traditional brick -and-mortar brands often fail to realize: The brand is the brand, regardless of how or where the shopper engages with the brand. While operations and other aspects are feeling the pinch on the front end of the talent pool – on the corporate side of retail –a painful loss of institutional knowledge on a regular basis in lease administration – and it is a costly and painful deficit.

Lease Management Is a Negotiation Game that Requires Expertise and Finesse

As experienced lease administrators retire and take with them their considerable understanding of leases, settlement negotiations, and relationship building, their younger replacements simply are not armed with the information and knowledge needed to properly defend contracts and protect their companies. In one instance with a national retail brand, the lease administrator retired. When the new administrator started, he immediately invested in a new system that included a lot of promised bells and whistles. They spent a ton of money on it – and promptly missed a kickout, costing them over $300,000. When we audited the system after taking over, 82% of their expiration dates were wrong.

Why Outsource Lease Management

Outsourcing lease management offers several benefits, including more efficient administration and expertise that saves you money. Outsourcing retail lease management has a measurable ROI. By placing lease administration in the hands of dedicated experts, there is a team proactively seeking opportunities, ensuring you’re not overcharged, and helping maintain compliance.

Lease management is often overlooked as a contributor to a company’s bottom line. But the benefit derived from expert lease management in terms of cost avoidance, negotiations, and credits that can be offset against monthly expenses is often immeasurable.

Outsourcing lease management ensures that you have the best experts handling the second-largest expense item for many retailers. Relying on experts can help transform a game-changing expense item into a hidden profit center.

Increased Efficiency

For many companies, internal lease management is just one of many responsibilities that an employee shoulders, and they often don’t have the time to fully analyze and manage leases. Outsourcing to a company that specializes in lease management can free your employees to focus on the primary duties of their jobs – often allowing the company to realize measurable savings in labor and efficiency.

Expertise

Outsourcing provides your company with depth and breadth of experience that can improve your negotiations and ensure that you do not miss cost savings. Because outsourced lease administrators manage leases across multiple industries and niches, they are familiar with retailers of all sizes, ages, and types. And, they have a finger on the pulse of the industry, staying abreast of and ahead of changes that might impact your costs.

What to Look for in an Outsourced Lease Management Service

When seeking an outsourced provider for lease administration, seek a partner who has:

  • Provided this service for portfolios of all sizes, for retailers that are at the height of success, and for those experiencing their last days
  • Read thousands of lease clauses and has learned to detect the nuance of how they are written.
  • Experience disputing billing errors and demonstrated success in getting revisions for most disputes
  • An in-depth understanding of co-tenancy failures retroactive to previous years
  • The ability to play a key role in obtaining the best possible lease terms for you
  • A demonstrated track record processing billions of dollars in lease-related payments.
  • State-of-the-art technology

What You Should Expect with Outsourced Lease Management

Meticulous Auditing

One of the most essential functions of an outsourced retail lease administrator is auditing. The lease manager should ensure that all your lease documents, dates, and detailed information about your leases for each property as accessible. They should meticulously audit your invoices and conduct regular reviews to ensure you are not overpaying and that all your negotiated concessions are being met.

CAM Reviews

Building operation expenses (CAM charges) are a significant expense and one of the biggest areas in which there can be errors. When you work with a retail lease management partner, they can often save your organization more than what you pay for the service provided.

Preservation of Institutional Knowledge

If you rely on one or two internal lease managers, and one or both leave or retire, it is almost impossible to replace that industry knowledge. By outsourcing to a firm with a specialty in lease management, you get depth of experience without the risk of the loss of institutional knowledge.

7 DTC Brands to Watch
7 DTC Brands to Watch 1440 428 ASG

It’s an exciting time to be in retail. For DTCs, the opportunity to redefine their purpose and connect with customers on a whole new level has led to a surge in DTCs opening physical stores. Here, we take a look at some DTC brands to watch – those that have already made the leap into physical stores and those who may be in the near future.

“Direct-to-consumer, digital-first, pure-play, or whatever you want to call this new breed of breakout brands, for them, the physical footprint is about customer acquisition, building loyalty, and increasing eCommerce sales. Utilizing their online data assets, they’re focusing the in-store experience on a high level of service and brand engagement. With that, traditional retail metrics like sales per square foot are being replaced by new measurements that take into account multiple channels working together.” – Chute Gerdeman

Take Note of these DTC Brands

Article – Launched in 2013, DTC furniture company Article grew profits by 45% in 2021 by opening regional fulfilment centers and focusing on last-mile delivery network. “We’ve decided to take final-mile delivery to the next level with ADT [Article Delivery Team]. In-house delivery gives us a tighter feedback loop which helps us iterate on the process and create experiences people look forward to,” said Aamir Baig, Article’s CEO, in a Chain Store Age interview.

Tecovas – Founder, Paul Hedrick turned his passion for good-looking cowboy boots that were actually comfortable to wear into a business that was named by Business Insider as one of the 25 DTCs to watch in 2022. Paul Hedrick, founder and CEO of Tecovas, said in an interview with FN, “Our focus is – and will always be – on building the most beloved heritage western brand in the world, and this round of funding will only help us further drive towards that vision.”

Vuori – With a commitment to sustainability, ethical manufacturing, and community, Vuori is a standout brand for a number of reasons. After receiving an infusion of capital and completing a successful expansion in the U.S., Vuori recently announced plans to expand into Europe with their own physical locations as well as through partnerships with companies like Costwold Outdoor in England. “2022 is going to be Vuori’s biggest year yet, and we look forward to sharing much more in the weeks and months ahead,” Vuori founder and CEO Joe Kudla said in a statement.

Gymshark – Launched by a 19-year old in a garage in Birmingham, UK in 2012, Gymshark’s online presence today is nothing short of remarkable. The company now has five regional offices and was featured in an article last year about their transition to a billion dollar fitness company.

Rhone  – CEO and co-founder Nate Checketts of Rhone was an early visionary in recognizing the importance of developing physical retail locations for his performance-driven clothing and the company has enjoyed growth and success as they expand, being named one of the top 12 men’s athleisure brands in 2022.

Knot Standard – Recognized for their unique blend of fashion and technology, Knot Standard is not only expanding their own physical presence with showroom locations across the country but also selling its technology to retailers to create their own custom clothing offering.

Thuma – Launched in 2018, Thuma is on a mission to revitalize the modern-day bed through timeless design and smart manufacturing. Their success is reflected in the fact that they’ve been named the top bed frame to sleep on by Architectural Digest and Insider.  Thuma has also been named one of the top home and appliance DTCs to watch by IAB. This is definitely a brand to keep an eye on.

As the cost of customer acquisition continues to climb with increasing digital ad costs, more and more DTCs will likely consider new ways of fulfilling the needs of existing customers while also attracting new ones. Strategically located physical locations is a huge opportunity for many DTCs.

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Developing a DTC Retail Strategy: Q&A With Carrie Barclay
Developing a DTC Retail Strategy: Q&A With Carrie Barclay 1440 428 ASG

The advantage to DTC brands opening physical locations is clear, but if you’re a digital-only DTC considering opening your first location, how do you know where to go? What kind of strategy should you use?

Having worked with notable DTC brands like Warby Parker, Tonal, Purple, and Lovesac, we asked ASG President Carrie Barclay to share some insight on what works and where to start.

Q: It seems a bit daunting to transform from digital-only to incorporating physical locations. How do you advise DTCs just getting started?

Carrie: Initially, it’s important to keep an eye on your investment. This means choosing locations beyond New York City, where the costs are more manageable and data is more relevant. A clustered or regional approach to launching physical stores can be smart. Rather than spread across the country, many DTCs may opt to open a location or several near where they are headquartered. They can physically check in on the stores; see what’s happening; gauge client response and make adjustments to their physical store strategy before expanding further.

Q: What do DTCs have to consider in order to expand?

Carrie: It will really depend on the brand’s ability to scale. They have to think about logistics and distribution. A great example of how to do this well is Primark, a European company that opened a distribution center in Pennsylvania in order to support the stores they are opening in the northeast.

DTC Apparel Store

Q: You’re a fan of pop-up stores. Why?

The pop-up is the equivalent of a fancy customer intercept survey. You can gather a lot of customer data with very little investment to determine whether or not it’s a good location, what kind of traffic you can expect, and what your product mix should look like. Pop-ups have increasingly become an effective way to test a market and make sure it’s a good fit for your brand before getting too heavily invested in the location.

Q: How do you determine which path to take when opening physical stores?

Carrie: You need to use the data to make strategic decisions about your brand. Data will help you answer the questions you need to think about as you go physical. Do you build out your own retail shops across the country or test pop-ups in certain high-traffic areas? Do you sever ties with the retailers who carry your brands or focus on a hybrid solution that allows your brand to partner with retailers even as you build your own branded stores? The answers to these questions will differ for each brand, but the data is always there. The important element is being able to analyze and overlay market insights and match them with business goals.

Q: Why do you think DTCs need physical stores?

Carrie: We know customer acquisition costs are not sustainable with digital-only, so that’s a big reason behind the push we see among DTCs to open physical locations. But at the end of the day, it’s not about having a physical store or a website or an app or two-day delivery or a great return policy. It’s about being where your customers need you, when they need you, how they need you. It’s about being the brand they trust – because you meet your sustainability promises, you are accessible when they’re ready to shop, and you’re convenient. Physical stores increase trust in your brand, can put you in your customers’ neighborhoods and can give your brand enormous growth opportunity when done right.

Want to learn more about implementing a data-driven DTC location strategy? Explore our proprietary platform, ASGedge, where we combine tailored real estate data with industry expertise to inform confident retail decisions.

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