The DTC model relies uniquely on three advantages over other types of retail:
a) Marketing buzz. If Elle magazine is saying you’re “hot” then DTC works pretty well. Things work differently when they are not saying that any longer.
b) Funding. Once again, if investors think you’re “hot” then the model works pretty well. The challenge is when investors don’t know which company is hot in a group of 26 to choose from.
c) Risk. The biggest risk for most retailers is physical location investments. If 7-Eleven invests in more franchises in Tokyo this is a big risk if nobody goes to office buildings in Tokyo any longer. Birchbox takes on no such risk until they need to hire 3,000 samplers to roam the real world and get subscribers.
In conclusion, if you’re looking to go with a DTC model during this 2nd wave of Covid-lockdowns, take some time to consider your economics. You will need to look at marketing buzz, funding, and risk. If you have geography at the core of your business, think carefully about the wild swings we will see in Big Cities around the world during lockdown and then ‘new normal’.
A reminder that when Paris announced a 2nd wave lockdown that millions of Parisians fled to the country. They might want a DTC subscription while hiding in the countryside. They may also cancel that subscription when they return to Paris and get back to the salons and spas that a big city has to offer.
Finally, when looking at the success of DTC remember the two big stories from 2010-2015: Dollar Shave Club and Birchbox. Birchbox’s investors might not feel so confident if they tried to find where Birchbox is located in Elle magazine’s list of the 26 makeup box companies that you must have in your life.
Where do you want to be in 5 years? If you think Big City retail is going to come back to life, you should keep this in mind during lockdown 2.0 when you discuss marketing buzz, funding, and risk.
Good luck this week – please stay in touch.
Regards – Ray Gaul (@RayGaul on Twitter, linkedin/raygaul)
Taken from Linkedin
To learn more about Ray, go here