Are we moving out of the direct to consumer boom? Some statistics say so! Direct to consumer brands have been all the rage in the past decade. A mix of influencer marketing, retargeting data that helped online retailers online acquire customers and online market places offering seamless check out from the comfort of your home has made the growth of the online marketplace boom. During Covid when the only option was to shop online, some retailers saw themselves facing mass extinction as the reality set in that if their doors were closed, their digital doors had to stay open. Yet in the wake of the reality that Google can no longer use third party data to target online shoppers, are brands going to be looking into the competitive retail shelf spaces as an alternative option to acquire new customers? We think so.
Although VCs are investing more than ever, they see the very competitive landscape in the CPG market, and they are backing away for many reasons; high start up and inventory cost, supply chain difficulties, shortages of truck drivers in California making orders take up to six times as long to reach customers, etc. But there’s also been a surge in investments in brands that have proven their model online and have taken their popularity into big retailers such as CVS Target, Whole Foods and even smaller trend setting grocery chains like Erewhon or Cambridge naturals.
New brands and heritage brands need to rethink their strategy when it comes to acquiring customers. Strong retail relationships prove to customers that a product is more trustworthy and high quality. If you are like me you have ordered things online and had a handful of good and bad experiences. My worst online shopping experience is when I ordered a portable washing 3×3 machine from an Instagram shop now button and ended up getting a 12 inch plastic bowl the same color as my mini washing machine in the mail- yes I literally received a plastic bowl and the company would not refund me!! I’m starting to meet more people like myself who have had negative experiences shopping online and forgot how much they enjoyed stepping into a target for product discovery and touching and experiencing an item before buying it.
It’s getting harder for retailers to stay open with staggering commercial rents and lack of regulation around commercial real estate, especially in cities like LA, NY and SF where the retail turn over rate has doubled in the last decade, but the retailers who have been able to stay open, are setting the standard for how retailers can and should operate. Take Erewhon for example. With its seven stores it has quickly become the place where new brands explode and millennials and Gen Z alike come in for a new product discovery and $15 lattes. This product discovery has led to organic product performance review, word of mouth marketing and also a cult-like following at the store which encourages people to share their finds as a bragging right, more than anything.
We’ve also seen big box stores like Target dedicate nearly 1000 ft.² at some locations to beauty and wellness. Target is now a place of discovery for new small indy brands, and also minority and women owned brands more than any other retailer in the world. Some retailers who do not understand this model are drugstores. With their archaic layout and lack of cool new items, the drug stores still feel like a place that we run into when we need a tylenol or bandaid, totally opposite of some big box retailers like Ulta and Sephora- stores that you can get lost in for an hour discovering new brands.
Three tips for successful retail partnerships:
- For retailers – Have inclusivity be part of your product offerings. Women love supporting women. People love supporting underrepresented founders and discovering products they would not have been able to find online.
- For brands – Packaging is important, but let’s not let pretty things just be pretty. Differentiation through simplicity is in. Think Boy Smells, Heretic and Glossier. Also customers love seeing what a brand stands for very clearly when they are making that split second decision to throw something in their cart. If you can manage to inform them and not overwhelm them during the shopping experience, you can master organically acquiring new customers.
- For small CPG brands-, just know that LinkedIn is your best friend. Buyers are taking chances on new brands and the buyer-founder relationship is extremely mutually beneficial so don’t be afraid to reach out and let them know how much value you can bring to them..
Retailers are seeing a new type of shopper- one that wants an all-around experience and new brands can set the vibe for retailers to be a place to discover new brands, new trends and organically create that community and cult following type of feel. New and upcoming brands are part of that exciting discovery trend bringing shoppers back into brick and mortar and I only see in person discovery growing as the world has opened back up.
