DTC Briefing: Former employees sound off on the biggest mistakes brands make when opening stores

There are many challenges to operating physical retail as an online-first startup, which oftentimes means opening locations in expensive neighborhoods to harness the high traffic. But former employees at DTC brands argue that it’s not just cash burn making it hard for startups to operate stores. Former retail employees at DTC brands like Outdoor Voices, Glossier and Casper spoke with Modern Retail about the biggest mistakes they’ve seen digitally-native brands make when growing their store count — and what they’ve done better at compared to legacy retailers. Some of the challenges they’ve seen on the ground include a lack of cohesive training, inefficient practices like inventory mismanagement and an overall disconnect between the corporate and retail teams. 

“A pressure to scale”
After years of betting on stores to compete with established competitors like Lululemon, Outdoor Voices suddenly shut down physical retail back in March, in turn laying off hundreds of employees across 16 stores. 

K. was a former manager at a now-closed Outdoor Voices store. According to K., who worked at another DTC apparel startup prior to joining Outdoor Voices in 2022 and was laid off during the store closures, the two experiences were vastly different. 

“The previous brand I worked for was a little bit further along and was doing things the right way,” K. said. For example, he said, “That startup has been strategic about entering new markets even though it means taking years to grow store count.” The company has a handful of locations across Canada and a couple of states, and its count is still in the single digits despite launching around the same time as Outdoor Voices. Meanwhile, when he joined Outdoor Voices, the brand was in the process of opening two new stores. 

“Landing at Outdoor Voices was a bit more eye-opening to how these fast-growing brands operate behind the scenes,” he said. “I fortunately, or unfortunately, had more insights into corporate operations than others due to my specific role.”

One of the glaring issues he quickly identified was the lack of uniformity around the company’s operations. “They didn’t necessarily see the value in the person leading the retail fleet,” he said. “Even after getting an amazing director with experience, she wasn’t always set up for success.” Much of this was due to the lack of a dedicated team to delegate tasks to and help oversee all the stores across the country.

Part of this goes back to the inability to test and reiterate in-store practices while the company was still opening new locations elsewhere. “We were opening six stores when I came on board, and a lot of resources were spent there,” K. said. That led to individual store managers building out their own day-to-day operations, like deciding on how and when to train new hires. That resulted in inefficiencies. For example, he had to retrain an employee coming from another location.

Furthermore, he said HQ’s marketing of a new store dropped off quickly after that location opened. When Outdoor Voices opened a new store, there would be a flurry of events in the first few weeks, like in-store meetups or organized walks.

“But there were no community-driven efforts to retain that customer and give them reasons to come back in consistently,” he said. “So we didn’t see the newer markets take off.”

Another former Outdoor Voices store employee who spoke on condition of anonymity and goes by W., worked there when the company was on a store-opening streak in 2017. That year, the brand opened four stores, including the first on the West Coast in Los Angeles. She said even back then, there was a sense of pressure to grow quickly as a venture capital-backed startup. 

“The company had a specific vision: to offer luxury retail, but I think they scaled too fast,” W said. In turn, that led to growing frustration among store staff over what Outdoor Voices was willing to spend money on.

“We spent almost a grand a week on Topo Chico,” she said, along with high-end floral arrangements. At the time, she said there was also resentment among store associates over the company prioritizing store aesthetics over paying higher wages, which at the time averaged $15 an hour at that location. That treatment, she said, led to high turnover among associates. “I remember vividly telling our regional manager my staff needed to be paid better and having her say, ‘We’d all like more money,'” W. added.

Growing pains at a hyper-growth pace
That’s not to say that Outdoor Voices didn’t make improvements over the years. According to K., the hourly pay was a lot more competitive with the local market when he joined the company in 2022. “It was never going to be the greatest, but I thought it was fair at the time,” he said. People also got raises at the one-year mark and received promotions during his stint. Unnecessary cash burn on nice-to-have store features was also reined in, K. said.

“They did a great job of honing in on what was really important by the time I joined,” he said. But that wasn’t enough to make up for lack of cohesion in other areas. And ultimately, Outdoor Voices ended up closing all of its stores to focus on e-commerce.

Not all retail employees have such jarring experiences at DTC brands. One former Glossier store employee said that their experience working at one of the recently opened locations was pleasant. Compared to the legacy retailers this former Glossier employee had previously worked for, there was a bigger focus on social media marketing and ensuring that the customer had a great experience discovering the products in person.

“The store operations and overall culture were definitely different from what I was used to,” they said. “But after some growing pains, I was able to settle in well.”

For direct-to-consumer brands, operating retail stores during the hyper-growth stage is challenging and expensive even with an experienced staff on board.

P., who formerly worked on mattress startup Casper’s retail operations, told Modern Retail that the corporate and retail sides of DTC startups “are never going to be seamlessly integrated, but there are key pathways to connect them.”

P. worked at Casper until 2021, when the company underwent layoffs. At the time, Casper had been struggling on the public markets. The company filed for an IPO in 2020, but it struggled to turn a profit, and losses continued to widen. Eventually, Casper was taken private in November 2021 by Durational Capital Management.

“I entered into a culture that had a lot of over-promoted, highly paid people with a ‘devil may care’ attitude,” P. said. He explained that these young, early-stage employees were considered stars at the beginning because they were able to wear many hats. But as Casper evolved into a mature company that had gone public, he said, “their roles hadn’t evolved with the scale of the company.”

At the time, Casper was operating about 72 owned stores, many of which were located in expensive urban neighborhoods. “There were some questionable real estate decisions, and I don’t know what insights they were basing store openings on,” P. said. “At that point, Casper had become known for spending hundreds of millions of dollars on marketing.” It doesn’t help that competitors like Purple were doing the same amount of business for a fraction of the spend on operations, he noted. 

“We were trying to cut back on overspending,” P. said. However, there were still many inefficient decisions made for store rollouts. “There is this obsession with every store needing to be ‘different,'” he said, which proved to be an expensive approach to designing them.

Rebekah Kondrat, founder of Kondrat Retail, who ran retail operations for Warby Parker and Outdoor Voices, said inefficiencies are “quite common” among DTC brands venturing from e-commerce into brick-and-mortar.

Kondrat said that, often, brands bring in one seasoned manager from successful legacy brands like Apple or Nike to run the show. But there are often so many things for this single person to fix, Kondrat said, and they don’t have resources or a team to run training or solve store problems in real time. And their to-do list only grows as a brand opens more locations.

“If you’re going to put resources into opening stores, you also need to allocate capital to a support function in headquarters,” Kondrat said. This dedicated team would be in charge of communicating with store managers on upcoming product launches or sales to prepare for, she said.

Overall, P. said that when he worked at Casper, the vision the corporate team had for the merchandise and customer experience “wasn’t getting through” to store leadership. This led to chaos and inconsistent merchandise and marketing strategies at various stores. “It was a constant announcement of new products or campaigns that the store employees then had to execute on overnight,” P. said. 

Still, as is the case with most startups, many DTC brands end up refining their retail strategy over the years as they get a better sense of what does or doesn’t work for them. In the three years since P. left Casper, the company has shifted its retail strategy to design its stores with a bigger emphasis on sleep education. As of this year, Casper has 66 retail stores, with plans to open roughly seven to 10 new stores in 2024.

There are a number of ways that DTC companies can create a more cohesive retail strategy, P. said. For example, the corporate teams can bring in people from the best-performing stores to give feedback on a new product before rolling it out to all of the stores.

“Let the stores drive the culture,” P. advises. “They’re the ones interacting with customers and know what they respond to.”

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