This is the latest installment of the DTC Briefing, a weekly Modern Retail column about the biggest challenges and trends facing the volatile direct-to-consumer startup world. To receive it in your inbox every week, sign up here.
Jesse Derris, founder of the eponymous Derris public relations agency, is turning his attention to helping direct-to-consumer brands launch their own stores.
Derris is teaming up with restaurateur Will Guidara to launch In Person, an agency that will help startups launch permanent stores, temporary pop-ups and other retail experiences. Leaning on the expertise of Guidara, the former co-owner of the restaurant group behind Eleven Madison Park, the two hope to help direct-to-consumer startups infuse a fine-dining approach to hospitality into their stores. In Person will live as a separate company from Derris the communications firm.
It’s now taken as a given that consumer startups that start online will either eventually open their own stores, or sell their products in physical retail locations in order to reach more customers more quickly. In particular, next year is shaping up to be a big year for retail openings, as DTC startups ranging from Parachute to Vuori have announced plans to open upwards of a dozen stores respectively in order to capitalize on the e-commerce growth they saw this year. Industry insiders like Derris and Guidara see this as an opportunity to help DTC startups build stores that can truly stand out from those of traditional retailers, as the competition to win over in-person shoppers heats up.
Derris — who is also an investor in Warby Parker, Harry’s and Everlane among other customer startups — told me that historically, retail has been too focused on differentiation through merchandise. “We were at the whim of the product merchandisers and the visual merchandisers,” who he said had a disproportionate amount of responsibility in determining what the stores carried and what the store looked like — without focusing as much on providing a unique customer experience.
Guidara, for his part said that he was interested by the opportunity to work with DTC startups because of their obsessive “focus on the customer experience,” which he views as being similar to the way restaurants thinking about creating a unique experience for diners.
Derris and Guidara said that they are working on projects right now with two different brands, which they declined to name. But generally speaking, they said that the way they believe that In Person can offer a distinct approach is by taking a restaurant-style approach to training retail store staff.
“I really do think the [staff] training is where big differences can be made,” said Guidara.”There is service and there is hospitality training, and both are essential…that element often enough has not been brought to the classic retail experience,” he said.
What does a store that focuses obsessively on hospitality look like? “I think the very best brands consider the very first [customer] interaction,” Derris said, citing Aesop (which Derris has previously worked with) as one example of a brand that does this well. “They have an extremely specific first interaction around the bases of the sinks in the store…they have an intention not to try to sell you anything in that first interaction, more to build a relationship with you and to allow you to experience the product for free frankly and to allow you to understand what works for you.”
“I feel like there is a lot of opportunity to bring those hospitality practices into a retail environment,” Rebekah Kondrat, a retail consultant who formerly managed stores for DTC startups like Warby Parker, Outdoor Voices and Joybird told Modern Retail. “I think what needs to be considered is what is the customer’s mindset when they enter that store environment,” she added.
Particularly as more customers use services like buy online, pickup in-store, Kondrat said that the main goal of some customers is to get in and out of the store as quickly as possible — and they are not necessarily looking for a memorable experience. “It is not easy to marry those two things,” she said.
Derris said that he was inspired to start In Person now in part because “more leases are getting signed right now than we have ever seen before.” He attributed that in part to rising customer acquisition costs on digital marketing channels like Facebook and Google over the past few years.
“The thing that the pandemic has crystalized is how difficult it is to outsource basically the variable expenses of your company to third-party technology companies,” said Derris. “To me, what physical retail does is it builds an actual direct relationship with customers.”
American Eagle acquires a 3PL used by Outdoor Voices, Mack Weldon
Traditional brick-and-mortar retailers continue to ramp up their acquisitions and investments in retail tech and logistics companies. This morning, American Eagle announced that it has acquired 3PL provider Quiet Logistics for $350 million.
As Modern Retail reported in 2019, Quiet Logistics built a name for itself in the logistics space by squarely targeting premium direct-to-consumer brands like Mack Weldon and Outdoor Voices, and was the first warehouse to utilize Kiva robotics (which is now owned by Amazon). Quiet Logistics founder and CEO Bruce Welty said at the time that the DTC boom had created “plenty of work for everyone who does fulfillment.”
American Eagle executives told the Wall Street Journal that Quiet Logistics will continue to operate independently following the acquisition, and will continue to serve clients outside of American Eagle.
This is the second logistics-related acquisition American Eagle has made this year. The apparel retailer also acquired AirTerra, a startup that aims to more efficiently aggregate packages from multiple senders, for an undisclosed amount.
In explaining the rationale behind the Quiet Logistics acquisition to the Wall Street Journal, Shekar Natarajan, American Eagle Outfitter’s chief supply chain officer talked about the importance of having control over every part of the customer experience, a line of thinking echoed by many DTC brands. “Supply chain is becoming more of a consumer-facing activity,” he said. “And in that world, you need to basically have consistency and control of your experience.”
What I’m reading
- Chipotle workers spoke with Marketwatch spoke about how a huge influx in online orders is making their jobs more difficult, especially when combined with ingredient shortages and customers who are angry about long wait times.
- Some CPG giants like Hershey’s and Kimberly Clark are cutting back on advertising in the wake of temporary product shortages.
- Retail Dive has a look at how DTC brands plan out their exit strategies.
What we’ve covered
- Restaurant chains like Momofuku, Carbone’s, and Bubby’s are refashioning themselves as CPG brands, after the pandemic underscored the importance of diversifying their revenue streams.
- Facebook is rolling out its largest live shopping program to-date ahead of the holidays, with plans to host daily streams with retailers like Walmart and Macy’s through the end of the year.
- Shopify is betting on international markets to drive significant revenue growth, and has been expanding its assortment of cross-border tools.