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. More from the series →
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.
As direct-to-consumer brands rush to sign leases, swimwear brand Andie is taking a more methodical approach.
The swimwear brand has two pop-ups in the works — one in Sag Harbor, New York which opened at the beginning of the month, and another in Berkeley, California that’s scheduled to open on May 27. Founder Melanie Travis said that for now, the brand plans to stick to longer-term pop-ups (the Sag Harbor and Berkeley stores will be open for about seven months) “It’s still early for us in our retail journey, and I think there’s a lot for us to learn,” Travis said.
There’s been a boom in direct-to-consumer startups opening new stores lately, as e-commerce growth gets harder to come by. In interviews with executives at direct-to-consumer brands, many of them like to position new store openings as a chance to reach new customers, as well as meet offline shoppers where they are.
But, opening permanent stores is still a daunting proposition for startups that have only been around for a few years. Opening pop-ups, rather than permanent stores allows brands to get a better sense of what locations and store layouts perform best before committing to opening a full fleet of brick-and-mortar locations.
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Andie, founded in 2017, is profitable and has sold 1 million swimsuits to date. It’s now figuring out its retail expansion strategy. Andie previously ran one pop-up before, a West Palm Beach location that was open from November through April.
As a brand whose sales cycle is very seasonal, Travis said that Andie wants to see how store sales vary by location, as peak swim season looks different in warmer climates.
At the West Palm Beach location, Travis said that shoppers gravitated more towards colorful swimwear, while neutral colors sell better online. Other top sellers at the story included products from other companies.
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Andie carries a small selection of third-party products on its website — mostly products meant to compliment its swimwear collection, like Supergoop sunscreen and Corkcicle water bottles. Andie will continue to carry these products at its Sag Harbor and Berekely pop-ups.
“Paying attention to third-party assortment in our boutiques is is an increasing priority,” Travis said. “The ability to increase the basket size in store, there’s a lot of levers there.”
Melissa Gonzalez, founder of experiential retail firm Lionesque Group, said that when digitally-native brands open stores for the first time, “there’s a lot of assumptions… what you think might be really popular might not be as popular.”
Gonzalez said that she advises brands to do a pop-up for close to year — or, at a minimum, a quarter; “otherwise, they are not going to get a comprehensive look at what opening a permanent stores is like.”
Travis said she believed the iOS14 update has played a large part in the onslaught of DTC brands opening new stores. “I think opening stores is just another way of diversifying your marketing mix to, to help find your customers,” she said.
This has lead to a feeding frenzy come lease signing time. “When we hear of a location, it’s usually within a few days that there’s multiple [letters of intent] on the space,” Travis said.
Travis said that while she is open to opening permanent stores, it is still early days. As she put it, Andie has been in business for five years and many places require leases of five years or longer.
“There’s an emotional component of signing a lease,” Travis said. “It’s as old as the entire business.”
DTC earnings roundup
Within the past week, three of the top publicly-traded direct-to-consumer brands — Figs, Allbirds and Warby Parker — reported their first-quarter earnings. Some highlights from their respective earnings reports:
- Figs reported that revenue was up 26.4% year-over-year, to $110 million. Executives pointed to a 16% year-over-year increase in average order value as one of the most positive signs of the quarter. However, gross margin decreased 40 basis points year over year due to increased freight spend.
- Allbirds’ revenue for the first quarter was $62.8 million, up 26% year-over-year. The footwear and apparel retailer also opened four new stores during the quarter, helping drive a 129% year-over-year increase in store sales. Last quarter, Allbirds said that it would start making its products available for sale via wholesale, and executives revealed this quarter that Public Lands and Zalando would be its first two retail partnerships.
- Warby Parker continues to bet on stores to drive sales as well, opening eight new stores during the first quarter and announcing plans to open 40 new stores this year. Net revenue was $153.2 million, up 10.3% compared to the first quarter last year. The eyeglass retailer also claimed that it lost an estimated $15 million in sales in the first quarter due to the onset of the Omicron variant.
What I’m reading
- Just when you thought hype around the virtual world was finally dying down, Crate and Barrel named a new senior vice president of the metaverse.
- The stock prices of Oatly and Beyond Meat have tumbled in recent weeks, underscoring the challenges that lie ahead for plant-based food products as consumer demand wanes.
- Grocery delivery darling Instacart says that it has confidentially filed to go public.
What we’ve covered
- The footwear space is crowded, but Kicks Crew hopes to gain an edge by helping mom-and-pop sneaker shops sell online.
- How startups like Bean Box and Coconu use product bundles to drive more sales.
- In a twist on the typical influencer marketing playbook, pet food brand Brutus Broth enlists canine celebrities – and their human owners to – build brand awareness.