Road to Challenger Brands: Not All DTC Brands Need a Store

After this week, two prominent DTC brands are in very different places. Casper, the company famous for putting a mattress-in-a-box, made its public debut to a warm reception on the New York Stock Exchange. Meanwhile, the Federal Trade Commission blocked Edgewell Personal Care’s acquisition of razor startup Harry’s. The trial is set to begin June 30. Both brands are learning there isn’t a one-size-fits-all strategy as they try to shake up existing notions of how business is done. Mattresses and razors, after all, aren’t the same thing. According to Bryan Gildenberg, chief knowledge officer of retail at Kantar Consulting, both brands made decidedly non-DTC decisions that worked for them. In 2012, four years into its founding, Harry’s decided to place its products in Target. In 2018, Casper went offline and opened its first brick-and-mortar location in New York. “Those are two vastly different things you do for vastly different reasons,” Gildenberg said. We spoke to Gildenberg ahead of Adweek’s Challenger Brands summit, set for March 4-5 in New York, about current DTC strategy. Find your fans Because Harry’s is a product that “explains itself on the shelf,” it makes sense to go for wider distribution because the problem it’s trying to solve is one of reach, according to Gildenberg. Mattresses, on the other hand, are a bigger-ticket item that requires more convincing. “A retail store can be a much more efficient conversion platform than a million digital touch points,” Gildenberg said. “No person in the world spends $800 as casually as they spend $8.” However, Gildenberg pointed to reports that Procter & Gamble was planning to close several of its Art of Shaving stores. “You don’t need a store to tell you to buy a razor,” he said. Some sort of physical presence can help when a brand is just starting out, he noted. For starters, it lets consumers know you exist. It also can provide Instagram-worthy moments. Either way, Gildenberg believes the best way to begin is by developing a core group of consumers who care. “You can do a lot more as a small brand with a few people who love you than a few more people who like you,” he said. Be strategic about your outreach The next step is to target similar consumers who are just as likely to care about the brand, but haven’t heard of it yet. He suggested keeping the scope narrow though particular podcasts, key sponsorships or placing out-of-home advertising in neighborhoods where ideal consumer groups live. As young companies start to grow, the trick to keeping your reputation intact is to treat every stakeholder as though they were a customer. “If you have a great customer experience but a lousy stakeholder experience, the great customer experience doesn’t really matter very much—especially when those stakeholders are an integral part of your value chain,” Gildenberg said. Is the bad attitude seen in some recent DTC brands due to arrogance? “I don’t know if it’s arrogance,” Gildenberg said. “I would never ascribe bad intentions to what could more easily be explained by not knowing what you’re doing.” Gildenberg added that if someone gave him hundreds of millions of dollars at age 28, he probably would have alienated some of the stakeholders in his value chain, too. “I don’t think there’s been proper regard in this funding environment for just the basic experience of managing a complex enterprise,” he said. “There’s a skillset attached to that that no amount of passion mixed with charisma or funny hats can fix.” Is the DTC wave over? When asked if he thinks we’re reaching a DTC saturation point for both consumers and investors alike, he responded, “I hate simple answers to things, as I much prefer complex ones, but, yes.” Consumers have limited time and attention, and the idea that they’re going to continue buying enormous quantities of the things they need from an ever-growing multitude of DTC brands is misguided. As for the investor side, Gildenberg pointed to the greater fool theory, which posits that sellers are simply trying to find buyers who will pay more for a product than they did. “These are people entering something knowing that in all likelihood, their exit strategy is to sell to somebody who gets more excited about the idea in the intervening time frame than they were initially,” explained Gildenberg. “It works until it doesn’t,” he said. “Eventually, you run out of fools.”