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Last week, my colleague Samantha D'Addario and I attended The SKU: Retail Brew Summit, a one-day inaugural event from media company Morning Brew. Held in midtown Manhattan, the summit showcased around 40 speakers and 18 panels and break-out sessions. The event was attended by 308 industry players from 50 different brands and featured retail, marketing and operations practitioners from legacy brands such as Kroger and Zappos, as well as direct-to-consumer (DTC) startups such as Cadence, Canopy, Hill House Home and thredUP.
Almost universally, panelists addressed the potentially looming recession, persistent supply chain issues and which retail tactics and strategies were working for them. James Reinhart, co-founder and CEO at online consignment and thrift store thredUP, predicted that economic headwinds and other factors will continue to drive the burgeoning second-hand market, which is projected to double in the next few years, reaching $82 billion by 2026 .
Reinhart said consumers have been trained to expect retail to be discount-priced compared to years past. “Right now, we live in a world where items are 60% off all the time,” he said. “That is the moment where resale, like off-price (clothing) a decade ago, will shine.”
Here are four key takeaways from The SKU:
With the release of its iOS 14.6 update in May 2021, tech giant Apple shut down in-app tracking and impeded mobile advertisers’ ability to accurately measure whether their campaigns were successful. In the aftermath of the release, news analyses concluded that DTC brands were struggling to attract new customers through personalized ads on Facebook and Instagram—a marketing investment they were accustomed to seeing success with.
However, at The SKU, CEO and founder Steph Hon at Cadence, a refillable travel containers startup, said that iOS 14 hasn’t been all that detrimental for her team. They have still been able to find success through Facebook, Instagram and TikTok by leaning into metrics that pinpoint the best ROI.
“We have been ruthless with our testing, seeing what works,” Hon said. “TikTok has been really impactful for us.”
Michael De Santis, marketing and operations director at humidifiers brand Canopy, said that his team was initially worried about the iOS 14 update. But then they started blending first-party and third-party data to build their own lookalike audiences.
“We still found a ton of efficiency through Facebook and Instagram,” De Santis added. “It hasn’t been that bad for us.”
DTC brands have increasingly looked to build an offline retail presence in the last few years. In most cases, they first experiment with pop-up stores before signing commercial real estate contracts and going all in on brick-and-mortar.
Such has been the case for Hill House Home, a six-year-old clothing and bedding retailer which learned that locations—whenever possible—need to be tested out rather than approached with gut-feel assumptions. In the span of less than a year, Hill House Home set up two pop-up locations, one in SoHo, Manhattan’s fashion district with dense foot traffic from millions of people, and the other on Nantucket, Mass., a resort island with a peak summer population of 50,000.
Nell Diamond, founder and CEO of Hill House Home, said that the Nantucket location surprisingly attracted 1,000 customers in one day compared to only 200 visitors in SoHo. So, while the retail adage of ‘location, location, location’ still counts for a lot, Hill House Home’s results show the right location isn’t always as simple as picking a spot with incredible foot traffic.
Moving ahead after testing the pop-ups, Hill House Home can be counted among the growing number of DTC brands who want to increase their investment offline. Diamond went as far to say that her brand's future will be “all brick-and-mortar.”
One of the most frequently repeated lines by a range of executives during the event was: “We started listening to our consumers.” For instance, Crocs CMO Heidi Cooley and her colleague, Chief Digital Officer Adam Michaels, shared The SKU stage and said that they measure their success by having consumers of their footwear complete this sentence: “I never thought I’d buy Crocs until…”
“So often, the answer is ‘Post Malone’ or ‘Lightning McQueen,’” Cooley said, referring to the popular rapper and to one of the animated characters in the Pixar movie franchise ‘Cars,’ respectively.
Indeed, Crocs customers have expressed their strong liking for influencer collaborations. Cooley and Michaels rattled off details about their Post Malone collaboration, which crashed the Crocs’ website due to the massive interest and sold out , and how the adult-sized Lightning McQueen Crocs were released and also then quickly sold out .
“Lightning McQueen is one of the highest drivers of traffic and sign-ups we’ve done,” Michaels said.
The subscription experiences market is estimated to grow to $2.6 trillion by 2028 , so it was naturally a topic for speakers at The SKU. CPG brands should take advantage of how Amazon “has trained all of us to subscribe and save” due to subscriptions being the ultimate signal for brand loyalty, suggested Jennifer Peters, DTC manager at health gummies company OLLY, which is part of Unilever.
“For somebody to come to Olly.com, they have to really care about the brand,” Peters said, “because you can get OLLY Sleep [gummies] anywhere.”
Around 75% of DTC brands are expected to have a subscription-based offering by 2023. For brands that are set to launch their own service, Peters had a couple of lessons learned to share. Her team started out with quarterly subscriptions, which she said “painted us into a corner and limited our ability to scale. We had the wrong [subscriptions vendor] partner and the wrong framework.”
She and her team reworked their program to offer OLLY refills every one, two or three months, depending on the customer’s preference. “If you don't like the subscription program you have, it’s OK to hit pause and rebuild it,” Peters said. “Making that decision was a hard piece of the puzzle.” But the effort is worth it, she added.
“If you don’t have a subscription program, get one—they are not hard to start,” Peters said. “If your bosses aren’t on board at first, you can overcome those objections with data.”
<split-lines>"If you don't like the subscription program you have, it’s OK to hit pause and rebuild it."<split-lines>
In closing, it was educational for Samantha and I—who belong to Mission North’s Commerce & Supply Chain practice —to learn about Cadence and Canopy successfully working around Apple’s app-tracking crackdown to measure and optimize digital ads. And the winning stories from Hill House Home (pop-ups), Crocs (influencer collaborations), and OLLY (subscriptions) and others were equally compelling. These examples are helpful for better understanding the state of retail heading into the 2022 peak shopping season as well as going into next year.
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