Enigmas in DTC markets: NYC, LA, and Miami

How these markets are different from the rest, and how to maximize your potential in each

The tl;dr

1. In most cases, geospatial frameworks are consistent across brands and across markets within brands

2. But there are some notable exceptions: NYC, LA, and Miami MSAs

3. These MSAs typically make up 20% or more of a DTC brand’s sales, but have unique characteristics driving — or even preventing — future growth

4. Understanding why and how they’re unique will help you grow these markets whether you have offline retail expansion plans or not

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One of the many themes in the Clicks to Bricks Playbook is the consistency of patterns in DTC brands’ data

Ironically, one of the many consistencies across brands is the inconsistency of consumer behavior in a few key MSAs:

1. New York-Newark-Jersey City NY-NJ-PA

2. Los Angeles-Long Beach-Anaheim CA

3. Miami-Fort Lauderdale-Pompano Beach FL

These are some of the largest MSAs for DTC brands — usually making up 20% or more of their business in total — so it’s important to understand their nuances as you evaluate those geographies’ sales performance, and especially when you start thinking about building a retail footprint.

In many past newsletters I’ve mentioned how I think MSAs are great proxies for many brands’ store trade areas. And technically they are, but there are some market features unique to each of these markets that drive some nuances that may not be so obvious. These markets are each unique for one more of the below reasons, depending on the market:

1. Competitive landscape

2. Geographic characteristics

3. Public transportation availability and usage

4. Demographic makeup

Let’s dig in…

New York-Newark-Jersey City NY-NJ-PA

As a reminder, MSAs are agnostic to city and state boundaries. Despite that, this MSA is typically referred to as the “NYC MSA,” which can be a little misleading given it captures parts of the entire tri-state area (NY+NJ+CT).

What makes MSAs so valuable is that they take into consideration the typical commuting paths that center around a single nucleus: in this case, Manhattan. But this is also a downside to a market as unique as this one, since it makes repeatable analysis difficult.

To anyone that lives in the tri-state area, it’s obvious that (1) there is a large commuter and reverse commuter population, and (2) the subway is the most common form of transportation across nearly all demographics. Whether you’re making 5, 6, or even 7+ figures income, chances are you still take the train to and from work. The city is also one of the easiest to navigate:

You can get to most places within 30 minutes, and certainly within an hour — which makes trade areas a lot tougher to map and understand using drive times. Stores in SoHo still serve customers as far away as the Upper East Side because of how transient the city is. Unfortunately, that also means the traditional drive time trade area isn’t really a great fit:

Drive time trade areas: red = 15min; yellow = 30min; green = 60min

For anyone who lives in the area, it’s pretty obvious that this isn’t an accurate portrayal of a SoHo store’s pull. However, when we shift to trade areas as defined by public transportation, it seems far more representative of reality: