Preview: The Longer Game
A podcast episode where we talk about community, retail, AI, and everything in between!
I recently had the opportunity to talk about a range of topics with Michael Maher, and the podcast episode is dropping tomorrow! You can watch them here:
If you’re just interested in the retail highlights, here’s a few clips you might enjoy:
Some anecdotes about DTC brands (sometimes painful) journey to learning how offline channels work - whether wholesale or owned retail.
How DTC brands are repeating the same mistakes traditional retailers did many years ago.
I describe a common mistake many retail newbies' make that leads to a self fulfilling prophecy of poor performance: chasing cheap rents. If you think about rents as a retail CPM, then it shouldn't come as a surprise that the lowest rents will generate the lowest quality (or the fewest) leads. The key is to identify the rents that generate the most and highest quality traffic per rent dollar.
In this short, I briefly talk about the complex factors that can make or break a store's performance. Just like when a whole company hits or misses its goals, there are loads of internal and external factors that can lead to a store's performance -- good or bad -- that make this channel complex.
Unfortunately, you can't just open 1 store and know whether the channel is going to work for you or not. Store #1 might suck, but for a reason that doesn't exist for stores #2-#10.
Retail requires patience -- and capital!
I don't expect everyone to agree with what I say in this short: focus on the total real estate portfolio ROI just as much as you do on an individual store's ROI.
Much like how fund investors rely on the few home runs in their investment portfolios to offset the numerous flops (esp in VC), I like to think about a retail channel in the same way. There are so many factors that influence a store's performance that you'll rarely, if ever, have a fleet where every location hits the pro forma.
So if you miss pro forma by 20% in one location, then as long as you're making up for it in another location then I wouldn't sweat it - focus on the portfolio ROI. If you negotiate your leases well, you'll have opportunities to prune out the underperformers over time and strengthen your portfolio.
Obviously it'd be great for every single store to hit the pro forma on the nose, but that's just not realistic. Great retail fleets take time to build and with an eye on the forest, not just the trees.
Department stores are a dying breed of retailers. They're notoriously understaffed, poorly merchandised, and the associates are underpaid and ill-equipped to serve the modern customer.
While I'm optimistic about a small handful of them (like Nordstrom), I generally don't think the model (in its current form) will survive. Customer expectations have eclipsed the model's capabilities.