Good Morning Operators!

I hope everyone had a relaxing holiday break and got to spend plenty of time with loved ones. I know lots of DTC brands who are going to launch in retail in 2024 or are looking to expand in that channel this year. Lots of folks (including some of you) have asked me, “Zach, how do I win in retail?”. Today’s content is a non-exhaustive attempt to answer that question on a 1:many basis. We could definitely create an entire content series around just this (Caroline puts a lot of great content out there) but in the interest of keeping this content short enough to read in one sitting, I’ve produced a reader’s digest version of what I know. Areas not covered extensively today include Amazon, “Getting in” to Retail”, Sales & Field Marketing, Wholesale Fulfillment, and a few others.

Why does retail matter in the first place? Why should brands think about Brick and Mortar? The (not so) hot take here is, today’s consumer isn’t online or offline. They’re Omnichannel; i.e. they are constantly shopping online + offline and aren’t exclusively loyal to exlclusively purchasing items online as they were during the peak of the Covid-19 pandemic. According to Mckinsey, “75% of US consumers are actively researching products and making purchases in both brick-and-mortar and online channels.” Therefore, I believe every consumer goods brand should at least consider retail in some capacity since so much shopping (and purchasing) occurs offline.

Understanding Retail: Is it right for me? Should I enter right now?

It’s important to ask this question because believe it or not, not all retail is for everyone.

Read that again: Not ALL retail is for everyone.

Here are some considerations to make when thinking about getting into retail:

• How fast am I growing on DTC?

  • What is my ARR and how fast is it growing YoY?

    • If it’s not growing, why is that? It’s important to note that if your brand is failing at DTC, being in retail is not necessarily going to “save you'“. In fact, it often hurts more than it helps, particularly if you aren’t ready.

  • Understanding Digital Efficiencies:

    • What do my current unit economics look like for DTC? What are my gross margins?

      • Is my CAC going up or down YoY? Is my LTV, AoV going up if CAC is rising?

    • How flexible is my CAC with my paid media right now? Is paid media profitable?

• Category & Competitive Analysis:

  • What is the normal entry point for my category in retail? This is something that varies broadly across categories in CPG. Here’s what I’ve seen across a few categories:

    • Beauty/Skincare: Typically enters retail around ~$20-$30M ARR for DTC.

      • Notable exceptions: Jones Road Beauty is an 8 figure ARR business that only has 1 retail store in the West Village. They aren’t in any big retailers. (Yet?)

    • Apparel: Typically enters retail around $10M ARR

      • Notable Exceptions: True Classic Tees (They have 8 retail stores and are launching more of their own, but can’t be found at big box retail despite being a 9 figure ARR brand.)

    • Beverage: Early, around the $1M ARR point for DTC if not sooner. Oftentimes, Brands will launch directly in retail in this category because of the difficult path to profitability in DTC for this category.

    • Supplements & Other Shelf-Stable Consumables: Typically enter retail between $5M-$10M ARR.

• Retail Readiness: (not a hard & fast checklist, just a few items to consider)

  • Supply Chain & Production Infrastructure:

    • Do I have sufficient 3PL support to fulfill wholesale orders from Walmart, Target, or other retailers of interest?

  • Marketing & Branding:

    • Is my brand big enough to jump off the shelf?

    • Will my current customers notice / care that I’m in retail? Is this a place where they shop for items in my category?

    • Do I have the bandwidth / headcount to support running retail media?

      • Am I able to understand and measure the results ? (Spoiler: It doesn’t perform the same way media for DTC does)

Big Box and Beyond: Playing to Win in Retail

Winning in retail comes down to execution, patience, and building a thoughtful strategy. Here are some of the areas that I think about most:

• Operational Excellence: 

  • Supply Chain & Production: Do we have enough production infrastructure to fill orders from Walmart or Target? Do we have enough flexibility to pivot if a 3PL partner falls through?

  • SKU Segmentation: What SKUs are we going to launch in retail vs keep on DTC? What do we feel will sell in retail vs is best kept for online-only?

  • Packaging: How is my packaging going to show up on shelf? Does it draw attention?

    • Case Study: Great Packaging in Action

      • Liquid Death:

        • Bold Branding: Skulls + Funny slogans, “Murder Your Thirst” resonate with the younger, non-conformist consumer demo seeking an alternative to bland bottled water.

• Marketing:

  • Branding:

    • How good is my creative? Does it pop?

    • Do I have strong (and approved) “Find us at ______” creatives to use for my retail media?

    • How might I design my messaging and branding for a potential customer who has no idea who I am or what problem I’m solving for them?

      • Think critically about the consumers in your category who are not “problem-aware” vs those that are. How can you educate them in your retail media so that when they see you in the aisle they stop and pick you up instead of just walking by?

  • Community:

    • Who are my fans and where do they shop?

    • How can I incentivize them to buy my product in-store and share about it on social media?

      • Think about a "giveaway” or influencer/creator partnership your community might get jazzed about. If you’re cash/resource-strapped, you could also think about having a “launch” at a retail location and have your community “Meet the founder/team” to get folks excited about your brand being in retail.

  There are lots of factors that determine success of retail sell-through, I’m going to zero in on Retail Media (any media channel/tactic you’re using to drive retail sales) since there’s so much to dig into there.

  • Retail Media:

    • Measuring & Establishing KPI’s: It’s no secret that big box retailers minimize the POS data that they share with brands and don’t let you see who bought from you or how much they bought, etc. That said, here are a few KPI’s that I’ve seen brands measure & optimize towards with retail media:

      • Store Traffic: How much foot traffic did I drive to ABC Retail Store Chain last month from my retail media? How many people walked into ABC Store location after seeing one of my ads?

      • Omnichannel engagements: On my website, how many people are engaging with the “store finder” page? (E.g. Yeti’s “Find a store” Page, Liquid Death’s Store Finder)

        • “Store finder” Page views, scroll depth and time spent on that page

        • “Where to Buy” engagements/clicks on PDPs & Landing Pages (e.g. see this one from Sharpie)

  You should be measuring all of the above data points, or as many as you can as possible when running retail media. If possible, have your digital media campaigns optimize towards these engagements directly so that you can develop the omni consumer journey & path to purchase. In isolation, these signals may not mean much, but together they can paint a compelling picture about the quality of that omnichannel traffic you drove to your site.

  • Media Lift & Incrementality: Measuring incrementally of your retail media is paramount to successfully using it to drive sell-through in store. The Geo-Lift Framework below is adapted from an incrementally framework from Haus.io that they leveraged in this case study. As a note, this approach is most effective if you’re selling nationwide in a retailer such as Walmart or Target.

    • Geo Segmentation: Pick 3 Geos that have similar sell-out data. This is important because you don’t want your data to be skewed by performance trends in different geos.

    • Geo 1: Run DTC Media, no offline/Retail media driving to stores

    • Geo 2: Run Offline/Retail Media + DTC Media.

    • Geo 3: Go Dark, run 0 media

  Run this test for about ~4 weeks during a non-seasonal peak period and closely monitor sell through data. What does the % difference in sell through performance look like for these different geos? If you don’t see any lift in the Geo where you ran retail media, there are several potential reasons why it didn’t drive incremental sales; 1) Weak Creatives 2) Not enough data for campaigns to ramp up & perform within the testing time frame frame 3) Other external factors; placement differences in store, stock issues, etc. Other considerations may include thinking about the brand loyalty for that retailer across different geos. Are shoppers more likely to visit competitor retailers in that geo vs others?

• Creating Omni Halos & Engaging the Omni-Consumer: When someone buys from you online, it’s imperative you find a way to get them to come back to YOU online. A few tactics to consider:

  • QR codes on packaging, send them to →

    • Landing pages with UTM codes that help ensure you know that visitor saw you in retail

    • Loyalty Programs

    • Branded content on the site explaining your “Why”

  • Retention Messaging: Blast your email lists to “Email or DM us a picture of your receipt for a gift card or loyalty points on our DTC site (Obvi did this successfully with the vitamin shoppe a while back).

In conclusion, there’s a lot of opportunity for brands to win in retail, and most digitally native CPG brands should strongly consider making that a significant part of their GTM strategy in 2024. A TLDR of the above:

1) Determine if retail is RIGHT for you: Is it right for you right now? Also, don’t sell all of your SKUs in retail (save for a few exceptions, such as beverage)

2) Determine which retailer is best for you, based on who your customers are and where they shop. Is it Big box like Walmart or Target? Or is it specialty retail such as Sephora or Famous Footwear?

3) Win in retail with Omnichannel Measurement (Measure omnichannel touchpoints), Incrementality for Retail Media, and creating Omni Halos.

That’s all for this week! Cheers 🙂