If you're a clothing company, the margins you can reclaim if you're able to pull off direct to consumer, are astounding.
That $60 shirt you make that is getting sold in a store like Neiman Marcus or Macy's, you're getting $12.75 for it as the maker. Stores charge obscenely for their distribution access (and for the most part they have to, their costs are very high; a higher margin store like Macy's, in good times, only has a 6% net income margin).
Ten years from now the direct to consumer segment is going to be massive. The online platforms that can generate sales referrals (distribution), are going to become the new margin-eating department stores, the middlemen providing access to the buyers. That's eg: Instagram, Pinterest, Facebook, et al. There will be dozens of more specialized players as well. Right now businesses are commonly selling (leads &or transacting) across two dozen platforms (from eBay to craigslist, from YouTube to Poshmark, from Instagram to Etsy or Shopify), ten years from now that'll be four or five dozen. Sometimes you'll get lucky and get quasi-free distribution on them virally; most of the time you'll have to pay up for reliable distribution. There will be the occasional rare direct to consumer success story that has truly crazy margins because they spread entirely virally, they'll be the magic unicorn story that gets frequently written up as the trend gets larger and larger.
All these DTC clothing stores I've seen only tend to target the high end crowd. I don't want to pay $100 for a basic t-shirt or jeans. If someone can get good fitting t-shirt and jeans for the prices at Target but online, I'd be happy to buy.
I wonder how much of those saved margins will get eaten up by increasing customer acquisition costs as more and more competitors pop up in DTC.
First movers will probably have some brands awareness advantage for a lower CaC cost, but I question brand loyalty in DTC product lines without seeing numbers.
What I'm curious about is where the breakeven point is regarding tradeoffs with the benefits of selling to a retail chain.
For many products, the store is simply an artifact of a technical limitation, one that is now going away. Record shops, electronics shops and the like at best add little value and often (in the case of Best Buy/Frys/Circuit City etc) remove value.
Bookstores are a funny one: I miss the days when there were 7 bookshops in Palo Alto an still refuse to buy books from Amazon. But in other places books are sold sealed in shrink wrap, I see no reason to go to a physical shop rather than buying online.
Even though i purchase nearly everything online these days, record stores are a nice experience. hunting in amoeba bins just cant be replaced even if it isnt the cheapest way by far.
I'm with you on the record shop experience. You can't beat digging about shelves and boxes of vinyl. I don't mean the big high street chains like HMV or Virgin (bleh), but the small to medium size store (unfortunately killed off by the likes of HMV/Virgin) where the owner and staff had truly amazing knowledge about what they were stocking.
For clothing I don't like the online trend much. But already today a lot of stores have a much smaller choice than years ago. So sometimes customers are forced to buy online, because stores just don't have it anymore.
I really like mixed-mode stores for clothing: try things on in person, and order online. Bonobos follows this model, and it’s great: they can have one article in store in every size for every line, and one of each color or pattern. But they don’t need both: I can see what fits the best, they can keep their store well organized and easy to find what I want, and I know what I’m getting is what I wanted, without wasting a ton of time trying to find the exact size/color matches in a giant pile of clothes.
Hopefully this trend continues. Every mile of my overcrowded and high COL city dedicates a few square blocks to huge retail outlets - Office Max, Kohl's, Best Buy, etc. Besides the stores themselves, they all include huge parking lots which are often completely empty.
Though I've made purchases from these companies regularly, I probably step inside the physical stores no more than once every six months.
Knock em down, build more smaller residential neighborhoods, and maybe those of us under 40 can begin setting down roots, buying affordable homes, starting families.
Seattle has a lot of land-use faults but I actually kind of like the recent "shopping center" trend here. Next to Northgate Mall (a traditional, sprawling, flat mall with huge parking areas) are two multi-story retail buildings. All of the usual chain stores, save Barnes and Noble, are in them. Target, Best Buy, a movie theater, Petco, a sporting goods store, and so on. If we build more like that and less like Northgate or Westwood Village, I'd be happy.
(As for actually going into the stores, I do rather often mostly because ordering online has turned into such a mess for me. Having the stores "stacked" like that makes them a lot more convenient to manage.)
I wonder if we'll start seeing small, modernist physical stores pop up with nothing in them but kiosks linked to all these DTC startups (maybe offering high end coffee or booze to differentiate the experience from your couch)
'Per one observer at the time, the streets were “literally carpeted with a warm, brown matting . . . smelling to heaven.” So-called “crossing sweepers” would offer their services to pedestrians, clearing out paths for walking, but when it rained, the streets turned to muck. And when it was dry, wind whipped up the manure dust and choked the citizenry.'
On the whole, I'd rather have electric bikes and cars.
> Being better for the planet is not the main part - for starters, homo sapiens dying off would likely also be better for the planet
George Carlin had it right. There's nothing wrong with the planet. The planet is fine and will be fine no matter how much we meddle with it. It gets to live on a geological timescale...it was here long before us and will be here long after we're gone. Rising CO2 in the atmosphere, pollution, rising seas and all that won't kill the planet. Some species will die, new species will evolve and the earth will keep supporting life just as it has for millions of years.
What "save the planet" means is preserve an environment that's best for the homo sapiens and other species we care about. So killing off all homo sapiens isn't really better for the planet. It might be better for the survivors if a good chunk of the population died out or even if we stopped growing the population of humans, but it's arrogant to think that environmentalism is acting in the planet's best interests. Environmentalism is just acting in the best interests of our species instead of the best interests of individuals.
“Better for the planet” doesn't make sense; it's anthropomorphizing the Earth and projecting a value system—presumably the speakers, but they might fantasize the Earth as having a different one of its own—onto it.
eBay is probably closer than Amazon to that model. Amazon is more aiming for a consistent experience across their range and deemphasising the third parties you are buying some of that range from.
There is something to be said for physically holding an item. Recently I was on the fence about getting some Lifx light bulbs, but I was in Best Buy holding the box and found myself at the registrar before I knew what happened.
With technology I forsee a future were people directly order from the factory line. But today we already see the rise of Chinese websites undercutting Western webshops. And in my own country it is quite popular to buy mobile phones straight from Samsung and others bypassing telecom operators and retail.
The internet has really slaughtered traditional retail space.
How are they going to deal with logistics then? Or inventory management? I see that is the essential reason why Amazon will be relevant for a very long time.
3PL allows DtC companies to scale along with demand. These are companies that warehouse and ship products for multiple companies. They receive shipping containers, unload them into inventory, and ship orders. They're able to ship same-day and their inventory management software is able to interface directly with the ordering systems and ERP of the other companies.
Seems like that would be easier for DTC companies than for Amazon. The companies just have a handful of different SKUs and therefore can probably fit everything into one warehouse (where they also make the products).
If you have everything in one warehouse you can't do fast delivery that customers demand now. A lot of the big retailers have started leveraging their store networks to do same-day pickup and delivery.
There is a large class of products that don't really need any sort of inventory management; just-in-time manufacturing allows companies to respond immediately to demand, and not have to worry about managing more than a small buffer stock.
That $60 shirt you make that is getting sold in a store like Neiman Marcus or Macy's, you're getting $12.75 for it as the maker. Stores charge obscenely for their distribution access (and for the most part they have to, their costs are very high; a higher margin store like Macy's, in good times, only has a 6% net income margin).
Ten years from now the direct to consumer segment is going to be massive. The online platforms that can generate sales referrals (distribution), are going to become the new margin-eating department stores, the middlemen providing access to the buyers. That's eg: Instagram, Pinterest, Facebook, et al. There will be dozens of more specialized players as well. Right now businesses are commonly selling (leads &or transacting) across two dozen platforms (from eBay to craigslist, from YouTube to Poshmark, from Instagram to Etsy or Shopify), ten years from now that'll be four or five dozen. Sometimes you'll get lucky and get quasi-free distribution on them virally; most of the time you'll have to pay up for reliable distribution. There will be the occasional rare direct to consumer success story that has truly crazy margins because they spread entirely virally, they'll be the magic unicorn story that gets frequently written up as the trend gets larger and larger.