A new D2C men's fashion startup called 'Streak' has launched.
Their USP is not the product per se, even though they have innovated on material, comfort, etc. (with AI-based...you got it, right?). Their real innovation is 'real-time delivery'. You whip open your foldable iPhone, summon their app, select the dress that is recommended by that AI thingy, and voila, the dress is ready. All you have to do is to walk a few blocks and collect your dress from a collection point 'in a socially distant manner'. Oh, you can also walk in and see other new collections digitally. If they are physically there, you can buy them right there!
If you don't already realize, the startup is likely to be from the bay area and they would have just invented the 'clothing store' (just like how Uber invented the bus).
But instead of it being a 'suspended from reality' hubris, a store is likely to work. It just need not be a store that is exclusively operated by one brand.
USPS just (almost) confirmed that they are going to increase their pricing by 5% to 10% across all their commercial products. It is temporary but we know its unlikely to be. The cost of shipping, in the absence of USPS for the last mile (or USPS with different pricing), is going to make shipping costly. Then there is cost of returns too.
We don't realize how unrealistic the eCommerce business model is because nearly 50% of eCommerce is Amazon and they have gone beyond vertical integration and are cross-subsidizing eCommerce with other highly profitable business units.
D2C brands and pure-play eCommerce companies compete with a company that does not have to be profitable (Amazon, thanks to other cash machines it has) and are relying on a delivery partner that cannot be profitable and hence unsustainable (USPS). When Amazon turns on the screws further by making 'Same day shipping' table stakes , D2C and eCommerce companies have to look for ways to compete by changing the reference point.
Stores don’t have “cost per acquisition” and their conversion rates are 3x-5x more than online. The biggest bottlenecks have been rents and consumer behavior.
For a long time from now, consumers will appreciate restriction-less movement and the social activity of shopping. They have had enough convenience of being at home and they look forward to going out.
As WFH becomes the norm, going out will become an act of indulgence. What better indulgences are out there other than drinking, eating and shopping?
That leaves us with the biggest elephant in the room - rent per square feet. Manhattan retail rents at the levels of 2010. In some areas like SoHo, rents are likely to go as low as $400 per square feet. You can’t say the same about CPC rates and shipping rates. The faces of the Fifth Avenue, Magnificent Mile and Rodeo Drive are going to be affordable brands.
Remember that as WFH becomes the norm, pop-ups are going to get reinvented. They are going to become permanent fixers in residential blocks. The office smoke break will be replaced by the fashion sale break and you could walk a couple of blocks to find a pop-up.
‘Retail as a service’ players have to reinvent themselves as a turnkey solution - a last mile distribution centre that acts as the hub to serve showrooms across the city where D2C brands co-opt to sell and even fulfill.
It’s a no-brainer that the stores will come back and D2C brands will embrace them. It just may not be the mall stores as Macerich’s CEO, O’Hern is telling the public markets.
PipeCandy is a market intelligence platform that tracks the global eCommerce & 'direct to consumer' landscape.
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