Lululemon has 'ambassadors'. They are the face of the brand in the local community. They promote healthy lifestyle.
There are 3 kinds of communities a D2C brand can build:
An all-equal user community (reduces support cost, increases loyalty and influences product development)
A tiered community where the users come for the experts (Breaks down a 'hard to use' product or 'hard to acquire' habit into learnable chunks aided by experts - A cross between gig economy and community that is connected by learning) - Peleton has trainers. Lululemon has ambassadors
A producer community (where the organization is built to product and market on behalf of its members) - Co-ops are a standard way of how this works. CHS, Land Lakes are good examples
I have not seen good examples of D2C brands that are producer-first.
I recently read about the story of 'Lijjat Papad'. It's not as big as Land O'Lakes or even Amul (a $10B Coop that is also a phenomenal marketing engine, from the same country as Lijjat). Lijjat makes about $100M a year and is HQ'ed in India.
It's a 60-year-old brand that started with $1.5 (not a typo) investment that has now turned to $100M. That's a CAGR of 35%. I don't know the first year's revenue and so I took the seed capital as the base year's revenue. They profit in year 1 was 0.5 cents (not a typo). What's impressive is that Lijjat is a food brand that makes rice crisps (the ones you get as an appetizer at any Indian restaurant). There are a variety of ingredients. There is a multi-stage preparation process. All the preparation is decentralized to households of 'bens' (Sisters). There are 43,000 sisters who take the dough home, kneed them, flatten them into circular, thin slices of bread which are then packaged and distributed across India and exported across the world. They don't have machines. Everything is hand-made. Profits are equally shared with every ben, whether she joined a day back or has been there for 50 years.
The organization is run by 21 bens who form the committee. The bens who run the committee have to come from the grassroots - join as a roller, rise up to a branch head, and then get promoted to the corporate office, from where they get to the 21-ben committee. No men are allowed to members of the co-op and if a man is employed for salary, they don't have any say in how the organization runs.
Here's what is remarkable about Lijjat and what all D2C brands aspire to achieve:
Lijjat never raised money for equity
They do not take donations (as the movement is about dignified earnings for bens and not alms)
They are always cash-flow positive
Their accounts are closed at 'branch level' everyday
Trade has to pay cash upfront to take stocks
Ingredient sourcing and milling are centralized. Training, production, distribution, and marketing are decentralized.
Production at regional level is aligned to distributor's appetite to pick. Minimal inventory is maintained at Lijjat's side.
D2C brands stake their claim to a better life for their stakeholders (mostly, customers) and that is how they disrupt incumbents. Winning customers' loyalty is a long game. Brand building is an outcome of loyalty. Digital advertising arbitrage does not build a brand.
It's a great time to build D2C co-ops.
Co-ops align well with strong causes
Co-ops are anti-fragile
A lot of people are going to be at home for a long time or forever and they need dignified living
'A papad hand-made by our 43,000 sisters' is a better brand-building story than any coverage you can get on Glossy or Vogue. It takes time. But we are in a new world where time is still
Co-ops don't work towards an exit. Co-ops don't have preferred shares for the founders. So, what's in it for an enterprising founding team that actually likes an upside? I haven't yet seen innovative models that reward disproportional upside and yet keep the co-ops democratic and egalitarian, other than an IPO.
Maybe, that's how it is supposed to be!
PipeCandy is a market intelligence platform that tracks the global eCommerce & 'direct to consumer' landscape.
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