Retail Apocalypse. Voilà comment Business Insider qualifiait il y a quelques semaines la situation actuelle (et future ?) du retail. Et à raison : aux US plus de 8600 magasins physiques doivent fermer en 2019. La France n’est pas épargnée - en témoignent les fermetures de huit enseignes Gap et plus de 30 Conforama cet été, pour n'en citer que quelques unes.
Dans le même temps, les Digitally Native Vertical Brands - ces ovnis du e-commerce devenus leaders aussi inspirants qu’anxiogènes - envahissent les rues. Littéralement : sur les 84 DNVB à fort potentiel identifiées en 2016 par Andy Dunn dans son article phare, 44 comptent désormais au moins un magasin physique. Ici aussi : difficile de se balader dans Paris aujourd’hui sans passer devant une boutique Sezane, Le Slip Français ou Jimmy Fairly.
Pour passer à l'échelle, il semblerait que les DNVB doivent faire tomber le “D”. “Halo effect” disent les Américains pour décrire ce phénomène qui consiste à ouvrir une boutique physique pour considérablement augmenter les ventes online. Mais alors...
Entre apocalypse et terre promise, à quoi ressemble vraiment le retail de demain ?
Quel modèle, quels KPIs et quelles conditions pour émerger ?
5. In the US,
physical store
openings in 2018
actually grew
by more than 50%
year over year
For every retail company closing,
five are opening stores
Source: National Retail Association (NRA)
5
6. 5Y Growth +37%
ROE 13%
PER 19,7%
Retail is witnessing an ‘extremization’ of its cohorts
+81%
13%
26
Price
Deliver value by selling
at the lowest possible
prices, ‘off-price’,
clearly communicate
that message to their
consumers
5Y Growth +37%
ROE 13%
PER 19,7
Balanced
Deliver value through
a combination of price
and promotion, and many
offer widely available
products or experiences
+2%
9,4%
12,7
Source: Deloitte Insights, great retail bifurcation
Premium
Deliver value by
premier or highly
differentiated product
or experience offerings
6
7. Net store openings and closings
109%
Price Balanced
-108,1%
Premium
+108,8% +263,8%
Source: Deloitte Insights, great retail bifurcation
7
8. Stores,
That are closing
● Decreased foot
traffic in large
format suburban
stores
● Lack of
omni-channel
strategy: online &
offline need to be
complementary
● Brands need to
relocate in the
city-center
FranceUSA
8
9. Stores,
That are opening
Discount chains ● DNVBs set to
open 850 stores
in 5 years
● Strong
price-based
positioning of
Discount chains
● Both player are
customer-centric
and experience
enthusiasts
DNVBs
Source: Retail Dive & JLL Research
9
11. First, economics
The US economy
is booming
- but only profits
the top 20%
Over the past 5 years, the lower80% in the income distributionhave actually seen their incomestagnate or even shrink,with discretionary expensesconsiderably increasing:
healthcare +62%
education +41%
food +17%
and housing +12%
Source: Deloitte Insights, great retail bifurcation
11
12. How does that matter to retail?
Low-income choose physical,
high-income choose digital
60% of low-income show propensity to
shop in a physical store, while just over
half of high-income consumers (52%)
skew towards buying online (and this is
cross-generational)
Different incomes, different channels and preferences
For those who have seen their
income shrink, it’s all about the
price
Low-income consumers are 44% more
likely to shop at discount retailers,
supermarkets, convenience stores and
department stores - regardless of their
age
≠ income,
≠ channels
& preferences
How does that matter to retail?
$
$$$
Price
Experience
Physical
store
Low-income choose physical,
high-income choose digital
60% of low-income show propensity to shop
in a physical store, while just over half of
high-income consumers (52%) skew towards
buying online (and this is cross-generational)
For those who have seen their
income shrink, it’s all about price
Low-income consumers are 44% more likely
to shop at discount retailers, supermarkets,
convenience stores and department stores
- regardless of their age
Online
store
Source: Deloitte Insights, great retail bifurcation
12
13. Second,
The emergence
of a new retail model;
1. People Centered
2. Personal
3. Emotional
4. Harmonised
Term ‘harmonized retail’ first introduced by Steve Dennis,
Omnichannel is Dead. The Future is Harmonized retail
13
18. Digitally Native
A cosmetics tech company
Tech staff
40% of Glossier staff are tech profiles
Own tech solutions
Warby Parker’s proprietary algorithm to perfectly place
virtual frames on the user’s face
Data at the core of operations
Casper tracks user data at each touch-point and
constantly runs A/B testing to test new ideas and
solutions
18
19. 2 days ,
Vertical
A single line of products
Something as simple as flowers
Control over the supply chain
Traditional market:
4 to 5 intermediaries taking
10% to 20% fees each
Producer Consumer
7 days
,
Producer Consumer
Source: Bergamotte’s podcast & interview
19
20. “Brand”
is at the
core of their
business.
Through
storytelling,
community and
user-centricity
2.4M
followers on
Instagram
__
Channel slack with
top 100 customers
for co-construction
__
“70% of online
sales & traffic come
from peer-to
-peer referrals”
Emilie Weiss,
CEO & founder
Source: Recode Decode (Jan 2019), interview of Glossier CEO Emily Weiss
20
21. Brands
that master
instagram
and influencer
networks
like none
other
Fenty Beauty
8.7M followers
880k website
;visits per month
Kylie cosmetics
22.5M followers
Kylie Jenner
150M followers
1.1M website
visits per month
70% of Revolve’s
sales come from
influencers
21
23. “We are going to shut
the company down before
we go to physical retail.”
Michael Preysmann,
Everlane CEO.
Text
2012
23
24. .. but as they grow, they move offline
Today,
1700+ stores are operated by DNVBs in the US
2018 20152017
2010 20132010
Source: Kevin Campos, a principal at Venture Capital firm Fifth Wall, and Thinknum Alternative Data, Forbes
24
25. “Everlane needed to open stores because
‘basically’ no online-only companies are profitable
Michael Preysmann, Everlane CEO.
2019
25
26. Value Creation
● Goods & services
● Production methods
● Markets
● Raw material sources
● Methods of organisation
● CLV > CAC
● Barriers to entry
● Market size
● Scalable operational model
Value Retention
Text
Product
Customer Experience
Emotion
Convenience
Value Creation
and and
Creating value,
Retaining value
J.Schumpeter, Theory of Creative Destruction
26
27. Going beyond the first core community: the limit of digital
Core
?
CAC is exploding
Facebook & Google are becoming the new middleman.
Facebook Ad costs have increased 17x over 2011 & 2018
90% of sales still happen offline
Online sales over the next five years are estimated to
grow 11.7% annually vs 1.7%. Yet, event so, in 5 years time,
offline will still make more than 80% of all sales.
Competition arrives fast,
it’s hard to differentiate
At the time of Casper’s launch (2014), there were
no mattress-in-a-box services. Today, there are 175.
27
28. Text
Offline, the new lever to boost sales... online
Source: ICSC
Halo effect
The opening of a bricks-and-mortar store leads
to a 37% spike in web traffic for that company
$100 spent offline
$131 additional
spent offline
$167 additional spent online
$100 spent
online
(within store
catchment)
28
30. Text
DNVBs are redefining the physical retail’s role
Traditional retail store
A Check-out:
A point of sales for the brand
Product
Sell what at store’s stock
KPIs of a store: sales, traffic, conversion
Purchase experience
No unicity
DNVB retail store
A Check-in:
A customer acquisition levier
Customer
Zero-to-no stock, with delivery
KPIs: NPS, number of posts, number of visits
Brand experience
Exclusivity, unicity
Vs
Text
DNVBs are redefining the role of physical retail
Traditional retail store
Check-out:
A point of sales for the brand
Product
Sell what’s at store’s stock
Purchase experience
KPIs: on sales
DNVB retail store
Check-in:
A lever for customer acquisition
Customer
Zero-to-no stock, with delivery
Brand experience
KPIs: on experience & impressions
VS
30
31. Text
DNVBs are redefining the physical retail’s role
Text
DNVBs target locations to be exactly where their targets are
Tediber, no-stock store
in the core of the Marais.
The brand can get a 60m2
store in the center of the
city instead of a 200m2 one
in the suburbs like the
usual furniture stores.
A touch and feel store
Visible by everyone in the
street, not only instagram
followers
31
32. Text
DNVBs are redefining the physical retail’s role
Text
From product purchase to a brand experience
Sézane, the store as
a branding media
After the Apartments, Sézane
launched Libre Service in
Batignolles neighborhood
“We want people to come
to spend a moment with us”
Morgane Sézalory
Tables, multiple brands
magnifying Sézane products,
a vintage corner, upcycling
and repairs corner, tea & coffee
available.
32
33. Text
From salesperson to live community manager
Marionnaud
Sales Assistant job offer
Sézane
Sales Assistant job offer
33
34. The new KPIs for the physical store
Text
Conversion rate
Footfall
Sales in the store area (both online & offline)
Posts social networks
Halo effect
(average basket online after an offline
purchase for an identified customer
and vice versa)
Sales-in-store
Net promoter score
Average basket
34
36. Build, buy or partner, traditional strategies applied to DNVBs
1. Create
#Build #Partner
Build it yourself
Build it from your
partner community
2. Buy & grow
#Buy
Buy, do not absorb
but support growth
3.
Adapt
#Buy #Build
Buy it, learn from
it and then adapt
the model you target
with your own rules
36
38. The Build strategy
Traditional players are launching their own DNVBs, with mixed results.
2018
Be prepared to CAC growth
Strong launch, Ontex reduced
marketing investment ?
Lillydoo
420k website visits/month
Little Big Change
52k visits/month
2017
Know what you're good at
The best social media launch
30M$ invested
50,1% shareholder
Turnover 570M in 2019
10% engagement rate
2017
Don’t do things by half
Poor delivery experience,
no marketing strategy
Dollar Shave Club
2.5M visits/month
Bic Shave Club
21k visits/month
Different results...
38
40. Buy
Shiseido acquired Drunk
Elephant for $845M in October
2019, a fast way for the group
to access a more premium target
on a new market (clean beauty)
through a brand that already
masters digital codes.
But it is expensive...
Drunk Elephant expected
revenue in 2019: $100M
8-9x multiple deal
Source: Bloomberg
40
41. The Shiseido Strategy: acquisition
of Drunk Elephant
Strong international footprint
(even more in Asia)//
Know-how of physical retail
operations
Performing best on premium
brands Yoy sales growth of 16%
(compared to 12% of cosmetics
and personal care)
//
Not performing well in Americas /
and EMEA
operating margins -8.7% and -6.4%
//
Not enough online sales
16,4% of sales
Slow internationalization
Willing to strengthen in Asia//
Low physical retail presence
Only through Sephora//
Premium clean beauty
positioning
Strong presence in the US
ebitda margins between 20% and 30%
, //
Know-how of online sales models
Strong growth x4 sales between 2016 and
2019, $100bn revenue expected in 2019
$845M
deal,
Enter the clean
beauty market
with a premium
high growth
brand while
offering an
international
offline footprint
Source: Bloomberg
41
43. Acquired in
2016 $3bn
2017 $310M
$50M
2018 $100M
Buy then build:
The Walmart
strategy In 2019 : $1bn lost by
e-commerce division
Sell;
Modcloth Oct 2019
Slow down;
Bonobos:
● staff reduction 2019
● online sales decreased
by 12% following
acquisition
43
44. Text
Then Walmart changed its strategy
In 2018, Walmart launched
Allswell, a Casper-like company,
distributed in Walmart stores and
website and for Walmart’s current
customers.
And it seems to work…
Then Walmart changed its strategy
In 2018, Walmart launched Allswell,
a Casper-like company, distributed
in Walmart stores and website
and for Walmart’s current customers.
“I feel like our job is to develop
direct to consumer brands that are
purpose-driven that serve the widest
possible group that we can.”
Andy Dunn
Founder of Bonobos
Senior VP of digital consumer
brands
44
46. In 2010, there were 32 equity deals
in the direct-to-consumer retail space.
;By 2017, the annual deal count rose up to 196
;deals. Last year, there were 173 deals, and there
;were 104 this year through August.
With so many brands advertising on the same
channels, attempting to reach the same
customers, costs quickly began to rise.
More money more problems…
“Many brands have found themselves
trapped in the vortex of venture capital,
where the more money a company raises,
the more money it needs to raise.”
Alex Song
CEO of the Innovation Department
Former PE Associate Goldman Sachs
46
48. “The expertise of retailers is necessary for consumers, especially
in the performance category, we have 5,000 doors which means
that if 20 people per day in each store touch our products,
that’s 100,000 contacts.
Comparing that to digital acquisition, if you’re paying for
100,000 click throughs and it costs $3 per click through — that’s
$300,000 per day.”
David Alleman, CEO On Running.
48
49. Text
A future of an abundance of brands.. or re-aggregation?
October 2019
French DNVBs create an association to
better collaboration between them
October 2019
URW experiences a new
concept at Carrousel du
Louvres with several DNVB
49