For CPG brands, a physical retail presence, even with lower margins, should be viewed as a customer acquisition strategy. It provides crucial visibility and trial, driving customers to your higher-margin direct-to-consumer website for subsequent purchases and retention.
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Contrary to common belief for online-native brands, Peak Design's own retail stores have the highest contribution margin. This is because shipping products in bulk freight to stores is cheaper than covering the high last-mile delivery costs for individual e-commerce orders, which often qualify for free shipping.
Despite beverages being a category people rarely buy online, Breeze generated tens of millions in DTC sales. This built a huge base of customers who preferred to buy in-store, creating a powerful demand flywheel. When Breeze launched in retail, it sold four months of inventory in two weeks.
Unlike most retailers who apply a consistent markup percentage, Trader Joe's prioritizes the absolute dollar profit per item. They will gladly accept a lower margin percentage on a higher-priced item if it generates more cash profit per unit of scarce shelf space, optimizing for their key constraint.
Instead of using retail to build awareness, Manscaped waited until they had massive marketing spend. This ensured customers would specifically seek them out in stores, guaranteeing high sell-through for partners like Target and de-risking the move from D2C to physical retail.
Tushy finds little sales cannibalization between its DTC site and Amazon because they serve different customer archetypes. Instead of forcing an 'Amazon shopper' to a .com site, brands should meet them where they are, focusing on mental and physical availability across all relevant channels.
Malk, a retail-focused brand, built a Shopify site not for direct sales but to control messaging, connect with consumers, and gather data. Their site uses technology allowing users to add products to a local retailer's online cart. This creates a valuable, albeit incomplete, data point on purchase intent for a channel that traditionally offers none.
For commodity products with low differentiation (e.g., cereal, razors, shampoo), a collectible can be the deciding factor at the point of purchase. It acts as a powerful lever for trial. A consumer might buy for the collectible initially but discover they like the core product, converting them into a long-term customer.
Coterie treats its physical retail presence not just as a sales channel, but as a marketing tool. A well-placed product block acts like a billboard, driving discovery and funneling 10-12% of new customers back to their primary D2C subscription business.
In low-margin sectors like grocery, chasing sales volume is unsustainable. The true value of retail media lies in improving profitability by driving guaranteed incremental sales and avoiding wasted ad spend on existing customer behavior, directly impacting the bottom line.
Placing products in non-traditional venues like hotels or airports serves as a powerful discovery and sampling mechanism. This builds brand familiarity and trial, creating a flywheel effect where customers later recognize and purchase the product in traditional retail stores, boosting sales.
