The emergence of digitally native brands and the expensive operating models of traditional retail brands have contributed to an evolving retail landscape over the past few years. Bankruptcies of a number of long-standing companies, like Forever 21, Barneys and J. Crew, have marked the end of an era of brands that were at one point considered unstoppable and iconic.
The heavy reliance on expensive wholesale partnerships, retail real estate leases and advertising campaigns — in addition to products that are solely focused on “fashion” (as opposed to solving customers’ problems or speaking to their values) — has led to a number of less competitive and less compelling traditional brands and retailers in an increasingly digital world that efficiently markets products with multiple selling points.
The pandemic hastened the inevitable outcome for some traditional brands, while it also exacerbated the flawed strategies of VC-backed consumer brands that employ unsustainable growth models. Such models often included overpaying to acquire customers to achieve top-line revenue growth at the expense of profitability and, therefore, continually having to fundraise to generate more cash needed to fuel the overmarketing.
These dynamics, plus the emergence of Covid-19, have accelerated a brand reckoning in which only the lean, nimble and differentiated will likely survive.
The pandemic has highlighted businesses that have the flexibility and agility to weather the unplanned — from restaurants that have been able to repackage their inventory and put together meal delivery kits to clothing brands that have been able to quickly switch production from workwear to masks and bodegas stocking valuable PPE options in place of their regular food and beverage offerings.
Brands can navigate this brand reckoning and make themselves more resilient against unplanned macro events in several ways.
Ensure your product assortment appeals to a wide breadth of customers to help weather macro factors.
For example, while my company, Dagne Dover, offers various work, gym and travel bag options, it also offers baby bags and small crossbody silhouettes — the exact styles that customers were still purchasing during the pandemic. As a result, my company’s sales have continued to be strong through the pandemic. Brands that only offer products in one category, such as travel or workwear, have had much larger challenges staying relevant during this time. Take a look at your current offerings and identify areas of opportunity or where you may need to pivot to meet customers where they are.
Consider diversified sales channels to help temper risk to your overall business.
The benefit of growing a brand online is the ability to speak directly with consumers and control their content and brand interactions. However, in order to increase brand awareness and sell more products, brands often work with wholesale retailers. In fact, some brands solely sell through wholesale partners.
At my company, the majority of our sales come from our own channels: our website and our physical store. By design, only a small amount of our sales come from our strategic wholesale partners. This strategy has been valuable, as most retailers slashed their orders if not completely canceled them for Q2 and Q3, as soon as Covid-19 started. While we also experienced a significant decline in orders, we sold that relatively small amount of product through our own channels without diluting the brand. Take a look at your current channels and determine any alternative strategies or sales channels that could help protect your business, such as increasing your own channels.
During times of uncertainty, leadership should instill a sense of calm and transparency.
Employees need to know the path forward and feel confident in it. If employees have any doubt or worry about their job security, role, compensation or otherwise, it will likely cut into productivity and decrease morale at a time when it is critical for everyone to perform at their optimum level. It’s up to you to bridge these gaps. Communicate openly and transparently with your staff. Let them know what’s going on and the measures you’re taking during this time.
At the beginning of Covid-19, my company’s leadership team set up a meeting with each employee to talk with them about our plan. We updated them on how our financial and marketing plan for the remainder of 2020 might impact their particular job and how it could potentially impact their compensation, based on what happened with the government’s Payment Protection Program (PPP). We made sure to explain what we knew about the PPP so that they could understand the lens through which we were making these decisions.
Be clear and consistent about what you do and don’t stand for.
It’s easy for companies to say they’re doing something, like becoming more sustainable, for example, in their marketing messaging. It’s another thing to live by it and actually have sustainability built-in and reflected in all aspects of the business — from corporate practices to product development processes, logistics and so on. Consumers are savvier than ever before in terms of their knowledge of materials, manufacturing processes and production costs, and they are able to see through “brand BS.” Social movements such as Black Lives Matter have definitely highlighted people and brands who say or do things performatively versus genuinely, and customers are watching. They are shopping based on the values of a brand, and each brand will be judged.
I hope brands and businesses take this time to look introspectively instead of reacting to the current economic climate. A company’s thoughtfulness can be reflected in many aspects, including the language it uses, the materials it selects, the diversity of models it chooses for its marketing campaigns, the thoughtfulness of its CSR initiatives, the diversity of its employees, and more. Consumers are watching, and the changes they see will be appreciated.