Digitally native brands on the power of brick and mortar

Founders and CEOs at digital-first businesses at Shoptalk predict their business models will need to move beyond early strategies like social media marketing to preserve customer relationships.

LAS VEGAS — At a conference that heavily features executives from digitally native brands, a lot of them spent their time on stage talking about physical retail.

While it’s true that many of those businesses plan to open brick-and-mortar locations in the coming years, or have current partnerships with brick-and-mortar retailers, the direct-to-consumer movement is often associated with Instagram brands — companies that have reached success primarily through marketing on social platforms. And although they were born online, many of the digitally native companies at Shoptalk discussed the strength of a physical presence and a personal relationship with shoppers.

In the beauty sector, Glamsquad — which offers a range of services and now has its own haircare product line — partnered with CVS in August on a new beauty concept for the drugstore retailer that includes express versions of Glamsquad’s usual services. While it’s outside the brand’s regular experience, which is usually conducted as a personalized service in a consumer’s home, hotel or other chosen location, it gives Glamsquad a platform to meet new customers and allows CVS to better capitalize on consumers who are just, say, waiting for a prescription, Amy Shecter, CEO of Glamsquad, said during a panel.

“All of a sudden, the metrics around what you’re evaluating have changed completely because instead of spending 10 minutes in the store, you’re actually spending 30 minutes in the store and the opportunity to sell and to buy is much greater,” she said. Shecter also noted that Glamsquad’s services offer an easy cross-selling opportunity: A consumer buys a service through Glamsquad, tries out a product during that service and can then purchase it if it worked well for them.

Madison Reed, a primarily online, subscription-based hair color company, also sees massive benefits to having a physical presence. The brand is sold at Ulta stores and at Madison Reed’s own Color Bar locations in California and New York. Founder and CEO Amy Errett believes physical locations are key not only to her own company, but also to other direct-to-consumer businesses selling mainly online.

“When people see you somewhere, it is very different than [an] online-only advertising campaign,” she said during a panel, discussing the impact that physical interactions can have on both awareness and future online sales. “You become real,” she added. “It gives efficacy to the online channel.”

When it comes to marketing, such physical relationships were top-of-mind, even compared to the digital platforms these businesses were built on. That can be said of Zak Normandin, founder and CEO of Iris Nova, the parent company of Dirty Lemon and The Drug Store. He admitted that the company used to spend between $20,000 and $30,000 a day on Facebook and Instagram because of their success with customer acquisition on those platforms. But as costs rose, their interest in advertising on social media dropped, and the landscape is now so crowded that social media advertising can only get brands so far.

“Consumers have become so desensitized to advertising in the digital space,” he said during a panel. “We’re inundated by ads, whether it’s influencers promoting products, the actual ads that are served to you on Facebook or Instagram — your attention is pulled in so many different directions and I think consumers don’t want to be advertised to anymore.”

At the same time, though, Normandin acknowledges that social media networks have allowed many brands to find a start they may not have otherwise. His concern, as digitally native businesses come to rely on social media for customer acquisition, is that many of the companies finding success on those channels are not seeing it as the result of a differentiated business model and will die out fast once customer acquisition costs on social media get too high.

“There’s going to be a shakeup in just the broader startup space,” he said, “where a lot of the companies — their value proposition doesn’t exist, so what are you offering the customers when the advertising goes away?”