Should direct-to-consumer brands bother with brick and mortar in the age of ecommerce? That’s what we’re here to discuss with Yohan Jacob from Retailbound. Because while the retail landscape may be tough right now, there are some huge opportunities for retailers who are willing to adapt.
Brian Weinstein: Welcome everybody to Sippin’ & Shippin’. I’m your host, Brian Weinstein. We’ll be kicking it here every other Thursday, quenching your thirst for an insider’s take to enhance your customer’s experience. Grab your drink of choice, kick back, it’s Sippin’ & Shippin’ time. All right. Welcome everybody to another episode of Sippin’ & Shippin’. I’m here today with my partner in crime, Caitlin Postel, Postalle if you’re feeling French.
Caitlin Postel: Oui, oui. Oui, oui.
Brian Weinstein: And we have a special guest today, Yohan Jacob from Retail Bound. Good morning, Yohan.
Yohan Jacob: Good morning there, Brian and Caitlin.
Caitlin Postel: Hey Yohan.
Brian Weinstein: All right. So we do call the episode Sippin’ & Shippin’ our podcast. And this is unfortunately, a morning edition. So I am going to go with my standard. I’ll be sipping my Dunkin’ Donuts coffee, I’m a Northeastern guy and I’m a big fan of Dunkin’ Donuts. Yohan, are you coffee? Are you a tea guy? Are you a Midwestern pop in the morning guy? What do you like?
Yohan Jacob: I wish. No, I’m trying to stay healthy. So right now I got some flavored water. That’s what I have this morning. My beverage of choice.
Brian Weinstein: Very nice. What flavor did you go with?
Yohan Jacob: Orange tangerine.
Brian Weinstein: Okay. See, as soon as I got into that, I think I’d be looking for the vodka, right?
Caitlin Postel: Settle, down. I thought that you were plugging. I didn’t know if Dunkin’ Donuts was sponsoring us or what?
Brian Weinstein: Not yet.
Caitlin Postel: Not yet.
Brian Weinstein: Not yet.
Caitlin Postel: The power of yet.
Brian Weinstein: Exactly.
Caitlin Postel: I have some pomegranate green tea in my cup here this morning.
Brian Weinstein: Wow. You guys are going super healthy and look at me. I’m in here with, well at least it’s a black coffee, no sugar.
Yohan Jacob: There you go.
Brian Weinstein: Straight up. Just like my tequila at night. All right so Yohan we’re here to talk today about retail and retail with eCommerce brands and the struggles that are going on and I’ve looked at your LinkedIn, we’ve been around here for a long time and well before e-comm was around. So-
Yohan Jacob: Yep.
Brian Weinstein: Is retail not dead?
Yohan Jacob: I would say for the most part retail is not dead, relatively speaking around in the category. I think there are some opportunities, especially for [inaudible 00:02:14]ship, but retail’s definitely not dead.
Brian Weinstein: Okay. Well it’s good to hear because for me, growing up on shipping into brick and mortar, I don’t know, I was really concerned. And then of obviously you see all the financial difficulties of a lot of the retailers. I’m glad to hear you don’t think it is dead, and I’d like to think that as well. What do you think they need to do? Where do you think they’re headed?
Yohan Jacob: So retail, thanks to COVID, the retailers have changed their game, right? Some of the retailers who are a lot larger, like a Best Buy or a Home Depot have really worked hard on their omnichannel strategy. That means pushing more to mobile or to web, which I saw huge in gains in 2020, and also in early 2021. Retailers have also looked at trying ways to make it easier to get in and out. So offering buying online and pick up in a store. You’re not waiting in line. Or buy it online and pick it up at curbside.
So I think thanks to what happened last year in the pandemic, we needed to try and find ways to have people do a buy it online, be able to search products easier online and to get service a little bit faster than it did made through the traditional method. But no, I think this year, will be definitely a interesting paradigm for retailers. I don’t know if you saw the news last week, Fry’s, which is a regional retailer, they closed their doors after nearly what, 30, 40 years in business.
Brian Weinstein: Yep.
Yohan Jacob: Best Buy laid off about 5,000 associates also last month. So it will continue to evolve and change but I think by time it does sales, Brian and Caitlin, we’ll be in a better place.
Brian Weinstein: Well look, they always say a forest fire is good for the forest, right? And I think Lord & Taylor finally closed after… So there’s a lot going on in the brick and mortar space. So I look around and e-comm is just growing in leaps and bounds. And so if I’m a brand, if I’m an e-commerce, I’m a digitally native brand, I’m out there and I’m building my business.
Yohan Jacob: Yep.
Brian Weinstein: Why go to brick and mortar? What would be the driving factor, the catalyst behind me even thinking about going that direction?
Yohan Jacob: The biggest one is, there’s actually two things. One is selection. Often Amazon, or other e-tail sites, as a brand, especially for smaller brands that don’t have a big budget, you want to have a [inaudible 00:04:45] brands. How is a consumer to try to find you? It’s like Google search, right? I might look at the first one or two pages of results and then I’m done right. With Amazon, it’s not a creative assortment, any Tom, Dick and Harry can get on Amazon or marketplace. Where in brick and mortar, it’s a very creative assort range. You don’t have to choose from five million Bluetooth speakers. It’s maybe five brands, good, better, best.
Using Best Buy as an example. I can ask the blue shirt, hey, there’s two dishwashers. Which one do you recommend, and why versus looking at hundreds or thousands of offerings upon various websites. So I think there’re reasons why you’d want to choose a brick and mortar. Plus for me personally, when I do go to brick and mortar store, is that discovery phase. Ooh, something new, something different. I use that in the same analogy to trade shows. Last night they just announced The International Hoffer Show. It was a large show here in Chicago, where I’m based-
Brian Weinstein: Okay.
Yohan Jacob: Is canceled again two years in a row. So next year, this past January, the Consumer Track Show was one of the largest trade shows in the world was a virtual show. I’ve been attending that show for nearly 20, almost 22 years in a row.
Caitlin Postel: Wow.
Yohan Jacob: And this year, no offense to CTA who’s a great organization. It was a bust. A lot of smaller vendors didn’t find that show encouraging because it was a virtual show, hard to get buyers to stop by their virtual booth. Where they’re in person you get that ooh, it’s kind of neat kind of different. So I think there is for brick and mortar, Brian and Caitlin, I think people like that impulse. Let’s walk through the stores, get that browsing and say, ooh it’s kind of neat, I like this. Let me buy this. Where online it’s kind of [inaudible 00:06:38] I get that browsing and that unexpected discovery as you were saying.
Brian Weinstein: Yeah, I totally agree. And that convenience factor, having the ability to go see products that you don’t get is different than your online buying experience for sure. Now again, I having grown up in a generation before e-comm, it might be a little bit different. But maybe it’s not, maybe everybody shares that same feeling. So in that regard, do you think going towards retail is better for some verticals and brands? So is that something that’s better for consumer electronics versus let’s say a fashion company? Or do you think making that transition has a broader vertical breadth?
Yohan Jacob: I think that’s a great question. So for using consumer electronics versus apparel, right? So obviously apparel, you got the size, the fit, the color, right? And it’s really tough to buy things unless it’s generically. Those things sell better in store. If you look at returns, which I do, Amazon typically is a very high return rate on soft lines because people buy it online. Oh it didn’t fit, it was the wrong color, wrong size. They send it back. Where in a store like Nordstrom or Target returns are fairly low on soft line because they get to try it out and then if it doesn’t fit okay they send it back.
But typically returns are lower. Electronics, if it’s a commoditized product, like a Bluetooth speaker or headphone, you don’t really need a sales person to help you or navigate. So online is fairly straightforward. But if it’s more a complex purchase, like a dishwasher, like a 8K TV or a smart home system, you probably want to utilize a specialist in store. And again a couple years ago Brian, you remember this, the word show rooming.
Brian Weinstein: Yep.
Caitlin Postel: Mm-hmm.
Yohan Jacob: Where people used to joke about Best Buy being a showroom for Amazon. Right, I go to Best Buy, get educated about product X, Y, Z. And I go buy it on Amazon, right?
Brian Weinstein: Right.
Yohan Jacob: Best Buy has done a really good job in trying to combat that by educating their sales teams, by offering an instrument in store that’s not available on Amazon or Walmart or Apple right. So yeah, I would say that on the category, Brian and Caitlin, some products are made to be bought online. For others, it’d be better to buy it in store and have someone help you through the buying process.
Caitlin Postel: Sure. Yeah. I think that makes a lot of sense Yohan. And to Brian’s point before what I’d like to do is kind of pivot. And now I hear probably eight out of 10 of the startup brands and when I say startup, I mean five years or less in existence. They have their eyes on the prize of retail wholesale. I want to flip the script and say to you, what angles are the retailers coming from? What makes a brand stand out from others? What makes a retailer want to engage in an otherwise or with an otherwise essentially D to C brand? What position are the retailers taking on this?
Yohan Jacob: Sure. So as a former large retail buyer, we’re looking for things innovative. Something different. And honestly last year was an unusual year. Many buyers were forced to change their plans. They thought, oh I would have stores open in March or April or May. And they saw their stores closed. They saw their inventories cut in half. It’s been changing. And I would say retailers now that we’ve seen there’s a light at the end of the tunnel, there’s a vaccine, people are slowly feeling comfortable to go to stores and shop again. As a former buyer I’m looking for products that either A, drive top line sales, grow all my profits and importantly, turn inventory X number of times. And at retail we work a lot of young start up brands that are unique and innovative.
And a lot of times what we do when we pitch a BC brand, something that was Indiegogo, or they want Amazon marketplace. We now want to scale into a Best Buy a Home Depot, a Costco, an Apple, right. We kind of show here’s the brand’s product roadmap, they’re not a one hit wonder. But we show maybe some of their results, here’s their sales, generally speaking, here’s the return percentage. But look at the reviews on Amazon or New or any other marketplace site. Because buyers are mostly are risk aversed and anything you can do to show the buyer, hey we have a established sales history. It may be limited at best but at least we got some sales going, helps the buyer say Brian and Caitlin, I like your product. Let’s try it on bestbuy.com first and see how it does before we try a couple stores later in the year.
Brian Weinstein: Yeah.
Caitlin Postel: Right.
Brian Weinstein: You know, it’s funny. I didn’t want to interrupt you, but I was going to chime in and ask you the question too, because this is interesting. So you had these emerging D to C brands who were using retailers to get their name out to the marketplace more. You put a small selection of product in a retailer who does some drop ship maybe, or they put it on the floor. And that helps drive traffic to your site. I’m wondering are the retailers now looking for hot rising brands to bring people into their brick and mortar stores? Is that actually, are they starting to think about, hey you know what, we’ve got to get people coming here. If I hook up with a really hot rising eCommerce brand, is that going to bring traffic into my store?
Yohan Jacob: Agreed. And I think it goes both ways. Having a small brand add a few retailers on their resume, like a Best Buy or a Costco or Walmart, it legitimizes the brand, right?
Brian Weinstein: Right.
Yohan Jacob: Like wow, you’re at Best Buy, you’re at Walmart, you’re at Costco, that’s great. So it drives some value to them. For retailers, Brian and Caitlin, who are still in that, let’s say the tail of COVID and people are still trying to figure out what and when they want to do, there are certain categories that retailers are spending more time on to get people back in. So for example, products that we play at home. You can be having sitting at home with my kids. So board games, it’s getting nice here in Chicago so maybe it’s outdoor like bikes and pools. And we have a client we just landed recently that makes a really cool zoom webcam light to make me look good on zoom. I need more than light to make me look on zoom.
But products that help you work at home, products that help you study at home, products that cook at home. So these buyers or retailers, Brian and Caitlin are looking for products to help consumers who’ve been stuck at home working, studying. You’re kind of like, okay what are some product that will help me alleviate the stress of staying at home whether it be a bicycle or a zoom light.
Brian Weinstein: Right. That’s the first question that we talked about. Actually, the second question that we kind of touched on, was that are some verticals or some categories better, especially maybe given the marketplace and given where the consumers buying habits are, is that better to go into brick and mortar?
Caitlin Postel: Yeah.
Yohan Jacob: Yep. And I also say that, a lot of people like myself haven’t gone on vacations. We haven’t gone for meals and we haven’t driven around, right?
Brian Weinstein: Right.
Yohan Jacob: And so for some Americans, they have a surplus of cash. And Best Buy, they had in reports last week, they benefit from that in fourth quarter where people are buying appliances and TVs because, hey, I’m not spending five grand to go to see Mickey and Minnie in Orlando. I’ll spend that five grand on a new dishwasher, of a new fridge, or a new TV.
Brian Weinstein: Disposable income baby.
Yohan Jacob: That’s correct.
Caitlin Postel: Dunkin’, Dunkin’, Dunkin’ every morning.
Brian Weinstein: Yes, exactly.
Yohan Jacob: That’s right, yeah.
Brian Weinstein: I’ll take two.
Caitlin Postel: So what is that sweet spot Yohan of making that move from eCommerce into retail wholesale. Because sometimes it’s volume driven. Sometimes I talk to brands and right out of the gate they may be D to C centric, but they have their eyes on the prize of retail. And then others, they may only be doing 500 to a thousand orders a month, but they have made the relationships that they’re already trying to penetrate that market. Is there a sweet spot? And what does that look like?
Yohan Jacob: That’s a great question. And I hate to give you a vague it depends.
Caitlin Postel: Come on, give us the secret sauce. Come on.
Brian Weinstein: He’s holding back.
Caitlin Postel: I know he is.
Brian Weinstein: He’s holding heavy as they say.
Caitlin Postel: No fluff Yohan. Let’s get it.
Yohan Jacob: You as consultants can’t get the book for free, right.
Caitlin Postel: Fair enough.
Yohan Jacob: I would say that generally speaking, for brands who want to take the leap of faith, and that’s who we work with. It boils down to a couple of things. So it boils down to, is your product unique and different, right. If your product’s based on price, I’m the lowest pair of headphones. It’s tough because you’re competing against multiple brands. And at the end of the day, the buyer’s going to keep negotiating down where it isn’t worth some of that retail. You’re not making enough money to scale your business. So we look at is the product unique and different. A second thing is logistics.
Caitlin Postel: Mm-hmm.
Yohan Jacob: Because a lot of our clients we work with in the beginning, they’re trying to shift from Hong Kong or Shenzhen, right to US. And it’s very tough. Many retailers are going to buy domestically, they’re going to buy from your warehouse, okay. Or your three PL or your distributor.
Caitlin Postel: Right.
Yohan Jacob: So making sure that your logistics, or we call it your supply chain is bulletproof. The third thing is capital. Because retail, on Amazon your main expense is probably, excluding the monthly fee or the you pay Amazon is probably some pay per click advertising right?
Caitlin Postel: Mm-hmm.
Yohan Jacob: On how competitive the keywords. But with retail, like a Best Buy, well first there’s margins. So that’s one cost involved. There might be some variable costs like commissions, marketing. And some smaller brands who maybe are doing okay on Amazon or Indiegogo aren’t capitalized to handle large PO’s from retailers. They aren’t capitalizing the way 30, 60, 90 days get paid by retail. And they’re not capitalized to do some upfront marketing expenses.
But I think if you have a unique product that has a small, but established sales history on Amazon, or other marketplace, your supply chain, your logistics, which also your company plays a big part, is bulletproof. And you have some money in your bank to again, scale the right way, I think you’ll hopefully have a good track record in retail.
Brian Weinstein: And with some, it was kind of make me think a little bit further about retailers. Are some of them, if I’m a D to C brand and I’m saying, okay, I’m going to make that leap into brick and mortar, are some of the retailers I don’t want to say better, but maybe easier to navigate into? Are some of them out there working more so with D to C brands, so they understand where the pain points are going to be for a D to C brand?
Yohan Jacob: Yeah.
Brian Weinstein: Or are they all sort of on the same page right now?
Yohan Jacob: I would say that it depends on the category, but generally speaking, they’re all on the same stage. And I think for most retailers, for smaller brands if they’re going to take a leap of faith they’ll probably do it now versus fourth quarter. Now typically like using QVC, that’s one of the retailers we work with, we actually do a lot of retail, but using QVC. They’re not going to show a product on air in, a new product on air in November, December that wasn’t a proven winner.
So they’ll typically test on air in May or in August and see how it does. Seeing for a cataloger. We just got a large PO from image for their Father’s Day catalog. That’s their larger catalog for fourth quarter. Our client did very well in the February catalog and like, wow this is great. Hey, we want to put you in the March or the May June book, let’s give you a bigger appeal. Awesome. And I think retailers for younger brands, if they’re going to take leap of faith they’ll probably do in that winter, spring timeframe saying before say this thing did really well, Brian and Caitlin, let’s let’s really go full blown in November December during Black Friday and for Thanksgiving.
Caitlin Postel: Yeah. Timing, see timing is something I never considered. I thought you were going to touch on the other T, which is technology, which brings us to the dreaded conversation of…
Brian Weinstein: Yeah. So EDI, right.
Caitlin Postel: EDI.
Brian Weinstein: I know-
Caitlin Postel: Exactly.
Brian Weinstein: From our side of the business, from our digitally native brands that we work with. A lot of them are not savvy on the, on the EDI side. Do you see that as one of the top pain points for these?
Yoham Jacob: Not really.
Brian Weinstein: No? Okay.
Yohan Jacob: Not really. So a lot of our clients are obviously a IT department. So typically the two routes is when we pitch to a retail buyer, let’s use Best Buy. We always want to give the buyer, two options. Either A, the vendor can go direct, or we use a distributor. If we go through, and mostly for smaller brands, B to C brands, ones that we are all talking about, 99% of the time for larger retailers like a Best Buy, Walmart, Target distributor. Why? It takes much work except for one skew vendor, that’s when a vendor has a hundred skews.
So again, so these distributors already have the EDI feed, they already have a vendor record with a Best Buy, Target, Walmart. So that’s not an issue. However, if by chance these retailers like a Best Buy, want to go direct with a small brand, it’s fairly straightforward to find out a third part coming to do EDI. A company called SPS Commerce is one of the EDI for buyers that we recommend our clients to use. If by chance the buyer said, hey you need EDI. If we’re going direct, get us up. Then we typically go to SPS. But again, 9 out of ten times our clients go for distributor that we set up and already has EDI fees built in to that retailer.
Brian Weinstein: That’s interesting. Yeah, I really would’ve thought the EDI, the technology piece was probably the number one struggle. So what would you say is the number one struggle for these D to C brands when they want to go into retail?
Yohan Jacob: Finding the contacts work with buyers. I think buyers have changed a lot. Many buyers are working from home. So it’s really hard to cold call a buying office. Hey, my name’s Brian at Port Logistics, I want to talk to the buyer for X, Y, Z. It’s very tough. It was tough back then before COVID even tougher now because many buying offices are still closed. Target and Best Buy as an example, they’re both in Minneapolis. They, as of now, not plan to open the corporate office till this summer.
Brian Weinstein: Yeah.
Yohan Jacob: And they’d been closed for over a year. So how do you contact a buyer who’s working from home? It’s very tough. And so I think the biggest struggle for younger brands is trying to find the right buyer. And so they typically will choose either a distributor or a filling agency as one of the two paths. Trying to talk to a buyer, in old days it’d be you’re going to trade shows, which unfortunately are not going to be happening for this year. Or doing the cold call, cold emails to try to find someone to talk to.
Brian Weinstein: Yeah. And so if I’ve got a brand and I’m looking to go that route, what would drive me towards a retailer versus opening let’s say my own pop-up stores or flagship stores?
Yohan Jacob: Sure. So obviously with going after a Best Buy versus opening up your own little pop-up store right down the street. With a larger retailer, you actually make less money per unit sold, but it opens the network of people who can buy your product. It’s like, again, using QVC or AHN. To get on air millions of people can watch you on air on TV. It’s a 24/7 network. So one of our clients did a popup store in near…
Brian Weinstein: Yohan, by the way, not too dissimilar from this podcast. There’s millions of people that are tuning into this as well.
Yohan Jacob: Of course.
Yeah. But one of our clients that did a pop-up store, they had a really cool pair of headphones. They did one a couple of years ago actually next to an Apple store. And it was just [inaudible 00:24:19]. And they saw great results, relatively speaking. They did it a year later in a mall in New York and it was kind of dismal, but we get that broad placed at Brookstone, the airport stores. As well as Best Buy, they saw a lot more sales per store. Generate units per store versus the pop-up store that did in Manhattan and the one in Long Island. So I think there’s definitely costs you get away versus the benefits. But I think go after certain retailers, you can drive a lot more volume, and get your brand exposed to hundreds or thousands or millions of people every single day.
Brian Weinstein: Yeah. No, that’s a good point. I think we’re in a period right now and in eCommerce where people have to make decisions because retail seems to have gotten to the point, I should say brick and mortar retail has gotten to the point where there are advantages to it. It is coming back to life. I think the cream will rise and the ones that have sort of faded away, let’s face it COVID was probably the final nail for many of them. Not the reason that they are no longer with us.
Yohan Jacob: Agreed. Retailers they have a poor infrastructure, weak P and L, didn’t invest in a lot of technology. You’re right. Let’s use Sears Holdings. They own Sears and K-Mart. They’ve been going out of business for nearly 10 years. So when’s that last nail in the coffin? It’s like Pale of Shoes was when they went out to business. Retailers. So, yeah you’re right. So I think COVID will definitely remove the weak from the strong unfortunately. So I think once the dust settles, the retailers that emerge will be much stronger. And consumers like the three of us will better from that. We’ll have better customer service, a more creative assortment and hopefully lower prices from all this.
Brian Weinstein: Right. Exactly. All right. Well, this is good. This is a lot for brands to think about, and we appreciate you coming on today Yohan to share your expertise. I know you’ve been in this particular area for a long time, as have I in my space and I think the information that you provided today is going to really help people and guide them forward. So appreciate you coming on. Again, Yohan is from Retail Bound. Yohan that’s retailbound.com.
Yohan Jacob: That’s correct.
Brian Weinstein: Perfect. So anybody looking, there’ll be a link on the podcast. Caitlin, you want to take us out?
Caitlin Postel: Sure. Thank you everyone for listening. You can subscribe sippinandshippin.com or check us out on your favorite podcast platform, Apple podcast, Spotify, whatever works. Give us a thumbs up. Subscribe. Love to have you guys here and we’ll see you soon.
Brian Weinstein: Thanks everybody.