At Rare Beauty Brands, we are “unapologetically” omnichannel. What do I mean by that?
The past few years have seen the dramatic rise of DTC brands, followed quickly by the rise of Amazon-only brands. Many of these brands were able to scale very rapidly by leveraging changes in the ways that brands connect with consumers (e.g., social media), shifts in how consumers shop (e.g., more online than ever) and frankly, hundreds of millions of dollars from investors seeking to capitalize on these changes. It got to the point where if you weren’t exclusively a DTC or Amazon brand, industry experts would write you off as some sort of anachronism.
However, since the pandemic accelerated a shift to digital and then back to brick & mortar, and as competition and technology changes have made it more difficult to scale a brand online, people are increasingly seeing the wisdom of having an omnichannel revenue model. Just like my baggy 90’s clothes, omnichannel appears to be back in fashion, and for several really good reasons.
Channel Diversification
The first reason for this is obvious – diversification. At Rare Beauty Brands we are proud to partner with retailers that have over 6,000 doors of prestige and specialty beauty distribution, both offline and online. When the pandemic hit and people stopped visiting stores, it was great to have a strong digital business to keep us going, via our Amazon and DTC, as well as our partners’ online channels. And while department stores have been in long-term decline at a macro-level (though our brands have continued to perform well there), we have benefited from partnerships with key specialty beauty players and our growing independent channel. One channel may be up or down, but the other channels keep the business humming.
Channel Synergies
The second reason is less obvious but will ultimately be more important – omnichannel is the best path to profitability if the online and offline channels work together synergistically.
Increasingly, online channels are the starting point for the consumer journey. In fact, over 50% of beauty consumers start their product search on Amazon and according to McKinsey, “80 percent of consumers, on average, make their retail brand or purchase decisions online.” For this reason, a brand or “retailer’s online presence (including its website, app, email, and social media) will be the single most important portal to start interacting with consumers.”
But it works the other way as well. Every offline interaction consumers have with your brand is an opportunity to drive awareness and credibility. There’s a reason why online pioneers like Warby Parker and Glossier have opened brick and mortar stores. In fact, another McKinsey study showed that because offline channels increase organic traffic, omnichannel brands have higher shares of organic traffic and thus spend significantly less on advertising than DTC pure plays.
Impact on Brand Valuation
Finally, as I pointed out in my last post on brand valuation, getting your distribution strategy right will have a big impact on how investors and potential acquirers view your business.
So how to maximize your brand for offline and online at the same time? That’s the subject of another post…
