Master the direct-to-consumer model

How do these Growth 500 companies thrive in the fierce retail landscape? By working around the middlemen.

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(Illustrations by Emily Chu)

Growth 500: Canada’s Fastest-Growing Companies

It’s a plight shared by countless up-and-coming entrepreneurs: you have an idea for a great product and an identified audience that could benefit from your creation, but you don’t how to get it to them. For Sophie Boulanger, co-founder and CEO of Montreal-based custom prescription eyewear retailer BonLook (2019 Growth 500: No. 35), that idea was higher quality and more affordable glasses than the ones she’d grown up wearing (and replacing) every few years. “If you want to offer the customer more variety, better service and have a straight line of communication, wholesale kind of defeats that purpose,” she says, reflecting on her initial considerations for distribution. “Plus, it eats up a lot of margin.” Instead, the company decided to launch online eight years ago, leveraging marketing channels to build a consumer base when e-commerce was still in its infancy. It worked: BonLook now has 34 retail locations spread across Canada, along with a flourishing online business. 

The direct-to-consumer (DTC) model does have its benefits: greater control of product image and branding, improved relationships with customers, and increased profitability, not to mention the oodles of data that can be gathered to inform future business decisions. Plus, as these Growth 500 companies have shown, when done right, the DTC route can lead to rapid expansion throughout Canada—and beyond. 

Test the waters

For an early-stage DTC business, there may be nothing more valuable than the ability to test the market before determining a go-to-market strategy. “What’s your awareness with consumers? Your key target market? How do they perceive your brand?” says retail expert and co-founder of Retail Advisors Network Bruce Winder. “You really have to do a full-blown analysis and test the channels you’re interested in pursuing.” Before branching out into brick-and-mortar, BonLook opened a temporary kiosk in a high-traffic area—an inexpensive, and ultimately successful, gamble that gave them the confidence to look for something more permanent. 

When Geraldine and Rob Brouwer, owners of Big Country Raw (2019 Growth 500: No. 96)—which manufactures and distributes raw pet food for dogs and cats— founded their Smithville, Ont., business in 2012, their goal was to have their products sold in specialty pet shops. However, they used a DTC home-delivery model to prove to retailers that there was demand, a necessary step to convince stores to invest in the pricey refrigeration units needed to stock their wares. “It’s a strategy that still works for us,” says Geraldine Brouwer, who says Big Country Raw products are now stocked in more than 600 stores Canada-wide. “When we find an area with lots of home deliveries that’s not supported by a retail location, we use sales data to engage a retailer and can push our customers to them.”

Likewise, Indochino (2019 Growth 500: No. 239) leverages data it gains from sales using geolocation tools to strategically expand their showroom locations. “We review customer behaviour for about six to 12 months in a certain area before opening a location,” says CEO Drew Green. It’s a strategy they’ll be employing next in Australia, where the company has just launched its online-only business. 

Choose your channel

Our ever-shifting purchasing habits—and the prevalence of the internet—has certainly made it easier for DTC businesses to set up shop, but there’s no hard-and-fast rule that says a retailer needs to stick to one specific channel. Indochino, now the world’s largest custom apparel brand, began in 2007 as a purely online experience. When the company was acquired in 2015, and Green was installed as CEO, it began branching out into physical showrooms, a move that’s proven incredibly successful. “Eighty-five percent of all consumer behaviour is still done in-store, so my partners and I felt like we were missing a very big opportunity by not creating an omnichannel business,” Green says. Indochino has grown over 45% in the last three years and currently has 48 physical locations throughout North America, with another seven to launch by fiscal year end. Still, Winder has a word of caution: “One hazard is selling your soul a bit too early to some of the big retailers because you can’t pass up the volume they offer,” he says. “But, long term, it might be tough to wean yourself off of them and maintain profits.”

Other DTC companies have managed to establish a healthy symbiosis. When children’s clothing, decor and accessory company Pehr (2019 Growth 500: No. 97) launched nine years ago, it sold products through specialty children’s stores, as well as giants like Indigo and Nordstrom. Brand awareness grew to the point that, four years ago, they launched an e-commerce business to sell directly to their base. “We have over 500 products, and there’s no retailer that could carry our full assortment,” says co-founder and co-CEO Jennifer Kelly. The online business, which makes up close to 50% of Pehr’s revenue, allows customers to build collections from a wider selection, and exists as a valuable testing ground for new products that may eventually make it in store.

Marketing matters

Social media, a key part of any cogent marketing strategy, can be a crucial free (or paid) channel to reach customers. Big Country Raw has a private, very active Facebook group with around 4,000 members, and they work with 50 brand reps on Instagram with a cumulative reach of 13 million Canadians. “We find that when we go into a retailer with new products, they’re much more likely to pick it up if they’ve had customers coming into the store asking about it,” says Geraldine. 

Indeed, for bootstrapped businesses, online and social media marketing dollars can provide some of the best ROI. In BonLook’s case, online interactions were really the only way they communicated with their customers for the first four years of business. Towards the end of the online-only period, they started increasing their social media presence and advertising with bloggers. “That also helped us realize that people wanted to try on our products,” says BonLook’s Boulanger, a move that helped inspire opening physical locations. Online or in-store, the glasses business is looking good.

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