he lines are starting to blur,” says are private companies, making their collective size Communication Mortimer Singer, CEO of the retail con- difficult to estimate precisely. However, the razor and connection sumer advisory firm Traub. “It’s not about subscription service Dollar Shave Club, one of the will determine “ old versus young, big versus small, online 200 Davids, was purchased by Unilever in 2016 for the future or offline. Across the board, it’s brands that a reported $1 billion (the deal’s terms weren’t dis- of retail — not T are seen as authentic, as embracing and em- closed), and a year later Blue Apron, a meal-kit deliv- bodying a set of values, and communicating directly ery business and another David, raised $300 million a company’s with global consumers that are succeeding today. in its IPO. Traub conservatively estimates that each size or age, Traub And they’ll be the ones that will win over the long David generates at least $10 million in sales, putting CEO mortimer term. This is true even for the incumbents, and may- the Davids’ collective annual sales at $2 billion – and, singer tells be especially the incumbents, because they have the based on the effects of their pricing models, Traub Brunswick’s infrastructure and customer base already in place.” estimates the Davids take more than $4 billion out of blake Traub, whose clients include clothing companies traditional retail channels each year. sonnenshein. such as Naadam Cashmere and Knot Standard, the While these digital-first companies are tiny by big- skincare and cosmetics firm Borghese, the luxury name standards – Walmart had a 2017 revenue of al- brand Lalique and the premium candy and chocolate most $500 billion, with more than $10 billion in on- line Sugarpova, published a 2017 report highlight- line sales – the Davids are growing steadily in size and ing a group of smaller, often overlooked businesses “founded, launched, and nurtured entirely online.” Collectively, these businesses posed an economic challenge to the Goliaths of retail, the report argued. But more importantly, Traub believed they em- bodied and exemplified what the future of success- ful retail would look like – both as a mindset and a business model. These companies showed how da- ta-driven operations and candid, frequent, creative communications could build a brand and cultivate THE NEW loyalty among a new, critically important wave of younger consumers. Traub called these digital-first businesses “The New Davids.” While the “David” and “Goliath” labels suggest a fatal outcome for big businesses, in a recent conver- sation at Traub’s office in Midtown Manhattan, Mr. Singer shared a more optimistic outlook. Yes, the DAVIDS & Davids engage more naturally with Millennials, but we’re seeing Goliaths take note, adjusting the way number – as is online retail itself, where Davids prove they market their brands, communicate and operate especially effective and savvy. Less than 10 percent of their businesses – changes that have seen some estab- purchases in the US are online, and most every pro- lished names outpace their younger counterparts. jection has that figure increasing steadily and sharply. In its latest report, Traub identified more than 200 Part of the Davids’ appeal, according to Mr. Sing- Davids. They span the fashion, beauty, accessories er, is their niche focus. “They are able to offer luxury and wellness industries and create a range of niche or similarly high-quality products at lower, whole- products. BarkBox sends dog treats and toys to your sale prices, and are seen as great value. There’s also home each month. Brooklinen sells premium bed- perceived expertise in just focusing on glasses, or ding. Beardbrand sells beard oil, mustache wax, and mattresses, or water bottles.” combs. Everlane brings “radical transparency” to on- Alongside niche products, the new Davids, unen- line clothing, sharing videos and stories of the facto- cumbered by the restrictions that often come with ries where the pieces are made. legacy decisions, scale and global breadth, are able While concentrated in the US and Europe, these to bring a fresh approach to marketing and commu- Davids represent a global trend. Among the 200 were nications, engaging more directly with greater fre- a custom women’s wear business from Australia, a quency, transparency and creativity. Their authen- lingerie retailer from Israel and a beauty business ticity reads as refreshing. Many use slang to explain

founded by a Nigerian entrepreneur. Most Davids their products and policies. The dialogue, whether KITCH NATE ILLUSTRATION:

74 brunswick review · issue 16 · 2018 THE NEW RETAIL GOLIATHS in advertisements or asking for feedback, feels un- with content first and foremost. And then velocity. If THE DAVIDS scripted, unconventional. you think of a brand campaign 10 years ago, you had This communications style is not a tactic as much to do one every season. Now you have to create con- EMBODY AND as a core engine of their business: “They’ve merged tinually; which means you have to have something EXEMPLIFY WHAT content with commerce, finding ways to create hu- fresh to talk about. It’s almost as if these digital-first man, raw connections – they put out videos and brands are commentators on the world. They’re us- THE FUTURE stories that stay with you, that you talk about,” Mr. ing the pulse of today, not waiting to try and predict OF SUCCESSFUL Singer says. “The old mindset was: a product com- what’s going to happen tomorrow. In some ways, to pany creates products, and a media company creates use 21st century terminology, it’s a reality show. It’s RETAIL COULD content. But the idea of having an outside agency bringing radical transparency. LOOK LIKE – BOTH create all your video content is dated. So is the idea of “Chubbies, for instance, is a men’s bathing suit having to rely on third-party influencers. Companies company. They’re kind of ‘brotastic,’ and they cre- AS A MINDSET need to be acting like vloggers – amassing content ate hilarious content, a lot of it featuring their own AND A BUSINESS from which they might be able to mine something employees, like their CMO. It’s not only funny but for a story or an idea; becoming their own influenc- also creates huge loyalty – you get a sense they’re let- MODEL. ers, writing their own stories. ting you see behind the scenes, and that they’re be- “And it’s not doing it once a season. It’s daily, ing ‘real’ with you. As a result, Chubbies sells a lot of

ILLUSTRATION: NATE KITCH NATE ILLUSTRATION: weekly. Repetition is reputation. So being consistent shorts and bathing suits.

brunswick review · issue 16 · 2018 75 NEW DAVIDS

“Dollar Shave Club was an early adopter of this they work, along with a host of other data points, so technique. Their ‘Why Dollar Shave Club’ video they have a more targeted idea of where to put their made their business. Kylie Cosmetics’ sales exceeded stores. And they’re also taking shorter leases – the $420 million in its first 18 months. That was driven 10-year lease is nowhere near as prevalent as it used by the content that Kylie Jenner put forward. This to be.” convergence of content and commerce is only going Predictions about the future of retail often focus to become more pronounced.” on the battle between online-only and brick-and- Scan the landscape, Mr. Singer says, and you’ll find mortar, or apps versus storefronts. But perhaps this some Goliaths not only following suit, but creating is the wrong lens through which to look at the future their own communication style, making them com- – tomorrow’s retail success stories will be defined by petitive and even a step ahead of the smaller, more the best of both. nimble upstarts they’re supposed to be trailing. Mr. Singer predicts that a brand’s ability to con- “Gucci applied the tenets of digital-native brands verse and connect, to have opinions and take stances, “COMPANIES NEED to their business, and look what it’s done for their to be seen as cool, trustworthy and transparent, to TO BE ACTING sales, their business – they jumped by something create content that people actually care about – these like 60 percent year-on-year.” Mr. Singer also high- will determine a brand’s fate with Millennials and LIKE VLOGGERS lights Gucci’s recent stances on social issues, and its the next generation of consumers. And these quali- – AMASSING creation of a “shadow committee” of Millennials, a ties can rest within Davids or Goliaths. group of under-30 employees who speak directly to But are Millennials really that different of a con- CONTENT FROM Marco Bizzarri, Gucci’s CEO. sumer than their parents or grandparents were? Does WHICH THEY Another brand Mr. Singer mentions is the retail really need to adjust, as it never has before, to 160-year-old department store chain Macy’s. He win the respect and business of this new generation? MIGHT BE ABLE TO praised the company’s recent acquisition of Story, “People have said to me, ‘Look at the ’60s and ’70s; MINE SOMETHING a small retail company that “blends magazine sto- they were the “Millennials” of that generation.’ Well, rytelling with shopping,” as Mr. Singer describes it, yes, but they couldn’t communicate to each other the FOR A STORY as well as Macy’s investment in b8ta, another ex- way Millennials can today. They couldn’t be heard OR AN IDEA; perimental retail business. “These could rub off on at scale, or start a movement, the way that someone employees and customers in so many positive ways,” with a voice can today. BECOMING THEIR Mr. Singer says. “They’ve also done things like allow “That’s why teenage students from Parkland, OWN INFLUENCERS, 200 associates to monetize themselves online – so if Florida, whose classmates were shot and murdered, an associate posts a link to a Macy’s item, and then capture global attention: because they have a mega- WRITING THEIR their followers use that link to buy a product, the as- phone unlike any other generation in history; com- OWN STORIES.” sociate receives a commission. I commend Macy’s panies of all shapes and sizes need to take note if they MORTIMER SINGER for it – it’s trying something different, being open to want to be relevant and resonant. CEO, Traub change, experimenting.” “Earlier this year, we interviewed Gucci CEO But the tutelage is two-way. While Goliaths learn Marco Bizzarri at the Traub Lecture at the Harvard how to use content to drive commerce and change Business School. He was asked if Gucci’s million- the way customers experience their products, Da- dollar donation in support of the Florida students vids are realizing the value of the brick-and-mortar who marched for gun control was a marketing ploy. stores they were predicted to make obsolete. And his response was a firm ‘No.’ Bizzarri said that “Digital-first companies are realizing that rent and he explained the donation across the company, and SEO [search engine optimization] are the same thing to his customers, by saying: First, Gucci had lost – they help you acquire customers,” Mr. Singer says. two members of their staff in the Orlando shooting “So these companies have woken up to the idea that a year-and-a-half ago, so the issue was personal to the cost of acquisition (CAC) isn’t limited to market- their immediate and larger Gucci family. And sec- ing on Facebook or Google; it can also be embodied ond, if he, Bizzarri, is trying to teach young people in in rent. The catchphrase right now is ‘rent is the new the company to speak up to power, what better sym- CAC.’ But of course rent has been the CAC for mil- bol of standing up to power to support than children lennia. Not everyone wants to shop online – people standing up to the American government? do go shopping. Imagine that? We’re social animals.” “An audience member asked as a follow-up: blake sonnenshein is a True to their digital roots, the Davids have used ‘So going forward, does that mean that companies Partner in Brunswick’s New York office, specializing data to improve this old-school practice. “They should take a stand?’ And his response was, ‘Well, in both the consumer and

cross-correlate where their customers live, where who else is?’” u private equity sectors. ASSOCIATES TRAUB MARVIN OF COURTESY PHOTOGRAPH:

76 brunswick review · issue 16 · 2018