Every brand is different, but their lifecycle is the same...if they survive long enough. If you're running into headwinds finding profitable growth, trying to understand if or when brand investments will ever pay off, or worried about the risks of channel expansion, this post is for you.
Here are my lessons around finding a balance of Brand building and Channel Expansion in hopes you can skip the pain and jump straight to stage 7.
I used to think channel expansion was giving up on your brand.
This is how I used to think:
- "Ecommerce has infinite scale."
- "Why would we give up control of the brand experience?"
- "Why would we give up ownership of the transaction and all that sweet sweet data?"
- "All we need to do is build the brand strength and we'll be able to maximize the potential of the brand via our shopify website"
This is what I learned:
- Yes, maximizing profitable growth comes from increasing Brand Strength.
- That's necessary, but not sufficient.
- Increasing available TAM is also necessary
- Because shopping behaviors are sticky, pieces of your total TAM are locked up in other sales channels.
- Our Brand can't fully monetize without unlocking the TAM in other sales channels.
- We're not going to get everyone who is used to shopping in brick n mortar to buy online.
- Some will, but the number is small.
- Therefore, Ecommerce does not scale infinitely.
- TAM, TAM by channel, sequence of expansion that makes sense, etc is different for each brand, and changes as product offering changes.
- If you have an absolutely massive digital DTC TAM, there might be zero need to expand channel and still build the business you want
Mistakes: Along the way, you'll make mistakes as you run into headwinds either from your available TAM, or your brand strength.
These include:
- Over-rotating to short term tactics (discount, promo, high-ROAS, non-incremental spend options) to drive further growth when you don't see the 'results' from the brand investments you're making since you've run into the TAM ceiling of a channel
- Giving up on channel expansion forever if you see cannibalization.
- Cannibalization is a symptom, not the cause. The cause is the Brand Strength
- Overspending on a new channel after you see strong early results "just from turning it on"
- Undervaluing the operational complexity associated with jumping into a new channel. Each channel is, after all, a completely new and different business.
- Signing on to wholesale purchase orders you can't deliver on. Why? You don't yet have the Brand Strength to deliver the required full-price sell-through velocity.
- Result? Reduced overall Brand Strength resulting from discounting + promotions needed to move through the inventory
Mistakes are to be expected
Doesn't mean you should stop investing in Brand or stop building the capabilities to expand sales channels
Just means you need to increase one or both of them
It's just math
hope this helps ✌️❤️🤘
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