(Originally posted on Pipecandy Newsletter #99)
“Rent the Runway partners with W Hotels”
WELL, IT’S ABOUT TIME! I mean…pardon my angst but how are more D2C brands not doing (or are they not thinking?) brand partnerships outside of retail? There’s been a lot of noise about brands having to put themselves where their customers are but this has always meant being where the customer is within the confines of retail (Marketplaces, Brick-and-mortar stores, Pop-ups, and Own eCommerce websites, so to speak.), more opportunities for brands to promote themselves and gain brand sponsorships, and of course, more B2B partnerships amongst brands and retailers.
Being where your consumers are now requires taking the retail off of ‘omnichannel retail’ and going “omnichannel” in the truest sense. (Think coworking spaces, public restrooms, football stadiums, convention centers, cinema halls just any about any place where your potential customers could be). The most common and perhaps one of the earliest examples of these kinds of partnerships – one that you and I have witnessed – has been between skincare products and Airlines. Recall those tiny bottles of moisturizer in the flight restrooms? What better way to get your products millions of eyeballs, every day!
Just last week, I spoke to a D2C wellness brand that ships sanitary pads in containers to a well-known company that operates co-working spaces. It’s already happening and RTR’s partnership with W, we think, shouldn’t be seen in isolation as a trend that is set to disrupt the travel industry exclusively. Rather it is indicative of a larger trend that will gather steam among niche D2C brands to enable retail transactions and facilitate brand promotion in all possible non-retail channels.
That’s what RTR’s founder Jennifer Hyman means when she says “anyway to bring the service closer to members is on the table” She hopes to grow her hotel presence as well as promote her brand.
Why Hotels as an alternative distribution channel?
10 years ago, Facebook and Instagram may have worked as cheap, convenient customer acquisition channels. Today, CAC is anywhere between 3x and 10x depending on the competition.
As a new, up-and-coming D2C brand, you’re not going to outspend your competition anytime soon. However, you can stay in the game by partnering with other brands that complement your values (like Glossier, West Elm, Gravity blankets are doing) and or or, establish yourselves in new channels (like Rent the Runway just did) that would make your products more accessible, and facilitate revenue generation all year round without having to worry about CAC.
Staying with the example of RTR, let’s look at the business opportunity that makes Hotels worthy as alternative channels.
In the US, there are currently some 55,000 hotels and a total of 5 million guestrooms (or, 90 rooms per hotel on average). In 2018, the hotel occupancy rate was 66.2%, which is 60 rooms per hotel.
Assume each room has 1 person staying for 3 days, that’s a total of 7,300 unique guests and 22,000 guest nights annually, per hotel. Across the hotel industry, that’s about 400 million unique guests and 1.2 billion guest nights in any given year! (The duration of the stay will differ among the types of hotels – say, between an airport hotel and a coastal resort)
Assuming (again) that 20% of each unique guest who is staying buys a product worth $50 from the hotel, the potential across the US is a massive US$ 4 billion (at least)!
The US hotel industry saw a revenue of $218 billion last year. That means, based on our above calculations, 2% of that revenue comes from selling moisturizers, skin-care lotions, face wash, toothpaste, chips, etc. to guests.
Now add the potential similar alternative channels such as Airlines, Casinos, Co-working spaces have to offer. HUGE!
There’s no such thing as loyalty
How do hotels decide what products go into their rooms?
For luxury and upscale hotels, the decision is based on a consideration of function and brand identity and is often helped by lobbying from manufacturers. The hospitality experts who run hotels put a lot of thought into providing their guests with the exact right products – right as in works well enough that a person feels clean after using them but also right as in consistent with the image that the hotel wants to project.
Invariably, brands actively approach hoteliers about their offerings, often with tailor-made brochures in hand, and there are entire catalogs for people in the hospitality industry from which a hotel manager can order amenities. Some beauty/hygiene companies are specifically focused on the hotel market, while others see it as an opportunity to get their products in front of guests who might then buy the products independently.
Hotels don’t see brands seeking to promote themselves or brand sponsorships as an opportunity for loyalty-building. Instead, they see them as a one-off opportunity and pay them big bucks for sponsoring an event or two. What if hotels instead:
– Discovered brands tailored to their guest demographics and put a few products in each room right from pillow covers to soap to shampoo? And also,
– Launched their own eCommerce site with an inventory of products across all the brands that the hotel partners with, giving its guests the opportunity to order the products that they like, and have it delivered right into their rooms?
That would be smartly tapping into the customer’s wallet (without shifting the burden on the customer to figure out where she could get that specific product outside the hotel) and a win-win for both the Hotel and the brand. Recall what I said before about enabling retail spends in a non-retail landscape?
How many alternative distribution channels?
Per our research, there are some 1000 Airline companies, 55,000 hotel/lodging facilities, 600K restaurants, 100 Cruise companies, 5,000 coworking spaces, 6,000 movie theater sites spread across the US. These avenues would make for great brand partner channels since they see consumers arriving and leaving en masse.
As far as Hotels go, there are some 5000 – 10,000 Hotels (out of 55,000) that offer booking and other services on their web portal, which is a great start for facilitating eCommerce sales since they already accept payments. Layering an eCommerce platform and integrating payments isn’t rocket science.
Figuring out the right brands to partner with by triangulating guest data, location data, and brand data are where the science is and that’s where PipeCandy steps in. Here’s where I hope I can unleash a well-earned sales pitching spell on you. If you are a brand or know on, hit reply. Let’s hit a few out of the park for you in 2020!