When we talk about retail partnerships, we often talk about it in terms of increasing distribution. And that’s correct. But, done well, retail partnerships don’t just increase distribution; they expand a market.
Sounds obvious, but it’s worth an exploration.
To illustrate, consider the case of NUGGS, which recently announced a series of retail partnerships that will land them in a combined 4,200 Target, Sam’s Club, and Walmart doors by the end of the year.
(They’re projecting, by the way, that these partnerships will help them grow from $8M in revenue for 2020 to $40M in revenue for 2021. Not bad.)
But here’s the thing about NUGGS. They’re not just taking its product, as packaged for DTC, and shipping it to its new retail footprint. NUGGS has shrunk the box and shrunk the price point for retail—while increasing the minimum order size online (from one 50-pack box to two).
What to make of this?
Well, let’s review NUGGS DTC offering: You may or may not be able to afford or want to pay $45 for 100 NUGGS at a time. You may or may not eat them frequently enough to justify the size. You may or may not want to stuff your freezer full of simulated chicken nuggets.
If you’re a “not” to any of those answers, you were outside of NUGGS’ market—until these changes.
In a podcast released this week, Greylock partner Mike Duboe interviewed Jaime Schmidt and Chris Cantino about omnichannel approaches. In it, was this related quote from Schmidt:
“I think what every brand is told in the early stages of their business is: Know who your customer is, have a niche, and have a target that you’re always catering to and I think that’s very important.
But as the business grows and you got that really strong core established, then you can start safely looking beyond that. I think what’s really key here though is making sure that you’re carrying that niche with you.
So as big as you get, the more customers that you’re bringing in, if you still have that solid core customer who was there from Day One, who really resonated with what you’re doing and they’re scaling with you, that’s where the magic is.”
What NUGGS is doing is exactly what Schmidt advocated for: Find a core, serve it, and look beyond it. What often goes unsaid, however, is what that process of looking beyond it entails. And getting that right is important.
Which leads us to the question: What if NUGGS didn’t made the changes?
Increased distribution would, no doubt, increase revenues. But you have to accept those 5X growth projections would be significantly lower.
And that’s because nothing would have changed in terms of the size of NUGGS’ market—only its ability to reach the market it already had. And very little would have changed in terms of retention: It wouldn’t have found a new market to retain and while it might nominally increase the purchase frequency of its existing market, it likely wouldn’t make a material difference for a brand that now is looking at 5X YoY growth.
And that’s what makes the NUGGS’ expansion instructive: Retail/multi-channel doesn’t just have to be about adding a new channel. Done right, it can be about finding compounding growth levers—both via acquisition and retention—to hit scale.