Changing Your Business Model Series — The Retail Business Model

In our last newsletter, we covered reasons why your company might need to change its business model and provided you with a master list of categories and model types that you could review to assess whether they would be a better fit for your particular business case.

Today, we’re going to begin looking at the business model types and some example companies for each to continue to help you strategize around the type of change best suited for you.

Before we go into the first model, below is the list of business model categories we provided in our last newsletter for you to have as a reference as you evaluate today’s model examples —

• B2B (Business-to-Business) — where companies sell their solution to other businesses or organizations.

• B2C (Business to Consumer) — companies that sell to individual end consumers and may use retailers or wholesalers to sell to their customers.

• DTC (Direct to Consumer) — companies that sell directly to individual, end consumers.

• B2B2C (Business to Business to Consumer) — companies that sell their solution to other businesses to help those other businesses sell to consumers.

• C2C (Consumer to Consumer) — companies facilitate consumers selling to other consumers.

• B2C2B (Business to Consumer to Business) — companies who sell to the employees of other businesses who then advocate for their employer to buy the original company’s solution.

• B2G (Business to Government, also Business to Public Administration or Business to Public Sector) — companies sell their solution to government entities.

• C2G (Consumer to Government) — companies facilitate consumers directly interacting with a government entity.

Today’s Business Models — Retail, B2C & D2C

The Retail Business Model includes companies that sell products or services to end consumers. 

Often, companies that manufacture products or provide services through this model work with distributors to sell large quantities of their products or services to wholesalers, who in turn sell the product or service to retail locations where end consumers purchase them. These end consumers will use these products or services to solve problems in their personal lives.

Companies that use versions of this model can be listed under the category B2C (Business to Consumer) or DTC (Direct to Consumer).

Changes in technology and in shopper preferences have created new iterations of this model type and will continue to do so into the future. 

RETAIL: Mapping The Model

If you mapped out versions of the retail business model, they could look something like the following —

The Brick & Mortar Business Model

Let’s look into an example.

Brick & Mortar Model Example

Trader Joe’s is a great example of a Brick & Mortar business model.

Trader Joe’s is a national chain of neighborhood grocery stores in the United States. They focus on selling “quality products at the best everyday prices”. They don’t carry many branded items but rather focus on having unique products under the Trader Joe’s label along with everyday basics, friendly Crew Members, and transforming the grocery shopping experience into a welcoming journey full of discovery and fun. 

They have a website; however, consumers are provided with the opportunity to create their own shopping list online instead of filling their carts to complete their purchase. This encourages consumers to take their shopping list along with them during their next Trader Joe’s visit to experience the Trader Joe’s in-store experience fully in-person and for Trader Joe’s to avoid needing to pass on potential additional expenses to its consumers through raised prices because of working with third-party vendors. They also do not offer curbside pickup, or delivery, and have stated that they won’t work with 3rd party delivery services because the quality of those services does not match the quality of the in-store value and shopping experience Trader Joe’s provides to its customers. 

Up next is…

The Click & Mortar Business Model

Here are a couple examples of this model.

Click & Mortar Model Example #1

ZARA is one of the biggest international fashion companies in the world, and is part of one of the world’s largest distribution groups called Inditex. ZARA vertically integrated all stages of its business into it’s model instead of relying on external vendors — it does design of its products, production, distribution, and sales through the extensive retail network it has built allowing it to be more optimized, quicker, and agile to end consumers preferences and needs. It also allows them to stay in step with the commitment they have made to design, manufacture, and distribute clothes sustainably. 

ZARA integrated it’s brick and mortar stores with e-commerce to reach its customer base. Consumers can purchase clothes clothes in store and online. They can also purchase clothes online and return in-store for their convenience (BORIS, buy-online-return-in-store). Zara also sells through it social accounts and mobile app.

Click & Mortar Model Example #2

Brooki Bakehouse described itself as a new type of bakery in Australia with a focus on bringing the bakery to you. They strive to celebrate moments with you! Consumers can stop by the bakery and purchase delicious treats or order freshly baked products that are shipped to their doorstep daily. 

Brooki has a website where consumers can make purchases for Delivery or Pickup. Followers of Brooki can purchase the bakehouse’s baked goods through their social media (including TikTok, Instagram, YouTube, Meta).

The last retail model version we are going over today is…

The Ecommerce Business Model (DTC, Direct to Consumer)

Note: DTC (Direct to Consumer) companies do not use, or rely on, intermediaries (such as wholesalers) to sell and deliver their products to end consumers. They distribute their products or services directly to their end consumers themselves.

DTC Ecommerce Model Example #1

CHEWY is an online retailer of pet products striving to be the most trusted and convenient destination for pet parents and partners everywhere. CHEWY is vertically integrated. The company creates products pets and their pet parents will love, provides trusted brands, and delivers them directly to consumers’ doors. They also have a pet pharmacy, vet services, and pet insurance. CHEWY sells to consumers through its website and branded mobile app.

DTC Ecommerce Model Example #2

Dossier is a fragrance brand working to bring luxury French fragrance to the masses at more affordable price points. They offer their Dossier Impressions (“an ever-growing selection of designer-inspired fragrances based on customer insights”), their Dossier Originals ([their] collection of in-house exclusive fragrances uniquely blended by their perfumers in France to offer a variety of fair-priced niche luxury scents for the next generation), and home scents (including diffusers and candles) to their customers. Their products are sold through their website and social media channels (including TikTok and Instagram).

DTC Ecommerce Model Example #3

BEAUTY PIE is a skincare, makeup, and fragrance brand offering world-class products while cutting out the middleman and ridiculous traditional retailer markups. End consumers can get the luxury products they desire without paying traditional prices — allowing them to get up to 4X more for their money. BEAUTY PIE sells through its website and social media channels (including TikTok, YouTube, X, & Pinterest).

DTC Ecommerce Model Example #4

OURA is a Finnish health tech company selling a ring “designed to pair with your mind and body, [to empower] you to take control of your health from the inside out”. The OURA ring gives consumers “unlimited access to accurate data and information about [their] body, so [consumers] can make more informed decisions, and lead a better, healthier life”. It tracks details such as a consumer's sleep, activity, stress, and heart health. OURA sells its device through its website

DTC Ecommerce Model Example #5

MUD\WTR sells a coffee alternative made from 100% organic cocoa, Ayurvedic herbs, and functional mushrooms. It contains a fraction of the amount of caffeine found in coffee and gives consumers “energy, focus, and immune support without the jitters, crash [from caffeinated coffee], or poor sleep”. The company started as DTC by selling on its website. It also sells through its social media channels (such as TikTok and Instagram) and has expanded into retailer brands with physical locations.

Key Notes About The Retail Model

As mentioned earlier, changes in technology and in shopper preferences have required companies to embrace new iterations of this model. 

Brick & Mortar only brands have integrated e-commerce into their model and are benefitting from the ability to expand their outreach to new customers via their website and/or social platforms.

DTC Brands who’ve been successful online garnering that increased ability to reach more customers through their websites and social media are now integrating Brick and Mortar locations into their retail business model to take advantage of the ability to provide a more improved and deeper, or more comprehensive, brand experience and customer service experience to their customer base.

Some companies with retail models have begun to integrate with online marketplaces, delivery services, online gaming, the metaverse, and more to provide their customer segments with the brand experience and customer relationship they want to develop with them. They provide consumers with multiple channels to connect with them based on their brand standards and allowing consumers to be able to purchase their products or services wherever consumers live, work, and leisure.

If you have a retail business model, it’s important for you to stay aware of the technological, economic, social, and cultural changes that could impact your target market’s relationship with you.

Next Steps

Over the next several newsletters, we’re going to continue to look at examples of business model categories and types we covered in our last newsletter to help you with your thought process around which business model(s) may be a good fit for your business case.

If you’d like LUSID to help you work through your business model change and strategize around which business model is most appropriate for your company vision, you can set up a free call with us here. We’re excited to learn more about you and your company!

And feel free to reach out with any questions, comments, or additional thoughts you may have at [email protected]. We love connecting with visionary Founders, CEOs, and executive leadership teams working on impactful ventures.

Let’s Make Your Vision Your Reality.    

www.getlusid.com