Former employees talk about the biggest mistakes brands make when opening stores

There are plenty of challenges to running brick-and-mortar stores as an online-only startup, which often means opening branches in expensive neighborhoods to take advantage of high traffic. But former employees of DTC brands argue that it’s not just the loss of cash that makes it difficult for startups to run stores. Former retail employees of DTC brands like Outdoor Voices, Glossier, and Casper spoke to Modern Retail about the biggest mistakes they’ve seen digitally native brands make when increasing store counts — and where they’ve improved compared to traditional retailers. Some of the challenges they’ve seen in practice include a lack of cohesive training, inefficient practices like poor inventory management, and a general disconnect between corporate and retail teams.

“A pressure to climb”
After years of banking on brick-and-mortar stores to compete with established competitors like Lululemon, Outdoor Voices abruptly closed its brick-and-mortar stores in March, laying off hundreds of employees across 16 stores.

K. was a store manager at an Outdoor Voices store that is now closed. According to K., who worked at another DTC apparel startup before joining Outdoor Voices in 2022 and was laid off during the store closures, the two experiences were very different.

“The previous brand I worked for was a little more advanced and doing things right,” K said. For example, she said, “that startup has been strategic about entering new markets, even though that means it takes years to ramp up the store count.” The company has a handful of locations in Canada and a couple of states, and its number remains in the single digits despite launching around the same time as Outdoor Voices. Meanwhile, when she joined Outdoor Voices, the brand was in the process of opening two new stores.

“Coming to Outdoor Voices allowed me to see a little bit more of how these fast-growing brands operate behind the scenes,” she said. “Fortunately or unfortunately, I had more insight into corporate operations than others due to my specific role.”

One of the glaring issues she quickly identified was a lack of consistency in the company’s operations. “They didn’t necessarily see the value in the person running the retail fleet,” she said. “Even after getting an amazing, experienced director, she wasn’t always set up for success.” Much of this was due to the lack of a dedicated team to delegate tasks to and help oversee all the stores across the country.

Part of this is due to the inability to test and iterate on practices in stores while the company was still opening new branches elsewhere. “We were opening six stores when I came on board, and a lot of resources were spent there,” K said. That led to managers at each store developing their own daily operations, such as deciding how and when to train new employees. That resulted in inefficiencies. For example, he had to retrain an employee who came from another location.

Additionally, he said HQ’s promotion of a new store quickly declined after that location opened. When Outdoor Voices opened a new store, there were numerous events in the first few weeks, such as in-store meetups or organized hikes.

“But there were no community-driven efforts to retain those customers and give them reasons to come back consistently,” he said. “That’s why we didn’t see the newer markets take off.”

Another former Outdoor Voices store employee who spoke on condition of anonymity and goes by W. worked there when the company was on a store-opening spree in 2017. That year, the brand opened four stores, including its first on the West Coast, in Los Angeles. She said that even back then, there was a sense of pressure to grow quickly as a venture-backed startup.

“The company had a specific vision — to offer luxury stores — but I think they grew too fast,” W said. That in turn led to growing frustration among store staff about what Outdoor Voices was willing to spend money on.

“We spent almost a thousand dollars a week at Topo Chico,” she said, along with high-end floral arrangements. At the time, she said there was also resentment among store associates because the company prioritized the store’s aesthetics over paying higher wages, which at the time averaged $15 an hour at that location. That treatment, she said, led to high turnover among associates. “I vividly remember telling our regional manager that my staff needed better pay and her saying, ‘We’d all like more money,’” W added.

Growing pains at a rate of hypergrowth
That’s not to say Outdoor Voices hasn’t improved over the years. According to K., the hourly pay was much more competitive than the local market when he joined the company in 2022. “It was never going to be the best, but I thought it was fair at the time,” he said. People also received raises upon turning one year and received promotions during his tenure. Unnecessary spending of cash on nice-to-have features for the store was also curbed, K. said.

“They did a great job of focusing on what was really important when I joined,” he said. But that wasn’t enough to make up for the lack of cohesion in other areas. And eventually, Outdoor Voices ended up closing all of its stores to focus on e-commerce.

Not all retail employees have such unpleasant experiences at DTC brands. One former Glossier store employee said that his experience working at one of the newly opened stores was pleasant. Compared to the brick-and-mortar stores this former Glossier employee had previously worked for, there was a greater emphasis on social media marketing and ensuring that the customer had a great experience discovering the products in person.

“The store operations and overall culture were definitely different than what I was used to,” they said. “But after some headaches, I was able to adapt well.”

For brands selling directly to consumers, operating retail stores during the hypergrowth stage is challenging and expensive, even with experienced staff on board.

P., who previously worked in the retail operations of mattress startup Casper, told Modern Retail that the corporate and retail aspects of DTC startups “will never be seamlessly integrated, but there are key avenues to connect them.”

P. worked at Casper until 2021, when the company suffered layoffs. At the time, Casper was struggling in the public markets. The company filed for an IPO in 2020 but struggled to turn a profit and losses continued to mount. Casper was eventually taken private in November 2021 by Durational Capital Management.

“I came into a culture where there were a lot of highly paid, overpromoted people with a ‘screw it’ attitude,” P said. He explained that these young, early-stage employees were considered stars at first because they could wear many hats. But as Casper grew into a mature, publicly traded company, he said, “their roles hadn’t evolved with the scale of the company.”

At the time, Casper operated about 72 company-owned stores, many of which were located in expensive urban neighborhoods. “There were some questionable real estate decisions, and I don’t know what they based the stores on,” P said. “By that time, Casper had already become known for spending hundreds of millions of dollars on marketing.” It doesn’t help that competitors like Purple were doing the same amount of business for a fraction of the operating expense, he noted.

“We were trying to cut back on overspending,” P said. However, many inefficient decisions were still being made when opening new stores. “There is this obsession that every store should be ‘different,’” he said, which proved to be an expensive approach to designing them.

Rebekah Kondrat, founder of Kondrat Retail, who led retail operations for Warby Parker and Outdoor Voices, said inefficiencies are “pretty common” among DTC brands venturing from e-commerce to brick-and-mortar.

Kondrat said brands often hire an experienced manager from successful, historic brands like Apple or Nike to run the company. But often, there are so many things for this one person to fix, Kondrat said, and they don’t have the resources or a team to conduct training or troubleshoot store issues in real time. And their to-do list only grows as a brand opens more locations.

“If you’re going to invest resources into opening stores, you also need to allocate capital to a support function at headquarters,” Kondrat said. This dedicated team would be in charge of communicating with store managers about upcoming product launches or sales to prepare for, he said.

Overall, P. said that when she worked at Casper, the corporate team’s vision for merchandise and customer experience “didn’t trickle down” to store management. This led to chaos and inconsistent marketing and merchandising strategies across multiple stores. “It was a constant announcement of new products or campaigns that store employees had to execute overnight,” P. said.

Still, as with most startups, many of them end up honing their retail strategy over the years as they get a better feel for what works and what doesn’t. In the three years since P. left Casper, the company has shifted its retail strategy to design its stores with a greater emphasis on sleep education. As of this year, Casper has 66 retail stores, with plans to open roughly seven to 10 new stores by 2024.

There are a number of ways direct-to-consumer companies can create a more cohesive retail strategy, P said. For example, corporate teams can bring in people from top-performing stores to give feedback on a new product before rolling it out to all stores.

“Let the stores set the culture,” P advises. “They are the ones who interact with customers and know what they respond to.”

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