Welcome back to the Gentleman's Gazette. In today's video, we will determine if cutting
out the middleman really saves you money or if it's just an overhyped marketing term
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Modern menswear companies are awash,
advertising the supposed benefits of cutting out the middleman.
And if you're unfamiliar with that term, it's a sales model in which the producer
sells directly to the consumer rather than having an intermediary like a retail store.
And because there's one less person involved to turn a profit, it's often assumed that the
product will cost less. This system is called the "direct-to-consumer model"
and many online retailers use similar terminology. Does this inherently benefit
you? It's widely advertised that using the shopping model is an innate benefit.
It assumes that the products that you're looking for are available at the best possible prices.
And in today's video, we are going to determine if that is actually true. When examining claims about
cost and benefit, it's really important to have all the information at your disposal. After all,
how can you know that you're getting a good deal
"cutting out the middleman" unless you know exactly what's being saved.
For instance, in their "About Us" section, noted direct-to-consumer brand Spier & Mackay
ponders, "Why does great-fitting, high-quality menswear cost so much?
The truth is it doesn't have to. Bloated distribution models, unnecessary markups,
and greedy profit margins all lead to artificially inflated prices." The clear implication here
is that the traditional model of doing business clearly does you a disservice. But, if you cut out
all the incendiary and unnecessary adjectives like "greedy" and "bloated," what are you left with?
Next to nothing. You're left to assume that, by cutting out one part in the supply chain,
it's going to benefit you financially and there's no proof of this.
Consider this chart by shoemaker Beckett Simonon. There's no explanation for how these numbers are
calculated. They've simply stuck a normal price for their shoes on top of the chart in a vibrant,
attractive color and imagined up a competitor's price for a comparable shoe that appears to be
on the bottom in a bland, gray color. This is a great example of psychology in marketing and how
the color of the choice that they want you to make is bright and engaging versus the competitors,
which is dull and gray. This chart really doesn't tell us anything that we need to make an informed,
buying decision. You aren't told exactly how much you're supposedly saving on the Beckett Simonon
product because you aren't shown a specific price breakdown in raw materials, labor,
and markup, and you also can't compare that to the price of the traditional retailer
shoe because you're given no information. It's not even comparing apples to oranges
because it's almost like you're not even able to compare them. Now, we've reviewed Beckett
Simonon shoes before - you can see that video here -
and we've determined that they're a serviceable shoe at their price point. So, in our opinion,
using the direct-to-consumer model, you're really not saving anything even though this model tries
to make you believe that you're getting a $200 shoe at a $600 quality level.
Fast fact: I've also owned several Beckett Simonon shoes. I really like their sneakers, but they tout
them to be on the level of Common Projects and they're not. Many direct-to-consumer companies
dedicate web page after web page to tell you why this model is so great. But, ultimately, the
amount of money that you're saving really doesn't matter if the quality level isn't good anyway.
Most of the time, additional information like what it's made from, how it's assembled, and systems
for quality control will give you a much better idea about the quality of the product; rather
than giving you a crash course on the science of "cutting out the middleman." As an example, let's
look at our own shop and the shop that I manage on a day-to-day basis, Fort Belvedere. In many ways,
Fort Belvedere is effectively a direct-to-consumer company. We work directly with skilled artisans to
create unique products; we sell them exclusively online, directly to you without any retailer in
the middle. This means minimal overhead costs. But, do we fill up the Fort Belvedere website
with colorful graphics that trumpet how beautiful and amazing our business model is?
No, not at all. Instead, you can see that we've dedicated our website to help you make the best
buying decision when buying some of our products. I mean, after, all no one needs an abbreviated TED
Talk about how to sell their products, what makes them great,
or explaining their whole supply chain.
That's a whole lot of corporate jargon, and I need to stop going on before I explain to you about
you know logistics and shipping and all the rest of that good stuff. This emphasis on the
direct-to-consumer model might seem effectively benign. And, after all, if that's how a company
wants to focus their marketing, that's entirely their choice. But, from a practical perspective,
exaggerating the ways that you sell your products is effectively a hook,
and smart consumers like smart fish should avoid hooks. What are "hooks," after all? Well,
they're effectively a marketing way to hook your attention or grab you and make you buy
the product. Some common examples of hooks are inflated regular prices that are slashed through
and are called "sales," making you think that you're getting a really good deal.
It also includes meaningless and confusing buzzword. These trigger an emotional response,
and they prey upon confusion like "affordable luxury" or "custom." And also bait-and-switch
where customers lured in for one product and has eventually sold something else.
[scene from "The Simpsons"]
Homer: "Now, this wheel balancing is free, right?" Salesman: "Oh, you betcha! Absolutely."
Salesman: "Oh, wait a minute, these tires won't take a balance."
Homer: "They won't?" Salesman: "Nah, nah. No. You hear that clunk."
Homer: "So?" Salesman: "That tells me you need four new tires."
Homer: "Really?" Salesman: "Yeah."
So, in effect, marketing a product as good for you because
it's available to you in this model is a hook.
After all, you're being hooked into something that doesn't necessarily have
anything to do with the quality of the product. And I want to be really clear - we're not saying
that all products from direct-to-consumer companies are all bad. But, what I am saying
is that if a company spends all of its time telling you how they sell their products,
what aren't they telling you? And after all, what can you really guarantee about the product?
The matter of fact is being on guard against hooks is very tricky. You can defend against them by
carefully examining the product; reading reviews to see if you're really getting a good deal.
But, that can also become really exhausting if you do it for every product that you buy.
And, frankly, doing all this homework takes a lot of the fun out of buying something new.
If you look for companies that offer actionable information about products
and not just spiels about how they sell, it will make it a more enjoyable buying process.
without always being on the lookout for hooks. As part of their advertising,
many companies will actually give you the impression that they're doing you
some sort of favor. Recently, Nike has pivoted hard towards direct-to-consumer
models. And Nike makes sure to emphasize how much of a benefit this is to you. But,
the sales model also benefits Nike after all it reduces their waste overhead and their need
to rely on distributors. And yes, this can benefit you, too, but it's a two-way street.
And there's proof out there that Nike is enjoying massive profits as a pivot to this business model.
And it's difficult to tell how much it actually benefits you. Direct-to-consumer Nike products
might be cheaper than in stores, but you're paying for that reduced price in other ways;
especially while other direct-to-consumer models might save you money, they also come with their
own intrinsic cost. At this point, you can see that many direct-to-consumer companies like to
paint a very rosy picture of themselves, but this model often introduces many inconveniences. First,
you have to wait weeks or months to receive your product because the company doesn't want to pay
for warehouse space. Secondly, you can't try on those products in stores because they have
no brick-and-mortar presence. And you have to rely on the company to keep you informed
because you can't inspect the products first hand until you receive them. If a company is
trustworthy and sells quality products, this is less of an issue. The company will have taken
steps to mitigate these inconveniences and not let them hamper the buying process. But,
then again, companies of this ilk aren't really relying on the direct-to-consumer modeling to
lure in their customers. The companies that do rely on it are much more likely to gloss over
and not pay attention to these issues. This can give you quite the headache when items arrive
and they don't fit correctly or they don't look at all like they're advertised. Yes,
direct-to-consumer companies do sell products at lower prices, but are you really getting a
better deal if those low prices come with a burdensome buying experience? Furthermore,
many direct-to-consumer companies like Casper,
Warby Parker, and Nectar are embracing brick-and-mortar
stores to deal with all the hassles that go with online sales, which seems to indicate that the
direct-to-consumer model isn't all sunshine and rainbows for them either. As online retails have
exploded over the last decade, more and more companies are using it to boost their sales,
but these products still need to be advertised, stored, and shipped, so who does it? The answer is
the manufacturers themselves. In the traditional retail model, obligations like liability, supply,
chain management, shipping, and logistics are all handled by third-party distributors, retailers,
and warehouses. Because these companies specialize in these endeavors, they have large-scale,
well-built up processes to do so. This means they're often very expedient and cost effective.
But, because direct-to-consumer companies have to assume all these responsibilities themselves,
it actually raises their costs - especially because it has to be
done on an individual level rather than on an effective scale. So,
these companies actually have to develop beyond their traditional capacity in order to take over
roles done by middlemen. This transition is often very difficult and it can lead to a
really poor buying experience. Complaints about shipping costs and buyer experience
are often some of the highest complaints in the direct-to-consumer model business. Conversely,
larger companies simply expand in order to assume these operations. Because Adidas is
expanding into more direct-to-consumer sales, the fastest growing part of their business
is their operations and fulfillment. Warehouses, shippers, and labor are expensive and, ultimately,
add to the cost. And in the end, you the consumer pay for it. So,
it's clear that, in many respects, these companies cut out the middleman
and then became the middleman themselves. Now, there's only one thing to say about that.
[scene from Star Wars: Episode III] Obi-Wan: "Now, you have become
the very thing you swore to destroy."
So, in summary, are we concluding that all direct-to-consumer
businesses are bad and should be avoided at all costs? No, not at all.
As a sales model, the direct-to-consumer marketing can be a viable option and benefit everyone.
This is provided that businesses create a robust supply chain and have a great customer experience,
and provided that customers understand the cost benefit of a direct-to-consumer model. The issue
arises when a company uses the direct-to-consumer model as the central point of their advertising.
As we've shown before, the direct-to-consumer
model doesn't necessarily give you access to the best products at the best prices,
and any company that wants to give you that impression really doesn't have your
best interest in mind. Direct-to-consumer marketing is not a bad thing. Just be wary.
But, if a company primarily focuses on marketing their
direct-to-consumer system and withholds information about the materials they utilize,
how their products are made, quality control standards,
and satisfaction and customer service guarantees, then your guard should definitely be up. So,
if you encounter sales pitches about direct-to-consumer marketing
with shiny graphs and bars, don't get dragged by this tactic.
You have to ask yourself, "Is this a good quality product? Do I need this product?
And is it worth its cost?" Fortunately, we teach you how to determine these qualifications in our
"Is It Worth It?" series,
where you can benefit from our careful research and unbiased opinions. Ultimately,
cutting out the middleman has its advantages and disadvantages like any other sales model.
Just be aware that in many cases the obligation of the middleman is assumed by someone else.
So, it's not actually clear how much money is actually saved;
most especially when companies aren't transparent about their costs. Am I currently wearing anything
from a direct-to-consumer company? Well, let's find out. In today's outfit, I'm wearing a variety
of products from different companies and I'll let you determine in the comments below if they're a
direct-to-consumer company or not. Also, let us know if you think that they're worth the money.
And if you want to see an "Is It Worth It?" for any of the brands that I'm wearing,
let us know. I'm wearing a checked Spier & Mackay jacket with colors of cream,
brown, and blue and a pair of charcoal flannel Suit Supply trousers. My shirt is a custom,
made-to-measure shirt. It's an Oxford cloth fabric with a button-down collar
by Proper Cloth. My shoes are a pair of chocolate brown suede
Chelsea boots from TLB Mallorca. My tie is one of our Fort Belvedere brown grenadines and
it is untipped. My socks are also Fort Belvedere. They're our two-tone solids in a shade of gray.
And my pocket square is also from Fort Belvedere. It's navy blue with this rabbit pattern.
Check out all these products and many more in our Fort Belvedere shop below.
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