Luxury Direct Sales Case Studies
Luxury and high-end brands that have a direct sales business model are few and far between. Those luxury brands that do direct sales typically employ a multi-level marketing (MLM) business model. However, a number of luxury brands have recently started shifting to a direct-to-consumer (DTC) business model. This involves selling products through the brand's website and social media pages, as well as through fully-owned brick-and-mortar stores (as opposed to through third-party retailers). Even though the DTC business model is more focused on marketing than on sales, a DTC-only brand, The Clear Cut, has been included below, because shifting to a DTC model represents a significant trend among luxury brands.
- Cabi, W by Worth and Etcetera are three luxury brands that employ an MLM business model. This means that the company actually generates revenue from its salespeople, who are then tasked with distributing the products to end consumers in order to earn a commission.
- Another distinctive feature of an MLM business model is the refferal system. Salespeople can earn a commission whenever anyone they referred to the company generates sales.
- Cabi sells high-end women's clothing, jewelry and accessories. Cabi states that it creates luxurious clothing specifically designed to bring out the style of a woman.
- Industry experts regard Cabi as a high-end brand.
- Cabi uses an MLM model to sell its products. Specifically, Cabi partners with willing entrepreneurs called Cabi Stylists.
- Cabi Stylists can earn a commission by organizing pop-up shops and giving personal shopping advice to potential customers. Cabi Stylists earn a 25% commission for any direct sales generated.
- Additionally, the entire sales model of the company depends on referrals. Cabi Stylists can refer other people to the company. If those people then become Cabi Stylists themselves, they also become a part of the team of the person who referred them.
- There are 4 levels of team members. The person who is directly referred becomes a part of level 1. If that person refers someone else, that new individual then becomes a part of level 2 and so on.
- Regular Cabi Stylists earn 3% of any sales generated by a level 1 team member. If they refer more than 10 people, they receive a "team builder" bonus, which means they earn 8% of any sales generated by a level 1 team member.
- Cabi itself earns revenue by selling the products to Cabi Stylists, who are then responsible for clearing their inventories.
- One interesting feature of Cabi's business model is that it offers seasonal inventory to its Stylists, at rates below the retail value of the products.
W BY WORTH
- W by Worth is the luxury brand of Worth Collection that sells women's clothing and accessories.
- W by Worth is based on an MLM business model. The company also calls its salespeople W Stylists.
- Being a Worth Stylist is promoted as being part of a special club. The only way someone can become a W Stylist is to have another Stylist refer them.
- However, there is a form for becoming a stylist on the website. When someone submits that form, he can expect to be contacted by a W Stylist within 24 hours.
- W Stylists are responsible for generating their own sales, while the company earns revenue by selling the product to its stylists.
- The company offers free fashion and business training to its stylists.
- Carlisle Etcetera is a luxury women's apparel brand. The brand advertises itself as a luxury brand and the brand's press releases also note that Etcetera is a luxury brand.
- Etceterea is using an MLM business model and it calls its salespeople Etcetera Stylists. Only women can become Etcetera Stylists.
- All accepted Etcetera Stylists undergo business and sales training. The training is organized and paid for by the company.
- The stylists sell their products exclusively through trunk shows that can be set up on appointment.
- Etcetera Stylists employ a consultative sales business model. This means they are first and foremost fashion advisers to the potential customers.
- The salespeople are encouraged to act as personal stylists to their customers and to offer them fashion advice and wardrobe consulting.
- Etcetera's stylists also receive a commission on any sales generated, but the exact compensation details are only available to people who are approved to become Etcetera Stylists.
- However, it can be inferred from their promotional material that the company also uses a refferal scheme organized as a pyramid with several levels.
- Etcetera Stylists purchase the products from the company and then resell them at a predetermined price.
THE CLEAR CUT — A DTC CASE STUDY
- The Clear Cut is a DTC luxury brand that specializes in selling diamonds.
- The DTC business model is focused on cutting out all middlemen between producers and consumers.
- The Clear Cut is an interesting example because it's a relatively new brand that launched in 2018, and it is achieving an average 108% quarterly growth since inception, while only focusing on organic marketing.
- The Clear Cut built its brand presence by heavy use of social media. It actually first sold its products through direct messages on various social media platforms.
- Employing the DTC business model enabled The Clear Cut to increase its profit margins while offering competitive prices to customers.
- Even though the definition of DTC includes physical stores, The Clear Cut, like many other DTC brands, does not operate any brick-and mortar stores. All sales are generated through online channels.
- The Clear Cut does not employ any salespeople. Rather, they employ brand ambassadors.
- Brand ambassadors take in customers' orders and are responsible for coordinating with other employees to fulfill those orders.
- Unlike the MLM business model, where commission-based compensation is the most common, The Clear Cut's brand ambassadors are full-time employees of the company and they receive an annual salary.
- The Clear Cut's CEO Olivia Landau said that the DTC model is responsible for generating over a million dollars in sales in a single quarter.
- By focusing more resources on promotion and by collecting data from its customers directly, The Clear Cut has been able to achieve rapid growth while consistently increasing the satisfaction of its customers, Landau explained.
- She also noted that the DTC business model can be of tremendous value to any business that can benefit from detailed information about its customers.