In this episode, Diana Melencio, partner at XRC Labs, shares critical insights for consumer brands navigating an economic downturn. She emphasizes identifying underserved demographics with high purchasing power, particularly women over 40-50, and rethinking traditional retail spaces with a digital-first approach. A key takeaway for startups is the necessity of achieving profitability from the very first sale to build resilience and sustainable growth in challenging economic environments.
XRC Labs is looking for the next consumer brand winner. The organization is both a venture capital fund and accelerator that has been around since 2015. Its portfolio companies include Outlines, Caraa and Billie. Partner Diana Melencio is constantly trying to figure out what's next -- and what market is under-tapped. On the Modern Retail Podcast this week, Melencio spoke about her investing process and the areas she's most excited about for the year to come. For example, she sees men's skincare having a moment soon. She also sees older generations as a demographic that remains overlooked by many startups. "Women over 40, women over 50," Melencio said. "They're a demographic that has some of the highest purchasing power in the world in the country. They're at a stage in their career where they have a lot of disposable income, and there are very few brands that try to directly speak with them." One of XRC's main theses is that digital is the way of the future for consumer-facing brands. And even though foot traffic is coming back to some stores, there is still too much under-utilized retail space. If you go to a mall in suburban New Jersey or Connecticut on a weekday, she said, "there are not a lot of people shopping there." As such, she's looking for ways that companies can rethink the spaces they once relied on. But perhaps most top of mind for her -- and most entrepreneurs -- is how to stay afloat given the current economic uncertainty. It's true that it's tough to raise money as a startup right now, said Melencio. But now is when brands can prove they have longstanding business models that can outlast downturn. "The first thing is that you should be profitable on your first sale," said Melencio.