Why would brands choose Direct to Consumer?
From razors to mattresses, many brands are taking back control from the retail middleman. DTC allows the brands to own the entire customer experience, rather than losing control and a large portion of the sale revenue.
Huge multinationals such as Nike, are rocking the retailer marketplace and are now putting a large portion of their focus on DTC. They plan to grow this channel by 250%, where DTC sales will reach $16 billion by the end of 2020. With such an extensive change in their route to market, this has caused some retailers to become disgruntled.
It’s not all doom and gloom for Nikes retailers, as Nike will be able to provide insights to their partner retailers. It will be easier for the brand to test products and campaigns, then pass the meaningful information to their retailers, limiting the risk for the retailer.
The fashion industry were early adopters of the DTC model with the likes of Tamara Mellons, co-founder of Jimmy Choo, branching out for herself and redefining how luxury footwear is sold. Tamara understands that today’s customer lives in a digital world, whereas the footwear industry operates in an old-fashioned way. Being DTC focused, allows the brand to be far more agile, offering products that the consumer wants there and then, rather than the current format where retailers are selling autumn/winter products in the middle of a summer heatwave. This means that Tamara is no longer chained to the fashion calendar.
DTC doesn’t have to be your single route to market; you can always add multiple channels whilst your business is growing. DTC was the original sales channel for snack brand Graze. Founded in 2008, they sold healthy snack boxes via regular subscription, straight to your office or home. Over the years they have tailored their offering and now not only are you able to purchase their subscription boxes, but you can buy in bulk. They have also expanded from DTC and now supply retailers, who sell their products via the likes of Sainsbury’s, Tesco and Boots. In 2019 Graze was purchased by Unilever, which is part of Unilever’s expansion into DTC.
DTC may look like it’s only suitable for smaller consumables, this is far from the case. Most people are aware that Tesla Motors is unlike the usual car brands. They have stepped away from the standard dealership model and are now exploiting retail spaces. Their showrooms are cropping up in shopping centres, which allows their brand to be seen by a larger audience, rather than those actively visiting a dealer showroom – as these consumers tend to already be aware of the brand and what they have to offer.
Brands could be choosing DTC as they can see that the digital era is the driving force behind the shift. With billions of people using smartphones, consumers have a much higher expectation of customer experience. For example, they want to be able to purchase straight from their social media feeds. With current active Instagram users sitting at around 500 million worldwide, it’s easy to understand why Instagram want to utilise this audience base for brands to sell through to.
If you have two similar products on a retailer’s shelf, the consumer can easily pick either one of the products. If your item has been selected, you’ve won the sale, but not built any relationship with the consumer. If you sell the same product but from your own branded store, the customer has taken that decision to walk into your store over a retailer, and that gives you the perfect opportunity to build a relationship and brand loyalty at every touch point.
As well as physical stores, you will have a digital store, your eCommerce website. The great thing with digital shelf space, it’s endless. Meaning you can carry more inventory online than you could ever stock in a retailers store.