Peter Phillips, Sales Director, Ecommerce @ Kenshoo
Direct-to-consumer brands are a key signal that retail is evolving rapidly. These companies were just a small part of the marketplace just a few decades ago, but with the rise of the Internet, these direct-to-consumer brands are finding ways to build relationships with shoppers and cut out the high costs of distributing through retailers.
If you spend any amount of time on social media, chances are, you have stumbled across direct-to-consumer brands, such as Warby Parker or Glossier. At a time when many older, enterprise brands are wringing their hands trying to figure out how to connect with younger audiences, direct-to-consumer companies have met these audiences where they live–on Instagram and other social media platforms.
Direct-to-consumer brands have become so popular, in fact, that eMarketer reports 40% of internet users predict that direct-to-consumer brands will account for 40% of their purchases in the next five years. And while D2C brands all started online, they are certainly not content to stay there.
Direct-to-consumer brands are businesses that use digital and mobile channels to sell goods directly to the buyer. For example, on Instagram, hundreds of clothing brands with very limited product lines have been able to connect with exactly the right consumer through sophisticated ad targeting techniques. So if you are a Los Angeles-based company that sells only retro leather jackets, connecting with a young, hip crowd that has expressed an interest in vintage styles is easier than ever before.
These brands are revolutionizing the ways in which we shop. In the not-too-distant past, shoppers would head to their local mall or department store in order to pick up all the clothing, cosmetics, and home goods they needed in just one place. But the rise of direct-to-consumer brands offers shoppers more choices than ever before, which means they are sometimes skipping the big department stores in favor of more niche solutions.
But does the rise of D2C mean the end of brick-and-mortar? Probably not.
Some direct-to-consumer brands are being incorporated into larger brands. On July 20, 2016, Unilever paid $1 billion for Dollar Shave Club, a startup that began when its founder needed to unload a ton surplus of razors he bought at a huge discount. For legacy companies, like Unilever, that are increasingly finding themselves losing favor with younger audiences, investing in direct-to-consumer startups such as Dollar Shave Club that come with loyal millennial and Gen Z fanbases is a smart way to tap into new audiences.
But brands that get popular online do not necessarily stay purely online. Many D2C brands are moving offline into the physical retail market. One great example is a millennial favorite, eyeglass startup Warby Parker. What started as an inexpensive eyewear option for hipsters in-the-know online has become a pretty successful brick-and-mortar venture. Though shoppers can still buy their Warby Parkers online, the brand also has 60 retail stores throughout the U.S. along with two in Canada where fans can try out products in person.
While it is hard to get an exact count of all the direct-to-consumer brands that are moving to brick and mortar, eMarketer has created a pretty great roundup of some of the biggest brands moving offline. One of the leaders in the charge is Fabletics, a sportswear brand that started as a subscription service. The company now hopes to conquer the offline retail market by launching 75 physical locations in the near future.
Well, sales, obviously. But in addition to sales, having physical locations can actually drive online traffic and vice versa, according to industry insiders:
“One of the benefits of having retail locations is we can use it to build awareness,” Mark Simmons, executive vice president of marketing at custom furniture startup Burrow told eMarketer. “A lot of the events and partnerships we do are to help bring people in, so they can experience the product firsthand.
When prospective buyers stumble upon a great product in their local mall or shopping center, they are likely to check out the product online. The opposite is also true. When cosmetics startup and Instagram darling Glossier launched its Manhattan showroom in 2016, fans lined up to try out the products in person, creating a hype that lead to permanent physical locations in New York and Los Angeles as well as popups in cities like Seattle, not to mention $100 million in sales in 2018 alone.
Brick and mortar predictions are often doom and gloom reports about the death of physical retail. But in reality, brick and mortar isn’t dying, it’s simply transitioning to an integrated online/offline experience that better serves customers no matter where they are shopping.
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