Of all the habits consumers have established in the past two years, some are more likely to stick than others and the uptick in online shopping is certainly one of them.
Even people that were ‘tech fearful’ prior to Covid lockdowns – like my 85-year-old mum – have become more comfortable with the online shopping process. Now they’ve got a taste for the ease and convenience and the thrill of endless parcels arriving at the front door, the appetite to continue is strong. And we’re going to see this extend from low involvement purchases like food and groceries to higher involvement items such as clothing, homewares and even cars.
Given that, there’s never been a better time to dip your toe into the direct to consumer (DTC) waters to cut out the middleman and add another sales stream where you have total control.
Some great examples of brands that have taken the bit between their teeth and gone down the DTC route include Dollar Shave Club. Founded in 2011, the razor brand was sold to Unilever in 2016 for $1 billion. In 2021, co-founder Michael Dubin said: “It’s easy and affordable to spin up a DTC site right now.”
In the US, eyewear brand Warby Parker is a DTC darling. Founded in 2010, the brand opened its first store in 2013 after capitalising on direct online sales. Today the brand has 145 retail outlets with a roughly 50:50 split of in-store and online sales, a ratio which has tipped further to online during the pandemic. Warby Parker listed on the New York Stock Exchange in September.
A little closer to home, New Zealand-born brand Allbirds which produces eco-friendly wool sneakers and slip-ons and has been all-in on DTC since its launch. Speaking on the Resilient Retail Podcast, Travis Boyce, Allbirds Vice President of Marketing, said: “We’ve always been direct. And we started direct through our own website, and ultimately believed a retail component that would also be direct would be a part of our business.” Like Warby Parker, the brand remains DTC and now operates online and in physical stores. Allbirds raised more than $300 million in its initial public offering in November and at the time of writing was trading at $6.01 on the NASDAQ.
The benefits and pitfalls of DTC
Clearly, there’s money to be made in DTC with higher margins per unit sold which is one of the key benefits.
Another is the ability to control the customer experience. This means avoiding performance issues or different motivations of resellers. In the case of Allbirds, it has meant staying laser-focused on the brand’s commitment to sustainability.
When you control the entire customer journey, it’s also easy to diagnose what’s working and what’s not which allows you to take corrective action quickly and easily.
It can also help combat the increasing dominance and power of major retailers to make life uncomfortable for suppliers who don’t or can’t comply with rising costs or demanding trading terms. This can be especially true for brands in categories such as hardware, electrical consumer goods or homewares.
But retailers should also be aware of the potential pitfalls such as the impact on relationships with current resellers. Going it alone may put a strain on standing arrangements if you’re seen to be cutting partners out of the equation although there are ways to manage this such as creating sub-brands, offering different pack sizes, designs or colourways, bundled offers, run-out stock or discontinued lines.
Additionally, you’ll have some work to do ensuring any third parties meet the standards you set for your brand such as delivery partners. You don’t want this to detract from the first-class experience you are trying to create. Remember it’s your reputation on the line more than theirs, so you can’t fob it off.
You’ll also need to invest in your customer and user experience to ensure it is intuitive and seamless.
Where to start?
If you’re keen to give it a shot, why not start small with a trial through an established marketplace such as eBay or Amazon. Start with a curated range – you can always scale up via your own dedicated site later.
While it may sound easy, doing it well is not always so but by investing the time and effort into DTC, there’s an opportunity to diversify your revenue streams and bolster the bottom line.
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Note: Original article appears in the Professional section behind the paywall at insideretail.com.au.