February 2019

Can DTC brands breathe new life into retail?

While shopping in Target recently, I was surprised and excited to see an endcap display of sleek, electric toothbrushes from a direct-to-consumer (DTC) brand that I’d been researching months beforehand. Although I didn’t ultimately purchase the toothbrush, I strongly considered it, and seeing it on display in one of the few brick and mortar stores I shop at only further elevated the retailer in my mind. Almost instantly, Target became a place where I can find and try out some of these niche brands that I’ve been hearing about more and more frequently.

DTC has taken the ecommerce world by storm. Consumers can buy anything from clothing to razors to mattresses to eyeglasses, delivered directly to their doors via an experience that feels personalized and curated just for them. Which is just what makes them so appealing and successful. Consumers are using digital to research, discover and compare prices more than ever now, and DTC taps into those behaviors from the ground up. Their business models are built on the foundation of cutting out the middleman (i.e. the retailer) to keep costs down, while allowing them to capture a ton of consumer data at the same time. They can use that data to learn more about their shoppers and, in turn, can continue to improve their products and the shopping experience.

Just as DTC brands have been on the rise, the future of brick and mortar stores has looked pretty bleak.  There’s lots of talk about the “retail apocalypse,” and with the recent collapses of legacy store chains like Toys R Us, and Sears’ bankruptcy filing, it’s hard to envision the tides shifting in favor of these retailers anytime soon. But DTC may be able to prove that otherwise.

These digitally-native brands are now starting to make their way from the online space to physical footprints. They’ve been experimenting with everything from partnering with larger retailers, to pop up shops, to opening physical stores. And they’re doing so (surprisingly) with success. On the surface, it seems risky. Why would DTCs willingly jump into the huge commitment of developing an actual footprint? When looked at more closely however, the move of distributing their products at retail is actually more symbiotic than it seems.

First, it’s a way to disrupt the sameness at retail stores and attract new audiences. These brands can help to elevate the store’s perceived cool factor, by making the store into a destination for further product discovery.

Outside of that, it can also drive trips and impulse purchases for both the retailer and the brand. If you’ve got an Instagram account and/or listen to digital content like podcasts, it’s almost impossible not to encounter a DTC brand’s message. Including an “available at” tag within these digital ads could get a consumer to walk through the doors of the store, when they otherwise may not have been planning a visit. For instance, I personally don’t frequently visit department stores, but if I knew my local Macy’s had a Stitch Fix collection (an online monthly clothing subscription), I would absolutely make the trip just to check it out. And, with the market quickly becoming saturated with DTC brands, offering their products at brick and mortar stores might be just what they need to continue to grow.

As comfortable as many of us are with online shopping, there are still some purchases that we feel like we have to make in person. Since digital discovery is such a big part of purchase consideration, aligning with a large, well-known retailer could be just what these brands need to get a consumer to move from simply considering their product to actually trying it. The consumer can learn about the product online and then go into the store to experience it firsthand. On top of that, attaching the name of a trusted retailer to a DTC brand serves as an implied endorsement, demonstrating to consumers that they (the store) stands behind the product, and believes that their consumers will like it and benefit from it.

Even if consumers are making their initial purchase in store, that doesn’t mean that the DTC brand won’t benefit from ecommerce sales. Many of them include a subscription model, and consumers need to subscribe (to get replacement brush heads, razor refills, etc.) in order to keep using the product. So, the initial in-store purchase acts as a gateway to getting consumers to commit by subscribing and keeps them coming back.

Overall, DTC’s entrance into the physical retail space reinforces how brands everywhere are trying to adapt to today’s consumer’s digitally-centric, less-than-linear path-to-purchase. So, does that mean that DTC brands can help to breathe new life into retail? Or, will the level of personalization that these brands provide be distilled when offered on a mass scale? Only time will tell. For now, I know I’ll be keeping an eye out for the latest new brand to try on my future Target runs.

 

Sources:

https://www.adweek.com/digital/3-direct-to-consumer-brands-reveal-why-target-works-as-a-retail-partner/

eMarketer 2019 Retail Trends

https://www.inc.com/magazine/201805/tom-foster/direct-consumer-brands-middleman-warby-parker.html

https://www.thinkwithgoogle.com/feature/search-intent-marketing-funnel/#/

 

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By Melissa Pote
Account Manager

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