Direct-to-consumer brands all have one thing in common when they first start out – an unsustainable business model.
By operating solely online, without physical stores or retail partners, they face the threat of having an unreliable consumer base. Brick-and-mortar retail brings the opportunity to create brand loyalty and embrace connections between shoppers and retailers. With no rent to pay or physical locations to run, their margins, theoretically, are fatter. And without wholesale, their customers pay full price, directly to them.
Many DTC brands, such as Glossier, The RealReal, Casper, Warby Parker, Peloton, Allbirds, Away, Lively and Wayfair, have strayed from their original visions and instead opened brick-and-mortar stores. While adding physical elements and changing up their sales approach, these retailers have continued to grow in recent years. Without these adaptations, their growth may be stagnant or even non-existent all-together.
“Regardless of the model that a DTC adopts, the math simply doesn’t support an online pure-play retail model of any kind that can be sustained against those that have a physical presence and can copy whatever someone else does online,” Forrester Principal Analyst Brendan Witcher said by email. “Not enough consumers have shown the propensity to remain long-term, loyal customers of a pure-play, online-only retailer. If they did, these companies would not have to spend the millions of dollars in advertising and marketing that wipe out their profitability.”
E-commerce growth has slowed significantly in the past year. With its well-known frictions, the only means of survival for all retailers is to embrace an omnichannel approach.
“As current trends clear the path ahead for physical retail – we can see the next development of retail would see integration of physical and digital, with one supporting the other,” said Rabia Yasmeen, Euromonitor Senior Consultant.
Source: DTC – Retail Dive
Photo Credit: DTC – Retail Dive