More Brands Are Going DTC. Here’s Why
Yeti’s recent decision to no longer sell its products at Lowe’s and transition to a direct-to-consumer model is not an anomaly. A growing number of traditional brands are moving away from wholesale and opting to sell to consumers directly through their own e-commerce channels.
Pepsi, Nike, L’Oreal, and Coach are just a few examples of brands that are experimenting with DTC strategies. The shift has the potential to change the retail space as we know it, as more brands look to take direct control of their sales.
“Direct selling allows Nike and other brands to completely own the customer relationship,” explains Kelly Goetsch, chief product officer at commercetools, a headless commerce platform. “Selling through a wholesaler can often dampen the brand experience, and retailers are left with much less control in the purchasing process. DTC operations offer retailers the opportunity to collect information from start to finish, which can then be used to build lifelong relationships with customers.”
The Pandemic Shift
Three-quarters of U.S. consumers say they changed their shopping habits during the pandemic, according to data from McKinsey, while 60% to 70% now conduct product research both online and in-store across categories.
Those aren’t the only ways the pandemic changed the retail space.
Many brands that relied primarily on retail foot traffic before the pandemic opted to upgrade their websites to include e-commerce in 2020 and 2021. Now, having seen the benefits of maintaining complete ownership of their customer relationships, those brands are reluctant to return to their pre-pandemic sales practices.
“The pandemic caused an immediate shift. All of a sudden, there was less need for physical retail space, and customers became more confident buying what they wanted online. This gave brands the boost of confidence to start cutting out retail middlemen in pursuit of a bigger DTC strategy,” says Goetsch. “Over the past couple years, brands have recognized the benefits of owning their own message and having control over the entire experience while minimizing facilitator costs.”
Seeing the success of DTC startups like Warby Parker and Allbirds has also been a factor in encouraging some retailers to reduce their dependence on wholesale. But Goetsch says the transition happens slowly. It’s generally much easier for a legacy brand with global name recognition, like Nike or L’Oreal, to make the transition to DTC, thanks to having the resources to create unique shopping experiences that consumers will want to come back to. For smaller brands, making such a massive switch can be an uphill battle.
“Years ago, the majority of shoppers went to physical stores to try on shoes, browse aisles, and examine products. However, Nike has spent plenty of money on its mobile tools and e-commerce experience, including AR shoe try-ons, QR code scannables, and a strong website. The brand has been able to create a seamless transition between the store experience and the online one, and it no longer needs these partnerships to generate revenue,” Goetsch says. “Not to mention, direct selling allows Nike and other brands to completely own the customer relationship.”
Selling DTC promotes customer engagement and allows brands to engage directly with their most loyal customers through social media, email, and direct mail. However, shifting approaches midstream isn’t cheap. It relies on a substantial marketing budget and strong backend technology to upgrade existing websites and other digital channels. Those challenges have held some brands back thus far, but Goetsch sees the tides changing as we look forward into the coming years.
“Customizing an e-commerce site is difficult, and shopper preferences are changing all of the time. As more purchasing continues to shift online, retailers need to be able to change product descriptions, sales promotions, and checkout options quickly, so it’s important that they aren’t stuck with a commerce solution that takes days or weeks to make those updates,” Goetsch says. “More and more retailers are seeking out headless commerce options, which allow them to fully customize their sites without having to be savvy coders or IT experts. As solutions like single-click checkout or social selling become trendier, retailers have to keep up with evolving customer demands and the expected offerings that make the shopper experience better.”
Stephanie Miles is a senior editor at Street Fight.