What does the future hold for DTC brands? Here are some predictions from Marketing and New Business Director, David Wright.
There’s no denying that direct-to-consumer brands, or DNVBs (digitally native vector brands) as they’re now catchily known, have disrupted numerous sectors, proving that their business model works. But what does the future hold for these brands? Will they stay independent? Will their trajectory keep soaring? Here are some predictions from Marketing and New Business Director, David Wright.
DNVB’s have made eschewing bricks and mortar their thing (hence the name), and only a handful have their own physical spaces, with even less owning more than one flagship. As these brands continue to grow, so will their communities, and providing spaces where customers can experience the brand IRL will become increasingly important. In fact retail, it seems, is the only growth channel left.
Away’s Vice President of Brand Selena Kalvaria said to Marketing Week, “When we decided to open physical retail stores, we thought that they would be great for brand awareness, but not something that would necessarily become a cornerstone for the business. Not only did our customers enjoy the in-store experience and ability to interact with our brand in this way, but that they were valuable to the business as well.”
DTC brands are coming to see stores not just as marketing initiatives but also as places that will generate revenue. Apple has been proving this for years. Yes, you can buy Apple products online with a number of third-party retailers, but there’s nothing quite like making the purchase in one of its experiential stores.
It seemed inevitable that the established brands feeling the threat of these disrupters would react by trying to buy them out. Some have already been successful – Walmart bought Bonobos in 2018 and the future is looking good. A study by Gartner L2 shows that Bonobos experienced a dramatic 40% drop in digital traffic in the month following the acquisition, but that it has since steadily recovered, and monthly visitors are now 10% higher than at the moment of the acquisition.
The thing is a parent company doesn’t just offer an injection of cash, it also has a massive database that enables smaller brands to build their presence and expand their reach. It’s not out of the question to imagine a world where L’Oreal owns Drunk Elephant, Unilever buys Eaze or LVMH takes a share in Rent the Runway.
Department stores offer a trusted environment for internet-born brands to dip their toes into the world of physical retail – this could be with a wholesale relationship or simply an in-store pop-up. Last year Thinx and Reformation both launched pop-ups in Selfridges. By teaming up with a trusted partner that shares their discerning eye, brands don’t feel as if they’re selling their souls to an uninspiring wholesale partnership. However, getting the balance right in this relationship can be hard and overexposure is a real risk.
Nordstrom recently changed its DTC brand strategy and dialled back the number of stores they appear in, as although they are a booming part of the business, many felt overexposed. Nordstrom’s considered approach to their buy and their caution around overexposure has ensured that DTC brands are clamouring to partner with them. They recently partnered with Thinx who see the relationship as a good training ground for opening their own stores. Maria Molland, CEO of Thinx recently told Glossy “we have ambitions to open more of our own stores in the future.” For internet-born brands that want to break into the physical world, department stores will increasingly become the perfect platform to do so.
Casper is no longer a mattress brand, it sells sleep – everything from sheets to help you kip to dog baskets to ensure canine friends get their forty winks too. Hims is no longer just about hair thinning and Viagra – it owns the self-care space and sells numerous concoctions for men and women. Glossier (recently valued at 1 billion) is evolving with a new ‘Play’ arm of the business to push it further than the ‘natural’ look space it has sat comfortably in for years.
With modest initial funds, DTC brands often began life with a single product, however as they become more successful their product range becomes more expansive. It’s not out the question to predict that Glossier may one day have a product range to rival Mac or if Muji has a hotel, why can’t Away? More brand stretch and expansion is heading our way.
The next phase of growth for digitally native brands sees them adopting some more traditional methods. Whether that be expanding their views on wholesale relationships, opening physical stores or perhaps launching TV adverts – as Uber and Airbnb already have. Similarly, the next phase of growth for traditional brands sees many forging more direct relationships with customers and being more digitally minded – ultimately adopting a more DTC mindset.
It seems reasonable to assume that there will be less distinction between the two and that what we’ll be left with is a ‘new normal’ where digitally native and traditional brands talk to consumers in a similar way through the same channels.
We can see this already happening when we look at the relationship between Harry’s and Target, the moves Nike has made to have a more personal dialogue with its customers or the way in which Warby Parker is slowly taking over America – it now has 92 stores with more in the pipeline.
Eventually ‘DTC’, or indeed ‘DNVB’, won’t be buzzy new words, they will represent an attitude that’s ingrained in the way successful brands engage with their customers – a new normal.
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