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Yet , like a lot of popular trends , DTC brands have struggled to sustain this level of growth and success . Increased competition has driven up production costs , and the rising cost of living has put pressure on bottom lines .
Similar to service disruptors like Uber , many DNVBs competed on premium services and features , using their investment backing to cover the costs associated with this customer-first approach . But many brands struggled to turn their early promise into a profitable and sustainable model , as can be seen in Casper ’ s de-listing from the New York Stock Exchange and the closure of a consumer goods company that failed to turn a profit with its low-margin operation .
The Covid-19 pandemic created further challenges for DTC start-ups , as major retailers turned to online channels and modified their own business models to adapt , reducing some of the advantages that digital-native brands had previously enjoyed . This evolution has raised serious questions around whether DTC is a sustainable long-term strategy , or even still relevant for start-ups .
Is DTC dead ? The cases for and against The arguments on both sides of this debate point to the inherent strengths and weaknesses of the DTC model . One of the key benefits of DTC is that brands interact directly with shoppers across the customer journey , providing a chance to control those engagements and generating highly valuable real-time customer data .
Bypassing intermediaries means brands control the trade margins through sales , marketing and inventory management . This can be highly beneficial for smaller or upcoming brands that may struggle to secure contracts with major retailers , or may only be able to do so at a disadvantaged position . DTC allows these brands to control their narrative and process without bowing to the demands of larger partners .
Engaging with customers directly online is particularly appealing for new brands . The global online consumer base is predicted to increase by a further 1 billion internet users over the next several years , meaning DNVB brands of all sizes have an opportunity to engage a wide audience , without needing to rent a physical space in a major retail location .
Yet , not working with larger partners , and not having an established distribution network , means that brands need to drive traffic to their own channels and convert sales themselves . With the growing abundance of content and brands competing for space online , it can be hard for small players without an established brand to break through the noise . This is particularly challenging for DNVBs that don ’ t have the opportunity to engage consumers in physical environments .
There ’ s also a risk that bypassing third parties to sell directly to customers could alienate retailers and distributors , making those partnerships harder in the future . Owning the narrative and controlling the entire process can be beneficial for brands , but it also means they ’ re on their own in building their base .
A related issue is how small brands drive experiences and build trust with consumers , particularly in a pureplay online setting . Conversion rates online are historically low , while cart abandonment rates remain high . At the same time , consumers now expect engaging experiences with brands , which can be easier to implement in a physical environment than in a DTC online setting . A case in point is Warby Parker , the poster child for the online DTC disruptor model , which now operates dozens of physical stores and plans to expand into many hundreds of locations . Even Amazon , which controls or influences the majority of online sales , has branched out into physical environments , from showrooms , to grocery stores and even to beauty salons .
This gets to the crux of this debate : Is the DTC model truly dead ? Or has it just evolved ? Based on our academic review , and recent examples , we argue it ’ s the latter . Have many pure DTC online brands failed ? Yes . But does that mean the entire model is dead ? Probably not . Does the DTC model generate challenges ? Absolutely . But could it still be a beneficial way for some smaller brands to launch into a market ? Also yes .
Where DTC once was primarily focused on online start-ups disrupting the market ,
Founded in 2007 , Bonobos was one of the early movers in the DTC space . the model has evolved over time to become an established retail marketing and sales option .
DTC is dead , long live DTC So , if DTC is not fully dead , just evolving , what is it evolving into and where could this evolution lead ?
While this may not be a sexy or trendy answer , the future of DTC seems to point towards integrated experiences across channels . In other words , omnichannel retailing ( another term that has been declared dead , prematurely ). If we peel away the consultant speak , trend reports and how-to guides , the essence of omnichannel is meeting customers where they are by offering a range of channels , touchpoints and experiences that work seamlessly together .
With that in mind , the role for a business model that allows consumers to engage directly with a brand should be relatively clear . Yet , as a brand scales and grows , that may not be the only type of experience or channel the customer wants . Take Nike as an example . The sportswear giant has made DTC a key part of its growth strategy over the past few years , increasing investment and successfully expanding its own retail operations to control the brand experience . Nike ’ s direct sales have grown considerably , yet the brand continues to work with intermediaries as part of a broader omnichannel retail strategy .
34 www . insideretail . us September 2023