Are DTC brands coming of age?
Many direct-to-consumer brands are reevaluating how they do business – and leaving the one-to-one intimacy with customers for a more traditional method of getting their products to more customers.
By embracing a wholesale strategy, often in conjunction with DTC methods, these brands are developing a more robust omnichannel presence.
An omnichannel presence is crucial to success in retail, as consumers have become used to having plenty of choices and will often choose convenience above most.
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Difficult circumstances for one channel of discovery
For example, in February, digitally native beauty brand Glossier announced its partnership with makeup mega-retailer Sephora.
Glossier’s products will be on shelves at 600 Sephora stores across the United States and Canada, as well as online and on the Sephora App.
The brand’s jump to traditional retail came after a trial run with wholesale sales in 2020, when Glossier experimented with its “Glossier You” fragrance that it sold in seven U.S. brick-and-mortar Nordstrom locations.
The shift for Glossier hasn’t been easy; the brand has reorganized, replacing its CEO and laying off employees as it moves from a single channel of distribution.
However, its experience highlights how DTC brands can realign their resources to help them navigate the ways in which their customers want to engage.
Additionally, new DTC brands are partnering with wholesalers from the get-go to build visibility and build their customer base.
DTC brands have had massive access to data from having sole access to all the data of their customers due to website-based operations.
The traditional retailers have learned from DTC and aimed to replicate the level of data for a personal loyal relationship with customers.
The cost of a customer
Keeping customers is a far less expensive proposition than acquiring them, but for DTC brands, it’s imperative to increase their base in addition to keeping loyal customers happy and engaged.
DTC brands often start as small, trendy brands that appeal to a particular niche.
For example, the launch of Warby Parker addressed a customer need for affordable, attractive eyeglasses.
By bypassing wholesalers and retailers, DTC brands such as Warby Parker and Glossier have removed the costs associated with having intermediaries between manufacturers and consumers.
As they grow, however, DTC brands are realizing they need to cost-effectively increase their distribution channels.
Expansion is easier with wholesalers’ large customer base as part of the equation. Rising inflation rates are increasing operating costs; goods are more expensive to produce.
Expanding reach for DTC brands
Adding wholesale as part of an overall strategy can help attract more customers, which is particularly important as consumers are becoming less brand loyal and more value-seeking.
No matter the stage of audience and growth your business is looking to have, omnichannel is the most important aspect a business can have to
A recent McKinsey’s Consumer Pulse survey underscores that sentiment, reporting that “more US consumers reported switching to different brands and retailers in 2022 than at any time since the beginning of the pandemic—and most of them say they intend to incorporate that behavior into their routines.”
Adding wholesale into the DTC mix can benefit all those in the ecosystem.
While the DTC model has provided high margins and customer insights, growing brands are able to parlay a wholesale relationship into a larger customer base while containing marketing costs.