Even traditional brands like Nike have moved more to a DTC model.
Most Americans (6-in-10) consumers shopped at a Direct-to-Consumer (DTC) brand last year, according to Diffusion’s 2022 Direct-to-Consumer Purchase Intent Index. This is a drop from 2020, when 79% of consumers bought something from a DTC company.
The results show that while Direct to Consumer companies are making inroads with customers, it is still difficult for them to compete with traditional retailers once the pandemic lessened enough so people could leave their homes. Once people started receiving vaccines last year and e-commerce was no longer the only reasonable option for shopping, retail sales mostly bounced back to pre-pandemic levels.
At the peak of the pandemic, online retailers captured 20% of the total spend, up from about 14% prior to the pandemic, according to Bureau of Labor Statistics (BLS) stats. Online retailers have given most of those gains back as lockdowns and brick-and-mortar store closures have ended.
DTC Is Digital Natives Like Warby Parker and Established Brands (Nike)
Direct-to-consumer companies — businesses that sell products directly to buyers usually via the internet, bypassing the need for third-party retailers or physical locations. These companies often build their audience through internet advertising and endeavors such as sponsoring podcasts. The idea here is that DTC companies can cut down on prices, and by removing middlemen, have more control over the user’s experiences.
As more people have begun to spend more time online, the DTC world has proven to be quite a growth sector. The sustainable shoe company Allbirds (BIRD) – Get Allbirds, Inc. Class A Report, the eyewear company Warby Parker (WRBY) – Get Warby Parker, Inc. Class A Report and Dollar Shave Club are all DTC companies that have, over time, grown to be worth more than $1 billion dollars, and the menswear company Bonobos became big enough to be acquired by Walmart (WMT) – Get Walmart Inc. Report.
Even established brands including Nike (NKE) – Get NIKE, Inc. Class B Report have made moves to do more DTC business. The sneaker and athletic apparel maker has pulled its products from a number of retail chains and instead opted to sell more of its products direct to its devoted audience through its app.
“This holiday season has shown the power of our digital transformation across the globe. Digital is the engine driving our Consumer Direct Acceleration strategy,” Nike CEO John Donahoe said during the company’s second-quarter earnings call.
Nike CFO Matthew Friend spoke glowingly about how well his company’s DTC strategy has been working.
“Nike is a growth company with boundless potential. And our Consumer Direct Acceleration strategy is transforming our operating model by driving deeper and more direct connections with consumers through digital,” he said.
DTC Has Also Gone Brick-and-Mortar
While some people love that they don’t have to leave their house to do their shopping, Diffusion’s survey found that 32% of consumers say that “Physical convenience and accessibility” account for why they prefer to shop at traditional retailers. After all, sometimes shopping is just an excuse to get out of the house.
The survey also found that last Christmas, 43% of consumers did not plan to shop at a DTC brand, as 23% said “they could get better prices and sales from traditional retailers,” and “21% said they could find similar products at traditional retailers at a more agreeable cost.”
In order to meet consumers where they are, some DTC brands have increasingly partnered with retailers such as Target (TGT) – Get Target Corporation Report and Walmart (WMT) – Get Walmart Inc. Report. In addition, DTC companies including Warby Parker and Casper Mattress have launched brick-and-mortar locations while Tonal, a DTC fitness equipment brand, has opened store-within-a-store locations at many Neiman Marcus stores.
These brick-and-mortar locations give consumers a chance to see the merchandise. That’s important for Tonal, which has a price point above $4,000. Some of these DTC retailers — it varies by brand — don’t even sell merchandise at their brick-and-mortar locations. Instead, they take orders online (or via a tablet in the store) to maintain the DTC supply chain model.
