Reassessing Direct-to-Consumer model
Dollar Shave Club took the world by storm when its 2012 YouTube video featuring founder Michael Dubin promoting the launch of its unique razor subscription service went mega-viral and kick-started a generation of new DTC (Direct-to-Consumer) businesses.
The idea of newly-created brands totally bypassing third-party retailers and going straight to consumers to sell their products online was something of a new phenomenon. This not only saw lots of new DTC brands hit the market but also many other big names including sports giants like Nike and Adidas shifted their focus away from wholesale selling into retail specialists and instead concentrated on selling through their own channels – both online and in their own physical stores.
It’s obvious why brand owners and manufacturers viewed it as a dream route to pursue. The opportunity to enjoy greater margins and also have a direct relationship with the end customer are massively attractive. And it’s still proving a draw as just this week interior heritage brand William Morris & Co. announced the launch of its first DTC website. Quite a move for a business that was founded way back in 1861.
For Dollar Shave Club the story involved it being snapped up by Unilever for $1 billion in 2016 and no doubt it looked like a particularly good deal as Covid-19 shook the world and gave a quantum-level boost to the online-only DTC brands and also to the subscription models that many of them had successfully employed.
Post-pandemic things changed somewhat for the DTC market and Unilever sold a majority stake in Dollar Shave Club to a private equity firm in 2023 while the likes of Nike have had to backtrack on their pure focus on DTC to the detriment of their other channels. The chief problem has been that consumers invariably shop in specialist multi-brand stores and if a specific brand is not available then they can easily be tempted into switching their allegiances to a rival name. Nike, as well as others, has found this at great cost and is now seeking to re-embrace its former retail partners.
Although the shortcomings of a gung-ho DTC strategy have been well documented it certainly does not undermine the great value to be gained from brands having a strong focus on selling products down their own channels. Rather than having the sole focus on DTC there has been a recognition that it can sit rather comfortably within a broad strategy that straddles multiple channels. Taking a multi-channel approach sounds like a rather tried-and-trusted retail strategy to me.
For some DTC brands life has become more comfortable inside larger organisations – including the recipe box players such as Dishpatch that was bought by Waitrose – where they can sit alongside the other channels to market and play a complimentary role. For many other DTC brands and manufacturers that only sold direct the move to also selling through third-party retailers’ physical stores and via the major marketplaces such as Amazon and specialist platforms has proven to be a very well-trodden path in recent years.
The critical factor behind operating any DTC-type model in a varied channel mix – and for many brands this also increasingly encompasses a manufacturing element – is the quality of the underlying technology infrastructure. This must deliver the capability for businesses to manage their inventory and transactions seamlessly across the various channels and the customer touch-points.
DTC has had its ups and down over the past decade or so but it still has a major role to play although experience has shown that it is much less potent when operating as a sole channel to market.
Glynn Davis, editor, Retail Insider
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