From DTC to retail: How brands are migrating into big box storesLaura Leiva
Listen to this article:
Walk down any aisle at Target and you’ll find quite a few DTC brands sitting there amongst legacy brands.
From Mighty Patch (absolutely love) and Flamingo razors to Hello toothpaste (have you seen the Unicorn Sparkle flavor?!) and Smart Sweets, chances are there’s a DTC brand waiting to get discovered next time you run in for just a few things.
Over the last few years, the growth of eCommerce and DTC-focused brands has been ramping up on an exponential level.
In every category, more and more brands are getting their foot in the door and taking a once digital brand into a retail space. For eCommerce brands, moving between digital storefronts and physical retail shelves seems logical.
For DTC brands, it might feel a bit different because historically the purpose of DTC was to cut out the middle (wholesale and retail) and sell directly to consumers through a digital platform.
That’s where this comes in: direct-to-consumer is more about the sales channel than it is the brand.
As more and more DTC brands start moving into retail stores (and legacy brands move toward adding a DTC arm to the company), there’s going to be a blurring of the lines – making it essential for brands to incorporate a variety of sales channels into a strategy in order to remain competitive.
So, for DTC-focused brands wanting to expand into retail, what does that look like and what brands are leading the way?
Let’s dive in.
Emerging DTC brands and the millennial shopper
When someone asks about the OGs of DTC, a few brands come to mind: Glossier, Warby Parker, Everlane.
By the middle of the 2010s, up-and-coming brands looked for ways to dominate specific categories and by utilizing eCommerce tools and websites rather than try to get a foot in the door at a department or retail store, they instead created digital storefronts and sold directly to consumers.
Instead of going through traditional channels, why not keep everything in-house and have more control over the product and the relationship with consumers?
The emphasis on DTC also came at a time when consumers were getting through a recession and wanted to eliminate the middleman to support brands directly.
Along with giving consumers an opportunity to support the brand directly, brands also made more of an effort to connect with their demographic and look for ways to provide a more personal experience – something retail wasn’t really able to do.
Features like quick(er) customer service, email campaigns with customer-centric messaging, and branding that spoke to relevant trends and design.
Millennials, in particular, were coming to an age where they had a little more money in their pocket and could be a bit more decisive about which brands or companies they wanted to support—pretty much tying millennials to DTC in the process.
This relationship pushed countless brands into adopting the ‘millennial aesthetic’ which consisted of soft colors, simple but motivational copy, and highly curated photos.
Aside from the obvious advantages of cutting out the middle man, DTC brands found this particular channel offered a number of other benefits.
The first was an opportunity to take savings from not selling in retail stores and apply it to more customer-centric benefits and experiences. Second was the ability to obtain first party data from consumers.
The information gleaned from consumers—past purchases, shopping cart habits, email addresses—provided DTC a gold mine of information that could then be used to attract and retain consumers for the long-term.
But, of course, there are a few disadvantages for brands to contend with, too. Namely, attracting enough attention to make the number of sales needed each month to stay afloat.
For close to a decade, advertising on social media was enough to direct traffic back to brand websites and make sales. All brands needed to do was spend a bit of money on ads and see the revenue come pouring in.
With privacy changes on social media and updates to operating systems resulting in decreased ad performance, DTC brands are finding it more difficult to get in front of consumers as well as direct them back to digital platforms to buy. There’s also the issue of oversaturation of advertising on social media, most of which consumers tend to ignore.
Advertising dollars used to stretch a lot further on social media. Today, brands are finding social media marketing to be much more expensive and less effective.
Between the advantages and disadvantages, plus the need to meld into what consumers are looking for make entering the retail world more palatable for DTC-focused brands. Within the last few years, it’s been repeatedly highlighted that the brands willing to ebb and flow or make changes where necessary are the ones to survive.
That means for some DTC brands, entering the retail market is a move in the right direction.
Standing out in a crowded space
Competition in the consumer space is nothing new.
But for DTC brands (or even new brands looking to establish themselves), they need to try different things to stand out from the crowd.
There’s the traditional DTC method of collaborating with other brands to tap into similar markets, and, of course, tailored marketing emails or SMS. Brands are doing away with bland branding and design in favor of more eclectic or bespoke packaging that speaks to the target consumer.
So, what else can brands do? Go global, for one.
Brands like Anine Bing have started to expand internationally as a way to tap into new and fresh markets overseas. When so many DTC brands have been focused on local or domestic markets, the ones who will survive the coming years will be those in niche markets around the world.
Another avenue for DTC brands to explore is the move into retail spaces.
This benefits both a DTC brand by expanding brand awareness and it also appeals to retailers who want to attract new shoppers—especially those who are less apt to walk into a department or retail store. There’s also the move for legacy brands to compete with DTC offerings.
While Harry’s, Flamingo and Billie razors all have respective fans, legacy brands like Gillette are expanding into the eCommerce space as well by offering a subscription based service, as it’s clearly a feature consumers want when it comes to consumer packaged goods, or CPG.
Here’s what’s more: as legacy brands see methods that DTC companies are using to attract consumers, there’s going to be movement on both sides of the fence to get (and retain) shoppers.
Is going the way of retail the right move for a DTC brand?
As with anything marketing related, it depends. It really does.
It needs to make sense to the brand and for the consumer experience. Take Warby Parker for example. One of the first DTC brands, this was a space where shoppers historically went in-store to purchase eyeglasses. For a brand to come in and disrupt the space is pretty impressive.
Even with the perceived success of Warby Parker as an online brand, why the push to create retail stores? It was a solution to offering even more for customers. Typically, anyone in the market for glasses needs to have an exam, first.
Through the retail locations, Warby Parker meet the needs of customers while highlighting the expanding inventory of the branded glasses. Before even opening a retail store, extensive data analysis is done to ensure that a location has active foot traffic and a demand for the service or products.
Not all DTC brands need to think about opening up a stand-alone retail space, either. For others, finding space on retail shelves through a wholesale approach is a great move.
Depending on the product, adding a brand where there’s demand for similar products is a good start.
For example, Jinx, which sells premium dog food, fits in retail stores where consumers are shopping for pet goods: Petco and Target, to name a couple. Target, which has a special knack for causing shoppers to buy more than they came in for, is a great option for DTC brands to get discovered in direct and indirect ways.
Plus, with retail brands like Petco and Target, there’s added trust and consumers will be more likely to try new products within these establishments.
Going from DTC to retail might not be the right move for everyone, but there’s plenty of space for brands to get in on the migration. As many have learned, the more accessible a brand is for consumers, the better the outcome.