DTC is Going Back to Basics. And That’s a Good Thing

A quick confession: I love the mall. I love the more tangible entertainment and leisure aspects of it. Walking around aimlessly is calming and creates a built-in way to take time for myself while shopping. I can’t always say the same about shopping online these days which, in my experience, puts me in a more tense “hunter” or “researcher” state of mind. Online, I’m either looking for a quick solution or taking in countless options, learning which fulfills my needs the best.

So, when more and more malls and physical stores struggle to survive, especially post-pandemic, my heart drops a little — both because of my personal feelings of loss but also because people are taking the wrong lessons from this shift in retail. Too few focus on much of retail’s history of overextension and poor track record for evolving with the needs of consumers.

The same is true for many direct-to-consumer (DTC) brands currently making their way through their own rough patch. When I see Allbirds struggling to stay listed on the Nasdaq or luggage brand Away partnering with Dick’s Sports or the various other once invincible DTC brands like Everlane, Warby Parker, and Casper show some vulnerability, I don’t see an immediate need to panic. Why? Because the DTC model is still working, just not in the way it was incorrectly hyped.

Great e-commerce is a powerful differentiator, but it was never the silver bullet for DTC brands. Like me, the world actually doesn't want to buy everything on the internet 100 percent of the time. Instead, it wants something more basic; something at the heart of DTC’s digitally empowered promise. It wants fundamentally well-run businesses with different voices, more personalization, and the freedom to choose your brand experience — whether online, offline or omnichannel. And as DTC brands come to better understand this fact, there’s a tremendous opportunity to drastically improve retail and e-commerce experiences, as well as secure the future of the entire DTC sector.

Related story: DTC Brands Aren't Dead: How the Smart Ones Are Thriving

All the Same Mistakes

Over the last decade, we’ve seen some in the DTC space skyrocket and plummet as entrepreneurs sought to disrupt old categories and investors sought entrepreneurs with big dreams. Then came the soaring costs of advertising, Apple’s iOS privacy updates, supply chain issues, and (maybe more than anything) an ungrounded lust for growth. Investors poured money into startups which catalyzed a deeper hunger for that growth, while the business particulars became increasingly challenged.

This isn't the first time we’ve seen this. For those of us working in digital during the dot-com bust, we saw the same story unfold as it will undoubtedly unfold again in new industries that promise a gold rush. At that time, the growth brands desired could not be supported by a market of users new to devices and websites. In fact, back in 2001, I personally know of businesses that said they were done, as an organization, investing into the internet. Instead, they were going to put their budget behind the Yellow Pages.

The problem then is the same as the problem now with DTC — gold rush thinking. At the end of the day, it comes down to business basics: creating a product that adds value to an addressable market, producing that product with good and fair practices, and selling that product for a premium greater than it takes to produce, market and deliver. This is lost in some of today’s DTC brands. It’s also part of the reason why, despite having momentum to spare, brands that rely solely on e-commerce without understanding the customer journey of modern audiences eventually produce diminishing returns.

How DTC Brands Still Misunderstand Shoppers

For DTC, part of the current downward trend is tied to an incorrect assumption about e-commerce — a channel that's sometimes too direct. In truth, people need to see the product many times, and in many places, to take us from awareness to consideration to trial and (hopefully) to the promise land of loyalty. Too many DTC brands still use a “sell exclusively” approach to e-commerce when they actually need to take a “sell everywhere, but not to everyone and not too fast” approach to truly gain the business health that creates long-term value. The new class of DTC brands — ones like Megababe and Gooselings that are self-funded, focused on growing sustainably, and already integrated with department stores — are already applying those lessons.

Also, take Vuori, an athletic apparel company founded in 2015. In less than 10 years, Vuori has reached a $400 billion valuation with expectations of public offering this year. It has demonstrated a commitment to omnichannel in a way many brands should learn from. Vuori has tightly controlled its wholesale expansion, delivered great value to its e-commerce customers (some lines are exclusive to its website only), and delivered sensibly to its overseas market.

In the end, it's not about whether to e-commerce or even how to e-commerce. It's about an approach that creates long-term value for the consumer. And you do that by meeting them where they’re at.

A Better DTC Approach

It’s important to take lessons from struggling DTC brands — what they did to foster customer relationships as well as how they moved into generations-old categories and successfully disrupted them. Here’s how any brand can apply the modern DTC playbook, but with principles that pay off.

1. Provide more value than the marketplace. The DTC channel should be looked at as a way to incentivize loyalists. Many consumers can and will find your product on shelves, hangers and on Amazon.com. However, the DTC channel is your opportunity to provide value that those other channels cannot. That means not just considering exclusives, bundles and subscriptions — tried-and-true tactics in providing more value than the marketplace. Content, advertising, emails, landing pages and the website … the whole ecosystem has to work together to create an ever-increasing value to the user. Think of it as a value stream.
2. Be in the marketplace, but honor the use case. For most brands omnichannel is the right strategy. Each channel has its own value proposition to the brand; awareness, revenue, insights and loyalty, to name a few. All are vital. But make sure to use consumer data and analytics to understand the use case of each touchpoint. What works in-store may not work out of home (OOH). What's being searched on mobile may be different from what’s desired on desktop, and different from what's desired from email and SMS. Know your consumer, find them where they’re at, and exceed their expectations.
3. Ground expectations. A grounded and metered expectation on growth can be an offensive thought to some, but brands need to learn from past mistakes. DTC should be looked at as a way of fostering connections with the most loyal, learning insights that impact the business in a real way — product road map, geographical decisions, wholesale strategy, etc. Fostering connections, gaining first-party data and executing against it won't happen overnight. Take the time to find the strategic inclusion into a real and robust omnichannel strategy.

Seeing DTC through a doom-and-gloom lens is naive and should be reserved for the young who haven't seen the pendulum swing over and over. For DTC brands, it's still early days. DTC is a real and important component of the omnichannel strategy. Its value can be game changing with its unique attribute of fostering direct connections with the consumer. The brands that will win will understand that value, know how to execute, and know what to do with the insights that will come with doing things the right way.