Apparel and footwear brands are uniquely positioned to lead the DTC revolution. We look at how it will work.
January 15, 2021
At face value, DTC is the same as it’s always been — brands selling products and services directly to consumers with no retailer or other middleman involved in the process. But things aren’t quite so simple.
Until recently, this was also a fairly easy question to answer: DTC was a sales channel. For example, adidas sells many of its shoes through retailers, online and off. Footlocker, Zappos, wherever. But they also leverage DTC sales channels, selling and shipping directly to consumers on adidas.com, or in an adidas retail store.
However, the late 2000s and 2010s saw the rise of DTC as a category. Digitally native companies that only sold directly to consumers. Allbirds is a prominent footwear example, though the list— even in just the apparel and footwear category — is long: Bonobos, Everlane, Outdoor Voices, Rothys, etc., etc., etc.
“What set [DTC brands] apart was not so much the products themselves, but the deep knowledge they had of their customer, their ability to adjust on a dime to hit changes in demand and to provide a seamless experience from the first point of contact through an ongoing relationship after the sale,” according to Forbes.
The line between DTC as a channel and a category today is blurry. Walmart bought Bonobos, but the brand is not sold in Walmart stores; you can buy Bonobos on Walmart.com. You can buy products from famed DTC brand Harry’s in Target. Outdoor Voices got some early major exposure with popup shops in J. Crew stores. You can still buy from all these brands directly, as well.
All of this illustrates the importance of direct sales, and companies large and small are working to grow their direct channels. The pandemic has served as an accelerator for this importance of direct. Ecommerce as a percentage of total retail sales was 15% prior to the pandemic; that number has now grown to 25-30% — numbers which weren’t expected to be hit for a decade.
And it’s not just sales.
“Today, brands that fail to sell DTC not only give up control over their product, distribution and marketing efforts, but also lose touch with their end consumer, arguably their most important asset,” says Forbes.
Fortunately, apparel and footwear brands are already poised to continue leading other industries in increased direct sales.
Apparel and footwear have consistently ranked at or among the top online sales categories for many years. Because consumers are already more comfortable purchasing fashion products online, the industry is uniquely positioned to be a leader in the shift to direct sales.
Consider the following from a McKinsey report on the importance of the fashion industry’s digital transformation and the opportunities (and risks) of companies of all sizes:
Digital and analytics leaders (companies in which online sales account for 30 to 40 percent of total sales, parts of the value chain are significantly digitized, and online and offline channels are integrated to some degree) have an advantage today but could quickly lose it if other players accelerate their transformation. On the other hand, laggards (companies with less than 20 percent of total sales coming from the online channel, low digitization levels across the value chain, and siloed online and offline operating models) have an opportunity to make an “all in” bet on digital and analytics.
Perhaps the most prominent fashion example is Nike’s shift to focus on digital, which started before the pandemic. This began with the announcement of the Consumer Direct Offense to leverage the power of digital to “allow Nike to better serve the consumer personally, at scale.” Finding success, the company overhauled its leadership when announcing the change to Consumer Direct Acceleration in 2020.
And the numbers illustrate why the company doubled down on the strategy.
“Direct-to-consumer growth accounted for 33% of the Swoosh brand’s revenue in FY20, up 3% from FY19,” reports Yahoo. “The firm is also confident that the company will close in on 50% [direct sales] penetration well within the next five years.”
Business of Fashion puts it into perspective: “In October 2020, in the middle of a global pandemic that had infected 188 countries, causing record sales damage across the retail sector, Nike’s share price hit an all-time high.”
Selling direct clearly has many advantages, and they all come together to create a better consumer experience.
And that’s where sales and brand growth begin.
Consumers expect more today. Brands that don’t find ways to give more are at major risk. Fortunately, there are ways to make direct sales easier and more enjoyable for the consumer.
A sweeping change in brand strategy is made up of many smaller improvements. Blue Bite empowers brands to turn their most valuable asset — the product itself — into a digital sales platform.
A consumer purchases shoes from a retailer. The brand has already lost out not only on the charges incurred by selling through a middleman, but also on the end consumer information that can lead to a long-lasting and valuable relationship with the consumer.
However, brands that turn their fashion items into smart items — through connecting technologies like NFC tags and QR codes — have the chance to establish that consumer connection that otherwise would be lost.
For example, the brand now embeds an NFC tag in the tongue of the shoe, which, when tapped with a phone, launches a Blue Bite-powered experience. This tap is incentivized by offering the consumer personalized styling instructions based on contextual factors like the specific item color, the location, the weather and more.
The consumer will also find related products to purchase that complement the purchased shoes. Now the brand secures not only a new direct sale from the consumer that previously purchased from a retailer, but also a data connection that it can use to engage the consumer on an ongoing basis.
Changes like this are how brands that are making drastic changes in their digital strategy are selling more and connecting better.