Direct-to-consumer brands are capturing more of the American retail market due to their differentiators of convenience, product quality, and fast and free (or low-cost) shipping, according to a recent report from Diffusion. A third of US consumers plan to do at least 40% of their shopping from D2C companies in the next five years, and 81% say they'll make at least one purchase from a D2C brand within the next five years. All of which means that direct-to-consumer brands are not a passing trend. They are an evolution in the retail industry that puts the customer at the center of business decisions.
While many brands are strictly D2C (mattress firm Casper, athletic sock brand Bombas), some legacy brands are establishing a D2C channel in order to compete. Nike, which recently reported sales results that disappointed analysts, said that investment in its direct-to-consumer channel continues to pay off all around the globe. It plans to put significant emphasis on becoming more direct-to-consumer in 2019.
The advantages held by D2C brands are numerous. D2C companies have more control over the brand, have less reliance on supply chains, and eliminate third-party retailers. Most legacy consumer brands base product size, packaging, and labeling on the specifications of their distributors and retailers, while most D2C brands make those decisions based on the desired customer “unboxing” experience. One obvious benefit of a D2C channel is that it provides direct access to customers and their data. Also, in a 2019 report called How To Build a 21st Century Brand, the Interactive Advertising Bureau stated that D2C brands have lower customer acquisition costs than legacy brands. The report goes on to say that once a customer is acquired, D2C brands are building communities around the brands and these communities are supplying lifetime value.
More legacy brands are expected to establish D2C channels this year.
Source CMI online