Large Brands Going DTC, But Hurdles Remain

The direct-to-consumer sales model, once dominated by smaller online-only brands, is seeing something of an evolution as major brands and manufacturers seek to grow their own DTC presence. And last year’s global pandemic accelerated the trend.

DTC ecommerce sales in the U.S. grew 45.5% last year, according to eMarketer, and big brands like Adidas, Under Armour and Levi’s jumped on board. Nike has also been increasingly investing in DTC. The sportswear giant split ties with more than a dozen retailers in just the last year. Even major CPGs like Kraft Heinz and Nestle and are taking its popular brands like KitKat bars DTC, the latter opening a luxury pop-up shop in the UK in late 2019.

On the surface it seems like a no-brainer: Cut out the middleman, increase margins, gain customer insights in an increasingly crowded retail marketplace hard to come by through third-party channels and retailers. However, this pivot will still be difficult for larger brands. Let’s take a look at some of the roadblocks and lessons retailers can learn from those who have been successful. 

Getting to Know the Modern Digital Consumer

To sell directly to your customers, you need to know who they are. DTC brands have thrived because of their ability to connect on a personal and customized level with customers. In this world, authenticity is key, whether it’s a charismatic founder or a company’s social agenda. Consumers are looking for brands that align with their own personal values.

Companies that have been around for decades have spent significant time and energy revamping their messaging around issues like sustainability. Levi’s, for instance, has home page video rebranding the company with a “Buy Better, Wear Longer” campaign aimed at cutting down on clothing consumption and waste.

With brand relationships becoming increasingly personal, customers are also looking for shopping experiences tailored to them. A 2019 InfoGroup survey reported that 90% of U.S. consumers find messages that aren’t personally relevant to them annoying.

Larger companies must rethink how to reach a massive customer base without the benefit of store segmentation. Consumers don’t want to scroll through an endless mall of products. They want highly curated, visually engaging sites that allow them to experience products digitally. Social media platforms like Instagram have driven this trend. Influencers are bringing products to life through pictures and videos, elevating shopper expectations and connecting them directly to the brands they want.

Cutting the Product Catalog

Many now investing in and selling DTC have spent decades scaling up their product lines and sales channels. Adidas was originally founded to produce just one type of spiked soccer shoe. It now not only sells athletic shoes for just about every sport on the planet, but it also produces apparel, backpacks, eyewear, professional grade game balls, etc. Companies expand their product lines to capitalize on customer brand loyalty, but what happens when you have to market all of them through a single website?

Nike is another perfect example. The company has a product catalog the size of the Library of Congress, and a massive customer base that spans generations, pros and weekend warriors alike.

As major brands start to decrease their store presence in favor of a direct model, many may struggle with appealing to and servicing every audience with a store-like assortment while still being consumer friendly. For now, that’s not really the case. Take my daughter, a competitive soccer player who wanted a specific goalie glove that wasn’t available in her size at a nearby retailer. We went to the major brand’s website, which was nearly impossible to navigate, not to mention extremely limited in its search capability for the product we knew they made and were advertising. Breaking up is hard to do, and so is going DTC.

Big brands that haven’t already done so need to structure their web presence in thoughtful ways so customers can find what they need with as little frustration as possible. This isn’t easy. One solution is choosing sub-brands to offer a narrower selection, then developing additional “microsites” to support them. But which brands are selected, and what products are left for retailers, while covering all of the niche consumer touchpoints? It’s an incredibly complex business problem.

Connecting the Dots

Barring another global pandemic, brick-and-mortar retailers aren’t going anywhere. While COVID-19 certainly accelerated the growth of ecommerce, a 2019 Shopkick survey found that a hands-on product experience makes a shopper more inclined to purchase. This is where the unification of sales channels becomes invaluable.

Shoppers expect to move seamlessly between in-person and online shopping, buying from their phone one day and in a store the next. Expect trends like BOPIS and curbside to stick, making it crucial to connect your online and store inventories. Levi’s has already rolled out a ship-from-store feature, along with associate ordering and two-day shipping. Other brands like J.Crew apparel offshoot Madewell, are launching mobile apps aimed exclusively at returning customers, making it easier to browse and buy in different locations.

Many larger brands appear to be in this for the long haul. Levi’s is buying up vacant storefronts across the U.S. in a plan to add to its 40 retail stores and 200 outlet locations. Nike’s CEO has laid out long-term plans to transform into a tech-first DTC brand. I expect they’ll be successful, but they will need to overcome some basic pain points first and get to know their customers enough to create unique, seamless online shopping experiences while still figuring out where the retailers fit in.

Jimmy Duvall is chief product officer at BigCommerce