In this piece, Oliver Hansard (pictured below), VP sales, EMEA, 4C Insights, explains, with the help of Amy Vener, retail vertical strategy lead, Pinterest, that the DTC model, though sometimes deemed 'the death of the high street', could still have a role to play in its resurrection.
"The mainstream high street is dead. They’re dead. The patient is dead.” Sports Direct tycoon Mike Ashley stated at the close of 2018.
If you read any of the recent BRC reports, the situation on the high street looks bleak. Footfall dropped 2% in February, the steepest fall for the month in five years. But this analysis paints a picture of inertia among retail brands that doesn’t quite capture the reality.
Change is happening. Recent research has found 87% of retail brands in the UK and U.S. plan to launch a direct-to-consumer (DTC) channel at some point in the future; and 23% aim to do so within the next 12 months. In 2017, Nike revealed plans to grow its direct-to-consumer business by 250% by 2022.
Perhaps even more poignantly, the digital native brands that began the DTC movement – such as Warby Parker, Rent the Runway, or Glossier – are expanding upon their original model and opening retail stores in order to meet higher customer expectations.
From the ashes of the traditional high street, it appears household names are experimenting with new ways to scale their business. 2019 will see a concerted effort to revive the long-suffering offline world of retail. The question is, will today’s DTC initiatives provide the answer?
Why are traditional retailers going DTC?
“Retail and shopping offline has always been visual and exploratory”, Amy Vener, retail vertical strategy lead at Pinterest explains. “You may see something you love in a store window, a catalogue, a friend’s living room, and you can visualise it in your own life and want to buy it. Today’s consumers are conditioned to expect tailored, visual shopping experiences across multiple channels – online, in-store, and at their doorstep.”
Most importantly, the online piece of the customer journey has redefined the relationship between brand and consumer. Google, Facebook, Pinterest, and Amazon are among the players that now put individual brand products in front of the consumer with images, videos, reviews, and influencer endorsements – everything they need to make an informed purchase.
This is the basis of DTC – it creates a direct relationship with the consumer. Cutting out the middleman of traditional retail means you have more control over the entire brand experience, including the retail experience, and less reliance on third parties. DTC brands can get invaluable insights about their customers that can be used to continually optimise the experience.
Traditional manufacturers rarely have an opportunity to interact with the people who purchase their products, maybe only through market research or focus groups. But that’s not the same as having a direct connection with the customer through every stage of the buying process – while they’re researching, when they buy, and post-sale.
Can it address dropping footfall?
Importantly, going DTC isn’t going to fix all of life’s problems. It can even be disadvantageous, as it requires the brand to take on the responsibility for the retail presence, logistics, and distribution. You also lose any benefits of working with third-party retailers such as the customer loyalty they already have, store footprint, and marketing support. It puts brands out on a limb.
In this environment, DTC brands have historically relied on performance-based digital marketing strategies. Many DTC leaders boast strong direct-response advertising experience. For example, Huel was started when founder, Julian Hearn, sold an affiliate marketing business to fund his successful business venture.
The advantages are that, with a small budget, brands can efficiently put themselves in front of high-value digital audiences, continually optimising this spend to ensure they make their margins. But brands need to think bigger. Right now, we are on the precipice of a new type of high street.
As Pinterest’s Vener explains: “At Pinterest, we believe the future of online shopping will be in pictures, and not words. The digital retail experience evolved opposite of physical retail with text first, then voice, and last visual. Pinterest started with the end goal in mind: visual. While the changing landscape has presented more considerations for retailers, at the core, retail is about introducing consumers to new ideas that inspire them to make a purchase. The future of direct-to-consumer retail centres on the ability for people to have discovery experiences.”
Visual discovery is the nexus between digital and real-world selling. This is the reason why giants of the online world are trying so hard to land their brick-and-mortar projects. The DTC approach brings these worlds together, with no middleman to disrupt the customer journey. Where brands successfully understand this fundamental change, they take the first step in reversing the high street’s ‘doom and gloom’ headlines.