Why direct-to-consumer could mean independence day for manufacturers
More and more successful brands – both established and emerging – are choosing direct-to-consumer retail strategies to take greater control of the selling environment. Owning the space to create valuable customer experiences, that differentiate and define, with the added benefit of providing rich streams of customer data. As increasing numbers of brands look for alternative sales routes, here’s why manufacturers should seriously consider taking the direct line.
New tech, new habits
In the words of sports industry analyst Matt Powell, “When a brand wants to control how a consumer perceives it, the best way to do that is to become a retailer”.
Back in 2001, Apple, was a challenger brand. (Funny thought now, isn’t it?) Then, almost overnight, they switched entirely from selling via wholesale environments – where they were price-fighting with well-known competitors – to relying entirely on their own stores. The rest, as they say, is history. Their success set the benchmark for an experiential, direct-to-consumer sales model that many manufacturers – Samsung, Nespresso, Dyson – have since tried to emulate, exploiting the freedom they gain to tell their stories in compelling, relevant ways.
Today, the factors driving selling directly to consumers are even more compelling. Consumers have high expectations. They have to understand how what they’re buying will improve their lives and what kind of brand they’re buying into. In the process they want shopping to be fun. Brands can’t deliver this through third-party retail alone.
If you can’t beat them, buy them
For a new generation of consumers – literally hundreds of millions of them – are cool with buying from direct-to-consumer brands via mobile. This has given rise to a whole parade of savvy, nimble, digital-first businesses, for whom direct-to-consumer selling is their default mode. Everlane, Birchbox, Glossier, Bonobos, M.Gemi, Dollar Shave Club, Casper – to name only a small handful – are disrupting the traditional wholesale-retail model and enjoying enviable growth.
With each interaction providing a rich source of data on purchase and browsing, likes and dislikes, there’s much to learn from these savvy disruptors. And some traditional manufacturers and retailers are snapping up them up. See Unilever’s purchase of Dollar Shave Club and Walmart’s acquisition of Bonobos for the big beasts taking the fast-track to seeing how it’s done.
More opportunities to build defining value
Other mighty names, like Nike and Adidas, are also shifting focus. Of course, this means delivering experiences, not just selling product. Nike Direct – the department whose strategy is to prioritise own-channel selling – is augmenting the physical storefronts and e-commerce sites with targeted direct-to-consumer platforms like Snkrs, an app for sneaker fanatics, and the Nike training app.
Born out of – and still living by – a passionate love of road cycling, Rapha CEO Simon Mottram says the brand wouldn’t exist in the way it does today if it hadn’t stuck to its direct selling roots. “Because we only sell direct – you can only buy Rapha from Rapha – we can have this direct conversation without worrying about anything or anybody else in this business, apart from doing the right thing for the sport and our customers. That’s incredibly liberating.”
The result is a distinctive offer that has grown organically, from its core performance cycle wear to a global club for seriously dedicated cyclists, supported by a network of café-store Clubhouses. The brand’s also a publisher (of Mondial magazine) and content producer (with over 300 films in its back-catalogue), as well as a travel operator (running cycle tours all over the world). The overall experience is authentic, inviting, enriching. All things more brands want to be.
Embrace the emotional
At Start Design, we feel brands create ‘defining value’ with experiences that meet emotional and societal needs – not just their practical, everyday ones. Ironically, retail experiences designed to meet societal needs have an almost anti-shopping spirit; a generosity of purpose that goes above and beyond the need to shift units. Nike is clearly realising this with the Snkrs platform. It’s a fantastic example of experiential selling and content marketing coming together to build a community of superfans, eager to share their love for Nike’s latest, limited-edition sneaker drop.
In the same emotive spirit, Start Design recently designed a pop-up store experience for menswear brand Couture Club – an Instagram- driven success story established in Manchester by reality star Ross Worswick. The result is a social space designed to feel like a pre-party hangout, perfectly capturing the brand’s online vibe, pride in its Mancunian street culture roots and locally-produced premium clubwear. DJs spin vinyl while browsers admire striking tattoo-inspired artwork and an in-store barber makes sure everyone’s #instaready.
Direct access to deeper insights that drive growth
Direct-to-consumer retail channels can really help you go deep. Nike’s apps and .com site give them valuable data on more than 100 million consumers, enabling refinement and personalisation of their offer on a vast scale. They can see feedback swiftly and tailor-make products and experiences that reflect what they see, even down to the level of individual consumer needs.
Netflix is another towering example of the rich pickings to be had from deeper datasets. At renewal meetings – wherein execs decide whether series will be recommissioned or dropped – there’s much talk of ‘completion’ – i.e. how quickly subscribers are moving through episodes to the end of the season.
Culturally, the primary drive throughout the organisation is to greenlight projects, rather than spike them. To this end, the commissioning process is highly decentralised, to facilitate more yeses than nos. It’s proven an effective business model – because the more content Netflix has, the more subscribers they attract, the more content is watched, the more viewing numbers can be crunched, the more they can refine their bets about future programming. “More shows, more watching; more watching, more subscribers; more subs, more revenue; more revenue, more content,” explains Ted Sarandos, chief content officer.
Stronger brands make stronger partnerships
Naturally, there’s a lot to consider if you’re shifting from a wholesale to direct-to-consumer distribution model. Becoming a retailer means competing directly with your own wholesale partners and distributors. And, whilst selling direct can mean higher product margins, volume sales could be correspondingly lower. So any direct-to-consumer retail strategy must include a go-to-market plan for channel mix, platform development, format and geographic location. And how this impacts the value of any existing or future wholesale business. Investment is needed to get the strategy and experience right.
But, as we’ve seen, the payback can be considerable – creating brand value that makes you stand taller in the eyes of consumers. Strong brands are an obvious draw for multi-brand retailers. So, while a direct-to-consumer retail strategy will need to work harmoniously with distribution partners, in the long run, improved brand value can only change these partner-relationships for the better.
Going direct Starts with your consumer
At Start Design, we help brands create direct-to-consumer retail strategies and experiences. We work from the outside in, beginning with the customer, understanding their needs, how they currently see the brand and interact with it. Then, we work from the inside out – using these insights to deduce how a direct-to-consumer sales strategy can iron out any rough patches and make the customer’s experience something they’ll want to shout about.