The industry debate around the direct-to-consumer model focuses on unicorn brands like Dollar Shave Club, but the model which was so successful for Dollar Shave Club is not a one-size-fits-all approach to retailing direct-to-consumer.
Dollar Shave Club started with a clear market opportunity. Massive demand existed for affordable razor blades. The brand is built on not taking itself seriously, clearly contrasting with its competitors’ highly technological and serious advertising. This makes it a natural fit for viral social content, and founder Michael Dubin created exactly that with his “f***ing great” video campaign. Since the product is small and cost-effective to ship, ecommerce was a natural fit, and with the brand at the centre of the business and a small product range, webstore-based commerce combined with the clever use of paid social advertising generated sales.
Following this, it might be tempting for current B2B brands and manufacturers to launch a branded webstore, spend on promoting the brand through social media, and look to drive sales there. However, this isn’t always appropriate and depends to a large extent on not just the brand’s positioning but also the market opportunity and competitive landscape. For a small but well-funded startup such as Dubin’s, positioned in a specific niche with a great market opportunity, agility comes naturally, and brand awareness is easier to earn. For larger and more traditional businesses, it’s often harder to draw in customers directly.
So, if the market isn’t an open field for disruption, and most brands and manufacturers aren’t organisationally or culturally set up to be disruptors, it’s unrealistic to look to the specific implementation of direct-to-consumer sales by a startup. Instead, these businesses must take a more channel-agnostic view of the market and understand where the consumers are likely to be shopping, in order to get their product in front of them.
This is leading to a growing number of brands and manufacturers that are looking to marketplaces as direct sales channels. From Nike to Superdry, these businesses are acknowledging that they need to be more than just available on these channels – they need to directly influence the customer’s experience.
Fashion Brands on Marketplaces
In the case of Nike, the brand had a problem. Their products were being sold on Amazon by retailers and resellers over whom they had no control. This was damaging the brand, and the best way to fix it was to sign up to Amazon’s vendor service, which meant they preserved their revenue stream without suffering damage to their brand equity from discounters and resellers.
Superdry began life on marketplaces with eBay, for reasons similar to Nike’s partnership with Amazon. Initially, the channel was purely for end-of-life and off-season stock. As the business realised how much traffic and sales the marketplace was capable of generating, this tactic switched to include new lines and products in a fully branded and optimised eBay Store presence.
Avoiding Channel Conflict
Another common element in the typical startup direct-to-consumer story is the lack of concern they have for channel conflict as natively direct brands. By contrast, channel conflict is one of the biggest fears for established businesses that are considering selling directly. However, there are several approaches that can reduce the cannibalisation of revenue and avoid harming partnerships on the wholesale side of the business.
The first approach is to imitate the Superdry model and test the waters with end-of-line or out-of-season stock, which can be a headache to move otherwise. Of course, this limits revenue potential and has some risks regarding customer perception of the brand if their primary shopping channel only contains its older lines. There is at least a relatively low risk of upsetting retail or wholesale partners with this strategy.
Another option for brands is to pursue direct sales in new markets, whether internationally or with new product lines. Once again, a marketplace presence can make this process significantly more cost-effective and flexible thanks to the low cost of reaching a new geography through Amazon, for example.
Established Brands Win by Differentiating
The key to these approaches is to differentiate the direct sales from the wholesale offering. For bolder brands, the truth is that a full-scale direct sales presence doesn’t necessarily have to harm the wholesale business either. By sharing the data and learnings, adapting product designs, and understanding the market better, brands can improve their offering to distributors and retailers just as they can for their end customers.