D2C brands are reinventing retail

From online to brick-and-mortar stores, D2C brands are redefining where and how people shop.

By Tomer Diari 9.30.19 CONSUMER

Over the last few years, Direct-to-Consumer (D2C) brands have revolutionized e-commerce, reinventing the way products are sold online through a modern and delightful shopping experience that’s uniquely tailored to attract millennial shoppers. As D2C companies begin branching out into the physical world, they are redefining the boundaries between brick-and-mortar and online shopping, setting the stage for a retail disruption.

But first, some background…

Direct-to-consumer (D2C) brands

The e-commerce industry has been around for well over a decade, but it’s only in the last three-to-five years that significant advancements in online and physical infrastructure have finally catapulted it forward. Two-day delivery, fulfilment centers staffed by robots, online shopping platforms like Shopify and targeted marketing campaigns on social media platforms have completely changed the game, making it ever-so-easy to launch a new virtual shop, attract customers and deliver products anywhere in the world.

And enterprising individuals did just that, launching their own D2C brands and following a simple and effective playbook: a delightful online-first shopping experience, boutique and premium products sold at affordable prices, modern and sustainable branding that’s tailored to millennial shoppers and most importantly — beautiful products and packaging that look great on social media. Mixed together, these techniques form a magic sauce that can turn any one-person-operation into a beloved national D2C brand, with examples aplenty — Casper, DollarShaveClub, Harry’s, Warby Parker, Brooklinen, HIMS, Glossier, Bonobos, AllBirds, Ritual, and the list goes on…

D2C companies have already conquered e-commerce. In fact, they’ve done it so quickly, effectively and systematically, that existing retailers struggled to compete, letting them scoop up considerable market share in their respective fields. Traditional retail brands with online presence are now trying to implement the same techniques to attract online customers, but D2C brands are already pushing the borders into a larger territory — physical retail.

AllBird’s store in Boston offers a large open space, minimalistic design and lots of natural light.

From online to brick-and mortar

How can online-first D2C businesses succeed in the barely-profitable retail industry? The answer is surprisingly simple. Instead of treating physical retail as a profit-maximizing business unit, they leverage physical stores as retail experiences that are both profit-drivers and marketing channels. Aside from driving sales, these stores are also used to solidify and enhance the brand, attract new customers and convert them to online shoppers. In fact, the same magic sauce that worked online can be applied in the physical world with little-to-no change, making it remarkably easy to breach the gap between online and brick-and-mortar. Not convinced? Here are a few examples:

Amazing in-store experience — D2C brands that took their foot off the sales paddle in their physical stores can instead focus on delivering a positive and memorable experience to their customers, offering quality service and amenities to any would-be customer or curious tourist that steps in. Branded water bottles, decorative and fun fitting rooms, fashionable chatty associates. It’s delightful.

Optimized for social media — the millennial customer-base of online-first D2C brands is incredibly active on social media platforms, and each of these customers will gladly become a brand ambassador if given the chance. The most sophisticated D2C companies that were quick to catch on have lined up their stores with hashtags, cozy photographic spots, beautifully arranged shelves and perfect lighting. In today’s world, if it’s not on the ‘gram, it doesn’t exist.

Limited inventory — D2C stores should carry enough inventory to display products and provide a feeling for fit and size, but not attempt to maximize in-store sales. Products bought in the store can be sent to customers, helping them get used to the online shopping experience, and customers can be encouraged to make future purchases online with discount offers. The benefits are clear — no costly inventory, no change to the existing fulfillment process, no extended revolving capital, and most importantly — no more shuffling through shelves in search for fit and color.

Iconic stores in prime locations — A few iconic stores in prime trendy locations can have an incredible impact on a brand that’s primarily focused on online-first sales, removing the need for excessive and costly physical footprint. New York City and San Francisco are the usual go-to places for a brand making its first steps in the physical world, just visit SoHo or Hayes Valley to get a taste.

The bottom line

D2C brands had an incredibly disruptive effect on e-commerce and many older brands already struggle to compete in the online arena. Now, they are ready to tackle retail itself, where the competition is fiercer and the potential rewards are larger (retail is a multi-trillion-dollar industry!). This new form of retail is already leaving a mark on the industry, and as online-first innovation continues flowing towards retail, we can only expect the trend to accelerate.

Incumbents across many other industries have already crumbled before innovative new entrants, and it’s now time for retail. It will start small with a few stores in trendy locations and a few hashtags on Instagram, continue with incumbents trying to leverage the same playbook in their own stores and conclude with a shopping disruption, as D2C brands become an integrated part of our daily life — online and offline.

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