It’s no secret that Allbirds took the footwear world by storm over a few short seasons as comfort and athleisure became dominant trends. Allbirds had the perfect play for its era — a wool blend provided both novelty and next-level comfort. The brand’s simple, laid-back style started as the “it” look for a certain subset of affluent techies and then quickly spread to the world at large.
Allbirds was able to accomplish all this without anything resembling a significant retail presence, something that was completely unheard of as little as a decade ago.
Direct-to-consumer strategies are now standard in footwear after years of the industry lagging behind the larger apparel category. In truth, shoes were a difficult e-commerce proposition for some time. Shoppers were used to the idea of being able to try on a pair before committing. Retailers like Payless and Walmart made their footwear dollars with large, accessible shoe floors.
At higher price points, buyers were at times unwilling to risk a size they couldn’t feel for themselves. At lower price points, the outsize cost of shipping footwear meant that businesses had trouble making money on a purchase, no matter the outcome — but especially if there was a high return rate as is common in e-commerce.
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Since then, footwear brands such as Allbirds were able to change the way the industry operates because they showed how a brand could use e-commerce channels in a way that was revolutionary, bringing footwear into the digital fold.
“While the direct-to-consumer model is much more common today, nearly no footwear businesses were 100 percent DTC when Allbirds launched in 2016,” an Allbirds representative told Sourcing Journal. “It was nearly inconceivable that a new footwear brand would eschew the widespread distribution of large third-party retailers, and many tried to talk us out of launching independently. One of the biggest challenges of starting a DTC brand is simply reaching your customers — if you’re not going into established department stores or e-commerce sites, you need to rely on strong marketing, press coverage and, most important, word of mouth in order to be successful.”
Other digitally native footwear brands, like Greats — which claims to be the first digitally native sneaker brand after its founding in 2014 — have been around long enough to live in a future in which their experience in e-commerce has become a massive advantage. Just don’t call them DTC.
“For starters, I think it’s more accurate to call Greats a digitally native business, not DTC,” Greats CEO and founder Ryan Babenzien explained to Sourcing Journal. “We have always been focused on building a brand that is digital first but not digital only. Greats has its own retail and key partner accounts that are all part of our distribution strategy, so we’re mostly DTC but not exclusively.”
Babenzien said that he never envisioned a world in which online sales and marketing were his brand’s only avenues. Being digitally native simply meant that Greats would be interacting directly with consumers, instead of passing off that duty to a retailer. It also meant that a brand could operate at razor-thin margins, though Babenzien believes those days are gone.
“In the early days of DTC version one, 10 years ago, brands were arbitraging inexpensive Facebook traffic and everyone believed that is what made DTC so exceptional,” Babenzien continued. “Cut out the middleman, have a better margin — but that only worked when acquisition costs were artificially low.”
VF Corp, which owns Vans, announced that it expected its DTC revenue to expand to $3 billion by 2023, growing by a CAGR of 13 percent to 16 percent. DTC digital revenue, it said, would grow to $1 billion, at an even faster CAGR of 30 percent to 35 percent.
VF Corp. can trace its roots back to 1899, long before the days of digital-only anything. However, the company said that the direct-to-consumer mentality has always been a part of Vans, though things still changed for the brand when the market adjusted.
“There’s never been a day in the brand’s history when the team hasn’t been sharply focused on its retail business, but I’d say that aligning the product creation process with the DTC calendar is probably one of the biggest variables,” Steve Murray, VP of strategic projects at VF Corp. said about Vans in an interview with Sourcing Journal. “The old wholesale-driven approach of launching two or even four seasons a year without thinking about monthly drops, coordinated marketing campaigns, transition periods and effective stock rotation died a long time ago. Vans was in front of that realization — and yes, VF’s other brands have been following suit.”
In this area, there is not much difference at all between the old guard and the new. Allbirds said its strategy was always to be faster and more agile, using its advantage — the freedom of e-commerce — in every way it can.
“As DTC becomes more common in footwear, we’ll see brands innovating the way products are rolled out and updated,” the Allbirds spokesperson said. “Since brands like us aren’t beholden to a wholesale cycle and the same release schedule as traditional footwear brands, we’re able to be more nimble and experimental around when and how we launch products.”
Still, what VF said about old strategies being modified and discarded for those better suited to e-commerce is what lies at the heart of the next question: What will digital footwear sales look like in 10 years?
Babenzien said the methods brands used in the past, manipulating Facebook for instance, will no longer work in a digitally native world.
“Cut to today where Facebook has become an efficient machine and printing money via their ad network and you no longer have the ability to arbitrage Facebook,” Babenzien explained. “Finding other channels that can scale is critical.”
As for the future of footwear being marketed directly to consumers, Babenzien said it will mostly look like the death of wholesale as a primary channel for new brands as they instead turn to digital sales in order to get their start.
“The old way of building a wholesale-reliant business out of the gate, without a digital-direct business that makes up the lion’s share of revenue, is all but impossible. But this does not mean it’s better or worse or easier,” Babenzien concluded. “Apparel and footwear marketplaces, I think, will continue to play an important role for digitally native brands — taking on the role of the ‘new retailer.’ In the end, it’s always about the customer and we want to be wherever they are shopping.”
VF Corp. believes it is already well positioned at the places where customers want to shop. Its retail network is still quite extensive and it sees the connection of both spaces, as do the digitally native brands, as the next hurdle in not only DTC but also the footwear industry as a whole.
“Our owned channels represent the pinnacle expression of our brands because of their ability to offer a superior product assortment alongside our respective brands’ culture, heritage, marketing assets and unique DNA,” Murray said. “In many instances, our stores showcase the brand in a way that’s difficult to achieve anywhere else. Through storytelling, comprehensive product merchandising, targeted store design and an upgraded customer experience, we can generate consumer demand that also benefits the retailer partners who carry our brands.”
Editor’s Note: This story was reported by FN’s sister magazine Sourcing Journal. For more, visit Sourcingjournal.com.