Direct-to-consumer brands have curried favor with consumers and generated buzz among industry insiders this year. But experts believe that these digitally native startups will need to do more in order to scale their businesses.
Third-party relationships are essential to thrive in the current retail climate, according to analysts at Edited, which released a new decision-making tool to help brands optimize their wholesale strategies.
Despite the undeniable allure of social media-savvy brands that drum up countless likes on Instagram, these companies lack a true brick-and-mortar presence and aren’t heavily saturated across different markets, they said.
“A time will come when DTC brands will have to mature in order to scale,” Edited market analyst Kayla Marci said. An effective way to do this is by using the resources of a more established business, she said, pointing to Nordstrom as an example.
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The department store has “emerged as a sort of launching pad for these buzzy DTCs to scale,” Marci said, with brands like Glossier, Allbirds, Reformation and Everlane all running temporary pop ups to test the waters in a brick-and-mortar setting, and Rent the Runway forging a newly expanded tie-up.
“All are still credible brands that have evolved their original strategy successfully in order to grow,” she added.
While DTCs must evolve in order to reach their full potential, they also need to hold firm to the values and attributes that brought them success and consumer trust.
Determining the ingredients of a brand’s “special sauce” involves digging into the data, according to Edited analysts. Discovering the qualities that have earned these brands their intrigue can help them optimize their wholesale strategies by targeting specific new markets that offer the product and pricing opportunities best suited to their businesses.
“Looking to tap into a new market or trade through a new platform is a challenging task with many factors to consider,” Marci said.
Edited’s new Retail Decision platform offers brands a breakdown of new markets in real time, “eliminating any guesswork and giving them full visibility of who is competing in this space, what products are on offer, what is and isn’t performing and the core price points being operated in.”
Brands must arm themselves with this information if they’re looking to maintain their integrity and voice while sustaining growth. And if DTCs play their cards right, they can avoid ceding share to online power players like Amazon in an effort to reach more consumers.
The defining benefit of a DTC strategy is the ability to control one’s brand image, Marci said. “For brands opting to sell on Amazon, a curated product mix and brand identity is something they will have to forego,” she said.
“While Amazon may beat out other sites for its vast reach, diverse audience and delivery speed, it’s more of an ideal platform for already established businesses to scale their brand instead of for startups to gain credibility or evolve a brand identity,” Marci added.
For relatively young companies with everything to prove, seeking out more symbiotic and flexible relationships with retail partners could be a more fruitful path forward.
Edited’s Retail Decision tool allows brands to monitor their performance on these third-party sites, as well as compare their metrics with those of a competing brand or product, lending full visibility into wholesale relationships.
“The businesses that are going to thrive are the ones that can leverage the strategies that resonate best with their consumer, be it DTC or wholesale, and combine the best of both in order to innovate and surprise,” Marci said.
Editor’s Note: This story was reported by FN sister magazine Sourcing Journal. For more, visit Sourcingjournal.com.