Something caught my eye in a consumer insights report released this summer by London-based global consultancy PwC: “One salient finding from our survey is that consumers are increasingly making the decision to eschew traditional middlemen and marketplaces in favor of buying directly from brands. A majority of consumers (63%) say they have purchased products directly from a brand’s website, and we expect that number to grow.” The survey found that another 30% of shoppers would buy directly from a brand, but just haven’t yet.
Online shopping and cheaper, faster shipping options have facilitated the rise of DTC brands, and with online shopping continuing to grow, it makes sense that DTC would grow, too.
Here’s the part of the PwC report that really got me: “Firms would do well to capitalize on DTC trends; with the right marketing tools and technologies, they can connect more often with the end consumer, bypassing their retailer partners.”
The whole point of the DTC model is to bypass retailers and sell to the consumer. It’s right there in that very straightforward descriptor: direct-to-consumer.
It’s the specific phrasing at the end of that sentence that stopped me cold: “bypassing their retailer partners.” Partners. And with that word choice, PwC encourages manufacturers to abandon the long-held manufacturer-retailer relationships on which the home furnishings industry is largely built. Ouch.
The appeal of DTC
DTC is not a new idea. In the earliest days of retail, manufacturers produced items and sold them directly to local consumers in a factory-direct model. And the home furnishings industry has long had vertically integrated — and quite successful — producers with their own retail outlets spread across the nation, another version of the DTC concept.
And aside from special relationships with a few favorite stores, interior designers already tend to avoid retail and take advantage of to-the-trade discounts offered directly from manufacturers.
For many manufacturers, especially startups, operating as an online DTC has great appeal: They control all the marketing and distribution. They keep all the valuable customer data. And they reap all the profits.
And with bankruptcies, store closures and consolidation across the home furnishings retail landscape, there a simply fewer retailers (at least on the brick-and-mortar side) to carry manufacturers’ products. Why not sell direct?
The Covid-19 pandemic accelerated trends in retail shopping — namely the move to online browsing and buying — that have been altering the retail landscape for more than two decades. E-commerce has been the biggest shift in retail since the rise of discounters like Walmart and big box category killers. (In a bit of irony, that last group, part of the death knell for smaller retailers, is now being driven out of business by e-commerce.)
Is DTC the next seismic shift?
Keep working together
Aside from its benefits, the online DTC model also has great costs, including, as PwC notes, maintaining “sophisticated e-commerce channels” and optimizing “digital marketing technology.” DTC brands on the bedding side of the business, in particular, have shown how fast DTC can grow — and how hard it can be to turn a profit. And even many DTC brands that began online have partnered with more traditional retailers or opened their own showrooms to give consumers a chance to see and feel products before buying.
Of course, not all manufacturers are interested in shifting their model to DTC and even some who sell DTC work to maintain their relationships with retail partners, notably by pricing their DTC products higher and by directing online browsers to local retailers where they can see, feel and experience the products in-person.
Besides inducing panic in retailers, the PwC report also hints at ways retailers can continue to thrive even as DTC brands grow. One starting place: Half of consumers told PwC that “the main reason they’re drawn to DTC websites is the authenticity of the products.”
Authenticity is a squishy word that means different things to different shoppers. But retailers can cultivate authenticity by doing simple things, including creating and maintaining a consistent brand identity, handling customer complaints quickly and transparently, and following through on promises to shoppers.
More than four in 10 consumers say they like the choice of products that DTC brands offer, and another four in 10 say they appreciate the competitive pricing and stock availability they find by shopping brands directly. Those factors may be a bit harder for some retailers to match, but it’s not impossible to do so.
In a growing DTC world, there is room for flourishing retailers, too.