Stay in Touch
Shopify is taking a page out of Amazon’s playbook as it looks to become the all-encompassing platform engineering the growth of direct-to-consumer retail.
In the last 18 months, Rocksbox's private-label products, made up of eight different brands, have grown from 25% of its total inventory to 85%, and private-label products are driving about 85% of sales for the company.
Resident is the latest brands group to form around a collection of retail startups, and it’s betting that a power-in-numbers approach will work in its favor in the crowded DTC mattress category. Resident is now the parent company of mattress brands Nectar Sleep, DreamCloud, Awara and Level Sleep, rug brand Wovenly and Bundle, a furniture line that launched in May.
Underpinning Rothy’s store strategy is an emphasis on profitability: According to Rothy’s president Kerry Cooper, the first store is profitable and became so four months in. As more digitally native brands move offline and into their own physical retail stores, these locations have served dual purposes as both marketing plays and sales channels, particularly in the form of pop-ups that ship inventory displayed in stores to customers’ homes.
Plus-size and extended-size fashion brands are launching by the droves, no thanks to wholesale partners. Rather than retailers' buy-in, the direct-to-consumer model's proven success is giving brand founders the go-ahead. More brands are launching to cater to women above a size 14, and are relying on the direct-to-consumer business model rather than wholesale to reach their customer.
Supermaker, which launches today, is a new media site founded by Schmidt and Cantino focused on telling the stories of entrepreneurs, particularly women and people of color who are launching consumer brands with a “conscious agenda” according to Cantino, as well as sharing career and business advice around topics like raising investment funding and commanding successful social campaigns. The site currently features spotlights on brands like Bippy, a sustainable toilet paper company, and Anna Robertson, the founder of Ghana-based apparel brand Yevu.
With Delivery Unlimited, Walmart is adding another option to its suite of delivery services that get orders to customers on a same-day basis, upping competition against Amazon and Target, as well as cross-retailer services like Instacart. It’s the latest in a string of additions to Walmart delivery options.
It’s Tim Armstrong’s belief that everything, eventually, will be direct-to-consumer, and he sees the issues currently burdening the DTC category as symptomatic of a burgeoning industry trying to grow up. There will be a tech-like shakeout, yes, but the successful brands in the space are rewriting the rules of how consumer companies develop product and market to customers, because at their cores, they actually know who their customers are.
Through the official partnership, VF gets access to data from Alibaba’s 654 million-customer database across its marketplaces, including Tmall and Taobao. With that data and TMIC, VF can more readily identify customer trends, test new products before launching them, build customer data profiles and track products post-launch in order to judge how well they’re performing with Chinese customers.
Terry Kawaja, CEO and founder of strategic advisory firm Luma Partners, anticipates these types of relationships will separate who wins in the DTC category from who disappears. Speaking at the BDMI Media Summit on Thursday, Kawaja positioned this evolution of the category as the natural evolution of an industry that started out independently, but now has to live up to big valuations from investor funding: According to data from Luma, $10 billion has been funneled into roughly 400 direct-to-consumer brands to date.
It’s not Amazon’s existence or cut-throat competitive strategies that have sealed the fate of other retailers that are losing market share, like JCPenney, Bed Bath & Beyond and Sears. Instead, it was a series of executional and strategic missteps over a critical window of time during which today’s better-equipped competitors were taking action in areas like e-commerce and logistics as well as experiences and services.
Under the weight of the category, and increasingly complex business models, the direct-to-consumer label is cracking in its purity, but startup brands still have a similar mission in mind as they navigate their categories: Build sustainable businesses by any means possible (even if that means wholesale) while keeping customer wants and needs firmly rooted in the center of that strategy.
Blue Apron’s rise and fall has become a cautionary tale to other billion-dollar-valued consumer startup unicorns: Profitability may not matter to venture capitalists, but a lack of it can sink a business that’s beholden to stockholders scrutinizing quarter-by-quarter performance.
Store fulfillment for online orders is something Target has been investing in heavily. Through a combination of ship-from-store, same day delivery powered by Shipt and in-store order pick-up and drive-up options, Target stores now fulfill 80% of online orders. As CEO Brian Cornell told investors during the company’s first-quarter results for 2019, it’s an operation that’s profitable for Target.
Retailers’ interest in CBD products is tilting the burgeoning industry’s favor towards traditional players, and away from DTC startups in the space. The digital marketing engines like Facebook, Instagram and Google that help spur the momentum of direct-to-consumer brands still block companies from advertising non-intoxicating cannabidiol products, as they’re derived from cannabis. These platforms have all blocked paid ads promoting CBD products, under their policies against advertising “drug and drug-related products.”
Kroger's digital sales are increasing as the company invests more in services like delivery and in-store pickup, but they continue to eat into the company's profits. During its first quarter earnings on Thursday, Kroger reported that digital sales were up 42% compared to the same period last year, but same-store sales excluding fuel were up just 1.5%. But, operating profit declined to $957 million, compared to $1 billion a year ago. Kroger is in the middle of its Restock Kroger initiative, introduced in 2017, a restructuring strategy put in place to create an Amazon-style flywheel to protect its business.
Read More