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D2Cs are going offline: What gives?

a blue dartboard with a bullseye that says O2O. there is a dart in the bullseye.

Sometimes, the retail landscape doesn’t seem to make sense. Just as we’ve gotten to grips with a major trend in a marketplace, it starts going in a different direction entirely. 

We’re back to talking about D2Cs – or more specifically, the D2Cs that are no longer exclusively D2Cs. 

Yup, that’s right; D2C brands are currently moving offline in huge numbers, walking back on the idea of ‘cutting out the middleman’ in favor of partnerships with major retailers. 

D2C underwear brand Proof made waves earlier this month by choosing to release its latest line through Target – barely a year after it first launched. This follows movements by Big Fig and Quip to pair up with Walmart and Target respectively to sell their products. Even the fiercely independent beauty brand Glossier paired up with Nordstrom in 2019 for a series of exclusive pop-ups across its stores.

Why are so many successful and well-established D2Cs choosing to pair up with retailers who house hundreds of competing offerings under their roof?

When D2Cs first started popping up on the scene, it seemed to promise an entirely new way of doing retail. They focused on commonplace consumer products, turning them from boring everyday purchases into a powerful statement about simplicity and convenience. 

Why struggle to remember to buy razor blades at the grocery store, when Dollar Shave Club can deliver them to you on a monthly basis? Why panic about buying the right mattress, when Casper Sleep can deliver one straight to your house AND let you return it within 100 days if you aren’t satisfied?

This disruption to traditional store-based retailing, combined with complete vertical integration and sophisticated direct marketing, has made D2Cs a force to be reckoned with. Over half of consumers say that they prefer to buy from a brand directly, rather than through a stockist or intermediary. 

But fast-forward to 2021, and the picture looks a little different.

You can still buy your Caspar Sleep mattress online, but you can also head straight into Target or West Elm – or one of their nearly 100 stores across the U.S. 

Dollar Shave Club? It was bought by Unilever for $1 billion back in 2016 (if that’s not ironic, I don’t know what is).

Considering that D2Cs earn trust from consumers because of the direct relationship, moving into big-box stores seems like a major contradiction of their core philosophy: Keep it simple (and more profitable) by keeping out the third parties.

So, what’s changed?

It comes down to two key shifts that have been accelerated by the COVID-19 pandemic; the brick-and-mortar sector is fighting harder than ever to stay relevant, while mature D2Cs are realizing that their evangelized model comes with some serious limitations.

Brick and Mortar is calling: It wants its mojo back 

There’s another reason why this online-to-offline movement feels counterintuitive. It flies in the face of everything we think we know about modern retail. 

It’s offline brands that are supposed to go digital, not the other way around – right?

Industry commentators have spent over a decade telling brick and mortar brands how to stay relevant; by not being just a brick-and-mortar brand. 

But as the likes of Walmart and Target invested millions in developing vast online marketplaces, this opened a whole new can of worms; the difficulty to avoid cannibalizing in-store sales.

When retailers add digital selling channels, it throws the inefficiencies of in-store shopping into sharp relief; getting to the store, the difficulty of finding products on the shelf, lengthy queues for changing rooms…we’ve all been there.

So, why should consumers shop in person when they can do it from the comfort of their living room?

The reality is that unless brands can find new ways to add value, the in-store experience very quickly loses its sense of purpose.

The parallel pandemic of thousands of store locations being shuttered each year shows that many big-name retailers are struggling to give their customers a reason to shop in the flesh. Macy’s department store will close 45 locations in 2021 as a part of its long-term plan to close 125 stores by 2023 – 20% of its total footprint.

This begs an obvious question: With so many D2Cs investing in partnerships to put themselves in physical stores, has the retail apocalypse been massively overblown?

If the past year has taught us anything, it’s that in-store retail is far from dead. The explosion of BOPIS (Buy Online, Pick-Up In-Store) happened against a backdrop of soaring online sales. It’s a clear sign that even in a global pandemic, many consumers are actively choosing brick and mortar. 

But the sector covers, retailers don’t want their stores to become glorified pick-up points. This has proven to be the push that many retailers needed to augment their catalogs with fresh offerings that reposition stores as places for product and brand discovery – rather than just carbon copies of their online catalogs.

All dressed up, but nowhere to go – except the shelf

We’re had years of publications extolling the virtues of D2C; more secure supply chains, less bureaucracy, better customer care. And with ecommerce having exceeded growth projections many times over in the past year, surely this is the best possible time to be a D2C retailer?

Conditions may appear optimal on paper, the reality is more complicated. Because While D2C brands may be powerhouses in their early years, they inevitably hit a wall.

It’s notable that some of the most well-known D2C brands – including Caspar Sleep and pet food supplier Chewy – are struggling with profitability.

The problem is simple. Once a D2C has maxed out its often niche online audience, it becomes impossible to scale at the same velocity using the original playbook. 

Add an increasingly saturated marketplace and plateauing customer acquisition into the mix, and brands are forced to explore new avenues to get their products in front of potential customers – such as a good ol’ fashioned department store presence that puts products (literally) within reach of new consumer segments unlikely to discover them online.  

D2C brands also have some major advantages when moving into physical retail that native brick and mortar brands lack. They already have a captive audience that can convert into valuable foot traffic. They also have a clear value proposition that differentiates them from similar offerings. 

But there’s another reason why D2Cs have succeeded where many retailers have failed; they have an in-depth understanding of what consumers want. 

Managing marketing, logistics, and customer care has given D2Cs unprecedented insight into their target audience that brick and mortar retailers struggle to match. By controlling every step of the customer journey, D2Cs have a virtual goldmine of consumer data at their disposal to aid their transition into new channels.

So, what does this growing hybridization of D2Cs and brick and mortar tell us about retail at large? 

That consumers, regardless of whether they’re shopping online or offline, increasingly expect their favorite brands to be where they are. 

As expectations grow for more seamless omnichannel experiences, having an in-store presence is set to become an even bigger competitive edge for D2C brands. For brick-and-mortar stores seeking to boost their foot traffic, a catalog that boasts some exclusive product offerings is a surefire way to broaden your appeal and remain plugged into a rapidly evolving landscape.  

The verdict is clear: Pairing linchpins of the suburban shopping mall with up-and-coming digital natives is a powerful strategy that we’re going to see more – not less of – as brands across channels fight to stay relevant in a crowded marketplace.

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