Direct-to-consumer brands reigned during the pandemic. While you’d think brands that survived a period of global economic strife that will be written about in history books would be well positioned for lasting success, the past year has proved that quite the opposite is true. In 2023, funding for ecommerce firms took a dive by more than 70 percent from the year prior. Most DTC brands are struggling to stay afloat, but some are even facing lawsuits for misleading investors in light of their poor performance.
What consumers expect from physical retailers that operate across categories is a one-stop-shop and, within that shop, there needs to be an experience that’s unique enough to lure them to get into their cars and go out among their human brethren.
Last year, I wrote about DTC brands changing course and coming to department stores to capture next gen’s physical retail spend. Those that did––Harry’s, Casper, and Warby Parker, among others––are still thriving. Those that didn’t add a physical presence to their DTC strategy. Well, in Nike’s case, they’re getting sued.
Let’s talk about how DTC could falter in a post-pan time where some people are still donning masks prior to interfacing with their fellows, the DTC brands that are still killing it, and how the strongest DTC brands are still thriving.
DTC Feels Like a Holdover from the Pandemic
This is a classic case of perception versus reality––and, in terms of consumer purchasing behavior, which do you think is more important? While the heyday of direct-to-consumer brands spanned from 2010 to 2020, most customers still associate it with the pandemic. And, unfortunately, direct-to-consumer brands don’t have the opportunity to present every prospective customer with a timeline for the growth of their industry. So here we are.
Of course, consumer perception isn’t the only factor at play here. There are also consumers’ bleak economic prospects in the age of AI with inflation increasing the cost of living. Nobody wants to sign up for a recurring charge if they aren’t sure their account won’t overdraft that month, and few DTC brands offer cost-conscious one-off purchases.
If online-only shopping feels like a holdover from the pandemic, experiential retail is the anecdote. The line between “weekend plans” and “just running to the store to grab a few things” has never been more blurred. With experiential immersions like Meow Wolf popping up across the nation, it makes sense that retailers are breaking their backs to add some fun to their operations. And I’m not talking about bringing in makeup artists from a store two hours away and calling it an “exclusive cosmetic event.”
No, customers want multisensory, artistic environments that make them feel like they’ve rejoined the human race reversing the lingering malaise of months of lockdown. That’s the experience that retailers from Prada’s Instagrammable Café at Harrods (the pop-up closed in January) to LEGO 5th Avenue are striving to provide. With industry leaders like these doing the absolute most to create a can’t-miss retail experience, brands that don’t are doing distinctly, glaringly less.
Physical Partnerships Are Still Where It’s At (With a Few Caveats)
Ye olde physical retail partnerships haven’t changed much from when I wrote about them last year. What has evolved is how many of the DTC brands that didn’t partner with physical retailers simply failed to stick around. Mind you, this struggle describes brands with their own physical stores––Allbirds, Warby Parker, Nike––as much as it does brands that chose to forego physical spaces altogether. A lack of diversification is risky business in physical retail.
The reason? Physical retail, when in a specialty niche like “flavored olive oil” or “bra and panty sizing” can use consumer education as its core form of outreach. People will go to a cool olive oil store to try different olive oils, if it’s done well. Few women trust their own bra cup size assessment––that hasn’t changed.
What has changed is what consumers expect from physical retailers that operate across categories. They want a one-stop-shop, and, within that shop, there needs to be an experience that’s unique enough to lure them to get into their cars and go out among their human brethren. A single selfie station and some artwork won’t cut it anymore––physical retail needs a comprehensive theme that represents the brand in a compelling way, but it also needs to have interesting things for customers to do when they show up. Great décor? That novelty lasts about five minutes.
Let’s take LEGO 5th Avenue, for example. They didn’t just decorate the space in an innovative LEGO theme and call it a day; consumers can try the LEGO Mosaic Maker, build a unique LEGO animal and take it home, or use the LEGO Minifigure Factory to make mini likenesses of their family and friends. Yes, the LEGO brand is represented in the architecture of the space, but it’s the activities that let store visitors take some of the magic home.
Every mom-and-pop shop worth its salt has a selfie station that few customers ever use. That’s the tired standard. Retail magic requires a comprehensive theme and innovative, on-brand, activities that can’t be found at the arcade around the block.
Farewell?
DTC is no longer the hot new thing; it’s more like a memory of an era we suffered through globally. As much as journalists prattle on about “quality issues” with specific DTC brands, it’s not really about quality––it’s about perception. Direct-to-consumer brands aren’t doing well because they represent more of a liability for customers than an asset: subscription models can cause overdrafts and force customers to deal with challenging cancellation policies, while stolen packages are an issue for deliveries across the board.
So, does this mean I should throw out my old Warby Parker frames and resign myself to the millennial chaos of Target Optical? Not quite. But, if Warby Parker partnered with Target Optical to offer at-home, try-on and free shipping, then we’d have the start of something good. If the Warby/Target partnership had a unique aesthetic––say “Coffee and Mints Glasses Try-On Café” and offered customers a gamified version of the app to earn points towards in-store purchases? Well, then I’d be covering it for The Robin Report.
