The Rise of Direct-to-Consumer Digital Retail and Fashion

Tamara Mellon — co–founder of Jimmy Choo and designer of her namesake shoe brand — thinks the fashion industry is going the way of the music industry.

In an interview with Racked, the designer examines internet-only, direct-to-consumer luxury fashion brands, including her own, and how they represent an ideological shift within the industry.

She equates the decline of brick-and-mortar retail to that of brick-and-mortar music stores, like Tower Records or FYE.

The future profitability of fashion, she argues, will come to those who are able to pivot to a digital-only focus — just like the profitability of music went to iTunes when it was able to provide direct-to-consumer digital downloads in 2003.

In other words, fashion is digitizing, and it is doing so in order to more directly meet consumer demands.

 

A Changing Landscape for Fashion

The digital upheaval in fashion has come at a time when traditional retail is experiencing a massive downswing. According to a 2017 report from Fung Global Retail & Technology, Macy’s and Sears each announced plans in 2016 to close 15% and 7% of their brick-and-mortar locations, respectively, while specialty retailer Express announced closures for 21% of its fleet.

Malls are struggling as fast fashion and off-price retail dominates, trapping brands in a merciless cycle of sales and reductions that not only damage the credibility of the label but also that of its retailer.

Facing an oversaturated market and too much choice, consumers have turned to fashion online, preferring brands that offer simplicity in design, choice, and message, as well as easily navigable customer touch points.

 

Direct-to-Consumer: A Potential Solution

The sales model many designers have turned to is known as direct-to-consumer, or the practice of putting a product in the hands of consumers without the assistance of a middleman supplier or retailer.

When you shop from a direct-to-consumer brand, you are buying directly from that company — often from their website — rather than picking up their product from a department store or a digital marketplace. This allows brands to circumvent the logistical costs of dealing with a third party retailer, while simultaneously sparing consumers of unnecessary markups.

 

Who’s Doing It?

This trend in fashion has, for the most part, seen its start in the online space with disruptive startups seeking to fill a gap in the industry. Some of the most famous examples include Warby Parker (glasses), Everlane (clothing), and Glossier (makeup), but by now cover a wide range of product offerings and benefits to consumers.

New, digital, direct-to-consumer companies were conceived of as a way to get products to consumers faster and cheaper by employing a more transparent approach to markups and distribution.

Warby Parker’s tagline boasts a mission to “offer designer eyewear at a revolutionary price,” while Everlane claims that “customers have the right to know what their products cost to make, so we reveal our true costs, and then show you our markup.”

Each seeks to meet the historically conflicting demand for quality products at affordable price points, and all have achieved this by foregoing traditional retail methods.

In the wake of trailblazer success, bigger, household name brands have begun to shift their approach. In the past 2 years, NIKE and Adidas have announced plans to increase their direct-to-consumer revenue streams by 250% and 60%, respectively.

The shift comes with promises for healthier consumer engagement and brand loyalty, better margins, and greater access to consumer data. Direct-to-consumer channels include selling through an online marketplace, social media, standalone stores, pop-up shops, and showrooms.

The most popular approach, however, is to sell to consumers through a standalone e-commerce website or app due to lower setup and operational costs and greater reach.

 

What Are the Drawbacks?

Scalability tends to be the biggest issue for brands born online. 45% of consumers claim they will not buy an item without touching it first and prefer to shop at brick-and-mortar retailers.

The most common solution has been a reverse order, with companies like Warby Parker opening up a handful of brick-and-mortar locations around the country. Everlane has also started to offer its products in department stores like Nordstrom and Bloomingdales.

The move to brick-and-mortar supersedes a significant online following, and the majority of sales continue to take place on flagship company websites.

 

What You Should Know for the Future

By industry projections, direct-to-consumer channels will continue to grow and, with most of this growth happening online, emerging brands will need to take steps to protect their presence.

Maintaining brand reputation and share of search is imperative to digital success, and owning the right domain names is crucial to accomplishing this.

Companies seeking to break into the direct-to-consumer space should be aware of the dangers posed by third parties occupying a deceptively similar domain name or typo.

Disparaging content and malware run rampant on related domains, especially for powerful brands. As the industry expands, brands should take care to properly leverage their domain name strategy not only to adequately protect their reputation, but also the give their customers the best possible experience.

The digitized, direct-to-consumer, retail industry is an exciting frontier for the fashion world. Brands should be vigilant as they seek to break into the space, and take care to protect their presence online.