The direct-to-consumer trend has seen exponential growth since the pandemic hit businesses globally, fueled by other factors like digitisation and consumers’ rising inclination towards online shopping. A recent article by Boston Consulting Group highlighted that as of mid-2021, there were as many as 20,000 direct-to-consumer brands globally, with new names getting added to the list every week.
An increasing number of fashion & lifestyle brands are embracing the direct-to-consumer model to keep up with evolving consumer demands. The leading players of the direct-to-consumer model are fashion & lifestyle brands at 77%, followed by beauty & cosmetics at 19% (source: Entrepreneur).
One of the largest sportswear brands has managed to shift nearly 40% of their business to a more direct-to-consumer-reliant model and is projected to increase it to 60% by 2025. By 2025, the brand aims to conduct 50% of their business through the digital medium, which includes their own channels and wholesale partners.
A similar announcement was made by another leading sportswear company in March 2021, with plans to achieve 50% of their businesses through the direct-to-consumer model by 2025. Their direct-to-consumer business grew from 30% in 2019 to 40% in 2020, expanding their e-commerce presence massively and intend to double their digital sales in the next three years.
Changes and challenges for direct-to-consumer businesses
As lucrative as the direct-to-consumer trend might be, the journey towards seizing this opportunity comes with its own set of roadblocks, as businesses are still learning to gain a foothold in this fast-changing landscape. A study by The Drum Network shows that 82% of consumers currently have between zero to four direct-to-consumer relationships, indicating that the direct-to-consumer model is still at a nascent stage.
A few of the obvious challenges that businesses might face are:
Front-end and back-end management
Brand websites and their supply chain operations need to be in sync with the order to offer consumers complete visibility. Newer brands shifting to the direct-to-consumer model have to compete with successful online retailers who have already set a very high benchmark in the e-commerce space. The 2020 direct-to-consumer Hype Report shows that 30% of respondents would still choose Amazon over a direct-to-consumer business because of the seamless experience.
Inventory visibility
For a smooth shipping and delivery process, brands need to ensure that inventory availability is continuously updated so that it doesn’t disrupt their consumers' purchase journey. They must also consolidate their inventory availability from all locations, from the back end to the front-end.
Failing to do so, brands risk losing sales if their front-end doesn’t have visibility of their global inventory (because orders can come from any location).
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One end-to-end direct-to-consumer solution
Businesses cannot treat their front-end and back-end differently. They need to function as one entity to ensure that the right information exchange happens at every juncture of their customer’s journey (source: Fabio Grazioli). Shipment delays, failed deliveries, misleading information, and more, can occur when brands are unable to tackle their supply chain and logistics issues while shifting to the direct to consumer model.
What brands must invest in
Source: IndiaRetailer
Success comes with the right partnership
Many businesses around the world have realised that shifting to a direct-to-consumer model is now non-negotiable. The right supply chain partner can help brands achieve this by ensuring they present their consumers with the right products at the right place and time (source: Deloite).
Seizing the omnichannel opportunity does not mean a complete revamp of production and supply. It starts with investing in a partner that can align businesses’ supply chain objectives with the right strategy. To keep up with consumers’ changing demands, brands must realise that the seasonality of traditional fashion is slowly becoming obsolete. Collaborating with suppliers to optimise production capacity through robust supply chain management is vital now (source: BCOME).
Direct-to-consumer brands globally have been investing in various strategies to offer a premium customer experience. These strategies include warehousing and inventory management, integrated payment options, seamless last-mile delivery, end-to-end management, and more.
The direct-to-consumer dominance will unequivocally play a crucial role as businesses continue to evolve this year. To unleash the full potential of the direct to consumer trend, having the right supply chain partner is just as important as having the right strategy.
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