Historically, traditional brands have relied on size to tell their stories. The assumption was that as long as customers could see the stores on every corner, sales would grow. Traditional brands focused on enlarging spaces, adding more doors – and expanding to different cities and countries. When Everlane launched a decade ago, it did none of that. Instead, the direct-to-consumer (D2C) brand tells its stories through transparency. Customers know where their clothes are produced an
ced and – more impressively – what exactly they’re paying for. There are itemised costs listed for each product sold on the website, right down to the transport fee. They can even see the markup cost, and it’s significantly less than traditional brands. Everlane only marks up three times the cost, which is half of what the rest of the market typically tacks on. Other D2C brands broke into their respective markets with a similar story. Traditional brands rely on wholesale; eyewear brand Warby Parker removes it completely so consumers can still get great eyewear styles at half the price. Traditional brands resort to low prices and high discounts; sustainable fashion label Reformation opts for prices that reflect its brand value. D2C brands play by their own rules, but these rules aren’t created on a whim – they’re focused on consumers’ real pain points. Brand story matters Consumers are increasingly value-driven, and bigger, brighter stores aren’t the only answer. Bardot is the latest company to shut down 58 locations across Australia, joining US brands Gap, Macy’s and Forever 21 that faced the same predicament. But that isn’t to say embracing an offline strategy will automatically lead to failure. The rise of digitisation contributed to the retail apocalypse, but as seen by e-commerce player ASOS’s tumultuous year, disruption can happen to any retailer, online or offline. The key to success is telling a cohesive brand story – something D2C brands immediately grasped. “Storytelling extends beyond the product,” says Katie Smith, a retail and trends strategist. “A large contribution of D2C brands’ success is because they speak the same language as the consumers – they sit right alongside them. In doing this, they sell the experience.” And experience sells indeed. It’s why brands are scrambling to improve the experience of a website or a bricks-and-mortar store, constantly updating with new visuals and enhancing interactivity. Consumer behaviour changed, but the underlying factor remained: consumers still crave experiences. This is something newer entrants to the market have to be more vigilant about. Over the past years, more brands are joining the landscape – and it’s already heavily saturated. What else can we learn from established D2C brands? Deliver consistent pricing and discounts New shopping habits have emerged: consumers are no longer driven by price, they’re now purchasing for values. According to a Wunderman Thompson report, 70 per cent of consumers are more than happy to pay a higher price for products or services that are both environmentally friendly and adhere to human rights. In a world where the likes of Boohoo are still slashing prices to attract customers, D2C brands are sticking to their beliefs. Reformation has been one to walk the walk. An average dress in Reformation costs in the range of US$180 to US$250, its pricing leaning towards the premium scale. This, of course, isn’t something new. Sustainable products require higher production costs, and other factors like eco-friendly packaging have to be accounted for. But what makes the cool-girl brand stand out is its consistency. Over the past months, the median price for its core products – dresses, tops and outerwear – remained in its respective bracket: US$200 for dresses, US$100 for tops, and US$190 for outerwear. The sustainable brand isn’t competitive in discounting either: in the span of four months, Reformation has launched just one one-day sale campaign. It was for Black Friday, and discounts were capped at just 30 per cent. The most surprising factor here, however, was that consumers were much more willing to pay for products at full price. According to Omnilytics, the discounted products saw a lower sellout than similar full-priced items: in the same month, a dress ranging between $US150 and US$200 saw 20 per cent sellout, whereas the discounted items only saw 3 per cent sellout. Releasing constant discounts trains consumers to expect price slashes, only purchasing at a lower price point. In contrast, sticking to consistent pricing and discounts speaks a different story: our products are worth it, at full price. Newness, redefined Instead of mass producing its popular day heel, Everlane used a waiting list (which racked up 28,000 orders) to gauge demand. For Everlane, waiting lists are not only a way to minimise overstocking issues, but they also generate scarcity. Newness matters more than ever, but D2C brands are redefining what that term means. On average, Everlane brings in only 150 new SKUs per month. That’s a big difference to Fashion Nova, a fast fashion retailer that brings in almost 3000 SKUs in the same time period. But for Everlane and other D2C brands (Reformation only stocks an average of 100 new SKUs per month too), quantity isn’t newness. It’s delivering the right products and meeting consumer demands. This brings us to the next point. The hero product as a stepping stone From Naadam’s cashmere sweater to Mansur Gavriel’s signature bucket bag, D2C brands have a unique trait of starting with a single product assortment. Often, hero products fill a market gap that industry leaders fail to spot. Before Warby Parker, eyewear was either too plain or too expensive. Bags and shoes often had cookie-cutter designs until Mansur Gavriel and By Far broke into the market with their one-of-a-kind aesthetic. Hero products force consumers to have a singular focus, allowing D2C brands to quickly grow a cult-like following. “Singular product lines help brands to get one foot into the market,” says Amelia Teh, head of business intelligence at Omnilytics. “Once customers start paying attention, the brand develops more products, with that consumer group as its focus, growing more sustainably.” Such was the case for Mansur Gavriel and By Far. The New York-based accessories brand has since branched into ready-to-wear and shoes, while By Far – the brand that saw 96.54 per cent sell-through at full price in 2019 – added handbags to its product categories. Product extension, however, shouldn’t be viewed as an option – it’s a necessity to survive in today’s cut-throat competition. “Retailers have a tendency to become stagnant after a successful launch,” says Teh. “It’s important for them to realise that a bestselling hero product isn’t a guarantee of profitability. It’s a stepping stone, and retailers must constantly innovate.” What’s next? D2C brands are more than just a disruption – they’ve shaped retail as we know it today. Traditional brands had to play catch-up to adapt, and larger corporations like Target have even created in-house brands to mimic the success of D2C brands. Less agile brands suffer, proving further the importance of understanding evolving consumer behaviour. This can even happen to newer D2C brands, evident in the high costs of customer acquisition. With that said, consumers always have to be placed at the forefront – thankfully digital has made it even easier to have that relationship, regardless of how you retail.