Direct To Consumer: Big Brands Vs. Small Brands

Cutting out the middle man of a physical store location is not a new phenomenon.

Since the Internet came onto the scene in the early ’90s, merchants have taken various approaches to figuring out the bestselling combination. In other words, what will make retailers more money – selling in brick and mortar, selling online or a combination of the two.

Though the amount of online retailers is astounding, many consumers still prefer to shop in-store. Between 2015 and 2017, the amount of consumers who prefer to still shop in brick-and-mortar locations fell from 85 percent to 70 percent, according to intelligent customer engagement company TimeTrade’s research report, The State of Retail Report 2017.

With in-store shopping waning, some retailers are adding a new option to the purchasing mix with a direct-to-consumer offering. Rather than selling through a brick-and-mortar location or even on its own company website, some brands are looking to marketplaces like Amazon to sell to consumers. In this piece, we’ll review some of the larger and smaller brands that have taken this concept and run with it.

Big Brands

Nike — Over a week ago, news broke that Nike decided to up its direct-to-consumer game by partnering with Amazon to sell its footwear and sportswear on the eCommerce giant’s website. Competitors like Adidas and Under Armour have already started selling their products on Amazon, but Nike has arrived to the game. The deal that was struck will be a quid pro quo situation in which Nike provides its products and Amazon serves as a watchdog for counterfeit Nike products.

As this news broke, shares of Footlocker and Finish Line fell a couple of percentage points while Nike saw a two percent bump.

While Nike already had a direct-to-consumer presence established with its website and mobile app, it’s hoping that the Amazon deal will help move the revenue needle.

Gillette — As Procter and Gamble’s biggest brand faces stiff competition from companies like the Dollar Shave Club, Gillette last month announced its plans to compete on the same level. Consumers looking for new razor blades from Gillette now have the option of either buying directly from the brand or creating a custom subscription model in what the brand is calling Gillette on Demand.

With Gillette’s share of the razor market falling from 70 percent in 2010 to 54 percent in 2016, this move to a direct-to-consumer model is likely an attempt at salvation.

Small Brands

Warby Parker — People with glasses who are looking to be more stylish but don’t necessarily want to make multiple trips to the doctor’s office to get a new prescription set welcomed Warby Parker with open arms. As long as consumers can provide an up-to-date prescription from a doctor to the online eyewear company, they’re able to buy new frames at a much cheaper price.

The way the brand is able to get frames at a less-expensive price point is that it designs and manufactures its own glasses, thereby cutting out the middle man.

Everlane — Rather than blindly buying clothes from already expensive designers and marking up prices, Everlane takes a different approach. The fashion manufacturer and retailer searches the world for the right factory and materials to provide quality clothing for its customers. In this direct approach, Everlane is able to offer high-end fashion for an easier-to-digest price point.

Whether it’s Nike or Warby Parker, the direct-to-consumer market is seeing tremendous profits. Bringing in $41 billion world wide, direct-to-consumer selling has seen an annual growth rate of 0.6 percent between 2012 and 2017 according to IBISWorld’s research.

With all of the direct-to-consumer brands selling directly through the online arena and eCommerce’s increasing foothold over brick and mortar, it may be safe to say that direct-to-consumer sales aren’t going anywhere any time soon.