Fast-emerging D2C brands are certainly getting a lot of attention and hype these days -- some might say, too much hype.
Others might say that these new digitally native brands that are direct-selling everything from form-fit bras and electric toothbrushes to mattresses-in-a-box are no different from brands launched decades before -- that they just have a fresher story and brand image.
I totally disagree.
Folks who believe that brands like ThirdLove, Quip, StitchFix and Casper are just freshened-up versions of Victoria’s Secret, Oral-B, Macy’s and Sleepy’s do not understand what is happening beneath the surface of those companies.
Likening these new brands to those they are disrupting is like saying that Amazon is just a freshened-up version of Sears or Walmart. It is not. They are not.
It’s easy to watch all the hoopla around these D2C cool founder stories -- their ready access to venture capital, funky irreverent TV ads shot on iPhones -- and assume they're no better than all the dot-coms we watched rise and fall in the late ‘90s and early ’00s once their ready supply of VC cash dried up.
Sure, some will be flashes in the pan, but to dismiss the category that way would be a big mistake. These companies are built, think and operate exactly opposite to the way most of the legacy consumer brands that we interact with today do. Here are some examples of the differences:
Consumer before channel. These companies and their leaders wake up every day focused on their ultimate customers and how to solve their problems. Conversely, given their dependence on traditional brick-and-mortar retail, the vast, vast majority of legacy brands wake up every day worrying about the folks who pay their bills: distributors and retailers. Consumers are very quick to notice the attention to detail provided by the D2C players. And they like it.
Digital first. Digital is where D2C brands were born, which is why they try to force all customer interactions into digital interfaces, even if you are buying in one of their owned-and-operated stores. Phone apps, websites and digital kiosks operate 24/7 by 365, are highly interactive, highly automated, and great at capturing data. That is not how almost any legacy consumer brands operate.
Product design and packaging. Most legacy consumer brands base product size, packaging and labeling on the specifications of their distributors and retailers. Most D2C brands make those decisions around the desired customer “unboxing” experience, aspirationally chasing Apple and the amazing unwrapping experiences it launched with the iPhone.
Backwards-running supply chains. Supply chains for D2C brands operate exactly opposite those of most legacy consumer brands. In D2C, the signal and pull starts with, and centers on, the consumer, and drives back through delivery, logistics, packaging, manufacturing and sourcing. They are designed fundamentally to deliver personalized products and experiences for each and every customer.
Not so for most legacy brands. Their supply chains were designed to build mass products, push them down channels and sell as much as possible for as high a margin as possible.
If you really want to understand this, please go to the Internet Advertising Bureau’s website and read all of the amazing research that the trade organization has put together under Randall Rothenberg’s leadership, starting here. There is no way that you can read the presentation on “The Direct Brand Economy” and remain a skeptic for long.
I know what’s bothering you. Many D2C brands today are super-sizzly, seemingly incapable of doing wrong, and get valuation multiple that seem irrational. However, don’t discount them until you really dig beneath the surface of how they operate.
What do you think?