With the emerging retail trend of brands moving toward a more "direct to consumer" model, here's a deeper look at a few select brands that are doing it right.
By now I'm sure you’ve heard of "direct to consumer" retail. Just as the Internet brought the advent of e-commerce, it has once again catalyzed a new business model that’s taking the fashion world by storm. New brands, and more importantly, savvy consumers, have become increasingly aware of the inner-workings of the retail business model -- specifically, its markup scheme. Thanks to a few pioneering brands (see: Warby Parker, Everlane), the floodgates have opened for businesses looking to leverage direct sales at a reduced cost via the Internet.
The metrics are simple: items purchased at traditional retail outlets have a total markup of about 400%. That means the $1,500 designer leather jacket you coveted only cost around $300 to produce. After a modest 100% markup by the designer, high(er)-end retailers get to slap another 150% markup on the final price tag.
The fashion industry has flourished for years on this model, but its future is looking rocky: every day new brands using different metrics arise to challenge this system. While some are more successful than others, sooner or later, the future of retail is going to look different.
Before we dive into what’s next, it’s important to review what many consider to be the grandfather of the direct to consumer movement: Warby Parker. Being an eyewear brand, it had vastly different circumstances than other fashion clothing startups when it was founded in 2010. Back then -- and for the most part, even now -- the eyewear market operated as a near-monopoly with one large parent company that could control the pricing scheme. Warby Parker succeeded in cutting out this big player with aggressive online direct to consumer tactics, beating out the big players' prices and helping reshape consumer opinion on how much eyewear should cost at retail. To this day, it continues to execute beautiful product for a good price and carries a positive social message (Warby Parker also donates a pair of glasses for every pair sold). The brand is special; the founders saw a very unique opening in the eyewear market and capitalized on it. Dozens of brands have tried to follow suit, but most have fallen short.
Most fashion startups fail to match Warby's skyrocketing success for one main reason: they don't provide the right “value.” There are two types of value: first, value that lies in good product at a fair price; and second, value that derives from cultural credibility, trend and other intangible "It" factors. Direct to consumer labels can only succeed with a delicate blend of both.
I am all for fair prices, but the problem is that “fair” isn't cool, at least in the fashion world. This may sound harsh, but any label worth its weight sold you a dream. Sure, I’ll buy basic white t-shirts at a discount online, but bargain hunting is not why I fell in love with my favorite designers. Many DTC brands today tend to feel closer to a tech startup than a design studio, only focusing on giving you lower, more affordable pricing -- everything is quantitative. I started this story with a simple goal: to find direct to consumer brands offering more value than a “value proposition.” Surprisingly, there are only a few labels that fit the dual-value criteria and match what we represent here at Selectism. The findings? Three relatively new brands all operating out of busy New York City offices. See the results below.
Outdoor Voices sold me on its unique vision of fashionable activewear. No, it’s not what you and your bro wear to the gym, and it's definitely not some Lululemon rip-off. OV fills a very real void in the market that falls in between the performance push of Nike and the aesthetic prowess of Norse Projects.
It was only after sitting down with the team that I realized they were operating on an equally unique business model. Admittedly, they're not fully DTC--80% of sales occur through their own webshop at a less-than-retail markup. While I don't find OV’s prices a bargain, I don't need to reconsider paying rent to pick up a full outfit.
Outdoor Voices achieves a healthy balance of price, aesthetics and brand voice. It focuses on directly communicating with its customers, heavily pushing its own social channels and website rather than relying on other retailers to tell its story. After all, who can tell a brand’s story better than the brand itself? President Andrew Parietti explains, “We’re building a business based on direct marketing and having a relationship with our customer.” OV is compelling because the brand doesn’t shout “we sell good shit”; it just produces and presents its product beautifully.
Good visuals are everything when it comes to online business and Outdoor Voices has understood this since day one. The webshop is intuitive and uses memorable typography (details that can make or break a project, at least for me). OV's social media accounts are approachable and have a distinct voice, particularly its Instagram. After following the account, I received a direct message offering a 20% off code to the online shop -- very impressive considering Instagram does not allow automated messaging.
As powerful as online retail can be, Outdoor Voices understands that it's not an end-all game. It wholesales to a few key doors like Five Story and Steven Alan, which act as "fitting rooms" and exclusive outlets to help build the label’s credibility. It hosts scheduled meet-ups and running events in New York where consumers can put a face to the brand and test out its gear — Founder Tyler Haney and President Andrew Parietti are usually in attendance. To top it off, it recently opened up its first brick-and-mortar shop in Austin, Texas. The future's looking bright for Outdoor Voices.
Isaora is a specialty label producing performance goods with a contemporary edge using high-tech construction techniques. Like many others, I discovered the brand through high-end retailers like Barneys where I would drool over the product only to find that almost everything was out of my price range.
Last season, the label made a move that no one expected: it boldly pulled out of every retailer, making a strict switch to an online DTC business model. To many this seemed like a suicide mission. Sure, the wholesale grind can be tough, but why disassociate from so many great retailers?
After talking to founder Marc Daniels, the reason is simple: “control.” He explains that once orders are shipped out, things can get difficult. “Essentially, you're just handing over the brand to these stores -- some represent it better than others.” For example, it can be difficult to ensure retail staff are knowledgeable on Isaora's highly detailed product -- this goes even further for foreign accounts where important facts like technical specs and construction details can get lost in translation. The choice to move all sales in-house streamlined the brand’s channels of communication into a simple two-way flow between the brand and its customers. Again, who’s more qualified to explain a brand’s product than the brand itself?
By having everything in one webshop, Isaora can gather detailed analytics more easily and efficiently which aids in everything from product development to customer service and retention. The brand's online experience is streamlined and to-the-point without screaming "We're DTC!" According to Daniels, it's just not that important; Isaora sells itself. Since there are no external fashion sales schedules to meet, new products and collections can be introduced on whatever timeline Isaora deems fit. Daniels further states, "now we're designing for our consumer, not for the small collection of the most important buyers in the world.”
With the DTC model, Isaora is able to significantly cut down on prices: it has nearly doubled its revenues in only a year’s time. Isaora may be on to something here -- the future is literally in its own hands, not the hands of big retailers.
Founded by architect Jeff Johnson and angel investor Kal Vepuri (Warby Parker, Harry's, Sweetgreen), The Arrivals is carving its own lane in an overpopulated online retail space. This is not your average fashion startup -- for starters, not many clothing brands are featured on TechCrunch. The New York-based label focuses on high-end outerwear with a contemporary edge. You know that slick leather moto jacket you've never been able to afford? The Arrivals has got it, and at a much, much better price.
First impressions are everything. Within seconds of landing on the homepage, you understand its mission through a surprisingly small amount of verbiage. Striking minimalistic images cover the full page without any unnecessary elements that distract from the beauty. The Arrivals’ web presence and visual ethos can be likened to Ssense, who has one of the best built e-commerce sites out.
After scouring The Arrivals’ website, I found no information about using a direct-to-consumer model. See a trend? Its communication is very controlled -- not dissimilar to the way Outdoor Voices and Isaora work. There’s a sense of mystery; no cheesy "About" pages here. My initial introduction to the brand's business model was through the TechCrunch interview. I was much more convinced hearing how cool they were from a third-party source than an "About" page convincing me that buying a half-price moto jacket was a deal.
As mentioned before, “value” is a hard sell in the fashion world, but The Arrivals doesn't even bother with that issue. It just offers contemporary, made-in-America fashion for a near unbeatable price -- no sales-driven gimmick needed.
With so many new brands in the market, it's surprising how few caught my eye. Why are there not more operations like the aforementioned three? Well, it's not so simple. Multi-brand retail shops have been the backbone of the industry for decades. They were and still are a main point of discovery for new consumers -- there's nothing like picking something up and feeling it. Retail shops have an established client list, reputation and credibility that can give valuable context to up-and-coming brands. A cosign from an "It shop" can mean big business down the line.
Any brand looking to circumvent the establishment and potential comforts of the retail system is bold, but for the movement to continue to boom, brands need to champion the model. But again, it's still not "cool" to boast being a direct to consumer brand -- it can be a turn off when labels only appeal with bargains. The brands explored in this story are not advertising their business platform; they choose to fly under the radar and reap the benefits of a lucrative model.
While the direct to consumer movement will continue to flourish, it’s going to take some time for the big players to cooperate. Established powers can be slow to adopt new technology and trends, especially when a great deal of infrastructure is already in place. Although there’s a slew of new brands paving the way for a thriving direct to consumer market, it’s just going to take time to see an entire shift to a new retail system. The question is, what’s your favorite brand going to look like in 15 years? What about a department store?