Merchant Innovation

Why Direct-To-Consumer Sales Might Be Worth Chasing

The big divide in today’s retail world is in-store versus online, and there’s no doubt that there are millions if not billions to be made for retailers that figure out winning internal formulas while also keeping customers satisfied. However, while the industry is worrying itself sick over establishing effective multichannel operations, a recent survey suggests that there may be another consumer-driven dichotomy that’s flying under retail’s radar.

According to a survey conducted by digital commerce solutions firm BrandShop, customers have indicated a clear preference when it comes to shopping directly from their favorite brands or through third-party retailers. In fact, an overwhelming 88 percent of consumers who were surveyed said they would prefer to buy directly from brands, and 82 percent said they expected such options would be available to them.

However, only 37 percent of consumers said they often shop directly from brands, their numbers far dwarfed by the 78 percent of consumers who keep going back to online marketplaces like Amazon. In fact, consumers are so accustomed to shopping anywhere but directly from brands that only 22 percent start their paths to purchase on a brand’s site. Instead, 58 percent began their research on Google, with another 14 percent starting on Amazon.

Reuben Hendell, CEO at BrandShop, explained that the findings underscore unexploited opportunities for brands that have not gone all in on direct-to-consumer outreach. And if the research is to be believed, such retailers might want to consider kicking it into high gear to establish a presence before their competitors do.

“Our survey reveals that transacting is a vital part of how consumers want to engage with a brand, and DTC brand marketplaces are the best destinations for consumers to experience a brand and its products in a way that only a brand can deliver,” Hendell said in a statement. “Currently, brands are underinvesting in direct to consumer initiatives, but are starting to catch up to these changes in the marketplace.”

One of those brands Hendell mentioned was Nike, the fitness apparel company long associated with professional athletes and amateurs alike. According to Statista, Nike’s global revenue from DTC sales sat at just $2.18 billion in 2009. By 2013, that number had almost doubled to $4.37 billion. In 2015, Nike has already garnered $6.63 billion in DTC revenue by going straight to shoppers.

Part of this success can be attributed to Nike’s large physical footprint around the world. Market Realist reported that Nike operated about 450 branded factory stores outside of the U.S., with an additional 175 stateside. In fact, Nike’s DTC sales accounted for more than 20 percent of its overall transactions as of Q1 2015.

In agreement with Nike’s singular approach to DTC outreach, Greg Johnson, executive vice president at Swirl, explained that BrandShop’s survey results indicate brands do not necessarily need to cast the widest net to interact with the right consumers at the right times.

“For years, brands have invested in engaging with consumers across a host of mediums only to forget that true consumer engagement happens when they interact directly with a brand,” Johnson said in a statement. “BrandShop’s survey results demonstrate how new consumer preferences are changing the paradigm of eCommerce and there’s a much needed return to focusing on direct consumer engagement and transaction.”

Some brands are even getting involved in funding startups that can make the DTC sales process more streamlined, and when companies are willing to put their own finances on the line, it should be taken as a clear indication that more brands will hop on the DTC bandwagon eventually. As more and more brands open up DTC sales through online stores, though, they will have to balance the thin profit margins of eCommerce sales with customers’ as-yet unmet desire for more interaction with their favorite brands.

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