Direct To Consumer: Ditching The Middleman

History tends to repeat itself.

In retail, we’ve seen this happen time and again. The latest aspect of retail to rear its head again is the direct-to-consumer (DTC) approach.

From Warby Parker to Etsy and Everlane, more startup consumer companies are making the choice to remove the middleman between themselves and the end user. While Warby Parker and Everlane make their own goods, Etsy gives the power of selling directly to crafty individuals looking to create and sell to the consumer.

Basically, the realm of DTC enables businesses to both manufacture and sell their products without involving third parties.

In a sense, DTC is the modern day replication of the “mom and pop” concept. By reverting back to this basic tenant of retail, alongside advanced technology, retailers in or entering the DTC space are able to provide consumers with a more customized offering — with a personal touch.

For years, the mass production side of the retail industry dominated, but with the introduction of eCommerce, retailers suddenly had a new avenue to reach the consumer. In this new digital realm, retailers now have the opportunity to combine the mass production side with the personalized side. The internet is allowing the retail industry to reach a much broader audience, while at the same time pinpointing their specific interests or tastes, due to the ability to collect and analyze data.

Effectively, these DTC brands have disrupted the retail industry by bypassing third-party vendors as well as brick-and-mortar stores. Through reaching out directly to consumers and building their businesses around those desires, direct-to-consumer brands have likely gone above the traditional retail mold and into a new territory.

Earlier this year in a Forbes piece, Primary Venture Partners General Partner, Ben Sun, commented on the DTC inner workings and why brands that choose to go this path are successful. He explained that the “new D2C brands emerging today understand these challenges and have built platforms that directly attack those vulnerabilities and provide consumers something of real value — either a far superior shopping experience, higher-quality goods, cheaper products or greater convenience.”

While DTC brands have the capability to incorporate consumer details back into their products or services at a much quicker rate than traditional merchants, they’re also able to deliver faster product turnaround and hold more inventory.

As we reported earlier this month, DTC is not without its challenges — including lack of commitment to a DTC strategy, consumer product companies’ lack of retail experience and uncertainty about how the DTC approach will impact competitors, according to Gartner. DTC has also significantly impacted consumer expectations when it comes to the speed and experience provided to them.

At the end of the day, we’ve seen larger brands, like Nike and Pepsi, heading in the direction of DTC. It seems the benefits of implementing a DTC strategy outweighs the negative aspects of it.

In direct-to-consumer news this week, luxury consumer brand Everlane has shared the news of its decision to open up its first physical store. The brick-and-mortar location will be in San Francisco and will include a Everlane Lab that’s meant to test out new products.

Amazon has filed a trademark application to venture over into the prepared meal kit space. Similar to that of Blue Apron, Amazon is looking to capitalize on consumers shopping from home. Fosina Marketing Group’s Founder and CEO, Jim Fosina, commented on this move and how it helps reiterate the importance of the retail industry diving further into DTC efforts: “This move further reinforces the power of direct-to-consumer and in-home subscription services. We are seeing this across the board. More companies are working on strategies to develop subscription-like programs and initiatives.”

Nike is predicting its DTC business will increase from $6.6 billion in 2015 to $16 billion by the year 2020.

It seems like ditching the middlemen has turned into quite the lucrative business.