Direct-to-consumer (D2C) commerce surged during the early stages of the Covid-19 pandemic, as new brands capitalised on the shift to online shopping, and mainstream brands – such as Nike and Levi’s – doubled down on direct sales channels.
Two years on, with physical retail regaining traction, and wider issues such as inflation, online advertising prices and tracking issues coming into play – how can D2C brands remain competitive? I recently spoke with Polly Wong, president of marketing strategists Belardi Wong, to discuss the topic.
Image: Polly Wong
D2C brands need more distribution channels
“We have seen a shift back to retail, even with the pandemic – I believe, right now in terms of total retail sales in the US, it’s still 78% in store,” Wong explains.
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“As digital is becoming more expensive, competitive, saturated and promotional – D2C brands need to have more distribution channels,” she said. “Not only are they opening their own stores, but they are selling on Nordstrom, which is wholesale, and even considering selling on Amazon, right? You have to be where your customer is – you can’t just have your own website and think you can drive scale at this point.”
Wong concedes that wider shifts in the industry are affecting the potential long-term growth of brands.
“The affluent consumer was stuck at home spending a ton of money online [during the pandemic] – spending a lot on home and sporting goods and gardening and many other things. Those companies had huge, double- or triple-digit growth for two years in a row. Now you’ve got huge numbers to grow on top of,” she said.
“The cost of marketing is up in every channel, the cost of goods is up, the cost of distribution is up. Also, the funding market has really dried up. I know a lot of our clients, emerging DTC brands, are having a hard time raising money for that next chapter of growth.”