DISCUSSION
Direct-to-consumer brands aren’t so direct anymore
Written by RetailWire Staff
Source: Walmart
One of the major developments in retail over the past few years has been direct-to-consumer brands opening stores to leverage the advantages of brick-and-mortar. Recent research, however, reveals that in the CPG space, direct-to-consumer brands are going wholesale rather than opening their own locations.
RetailWire BrainTrust members Ken Cassar, vice president of research at Shoptalk, and Carol Spieckerman, president of Spieckerman Retail, discussed the findings of a new study in a BrainTrust Live session yesterday. Mr. Cassar started off the discussion with the surprising statistic that while 18 percent of the top 50 direct-to-consumer CPG brands now have stores, 60 percent of direct-to-consumer CPG brands have wholesale relationships with mass retailers, both online only, like Amazon.com or brick-and-mortar, like Target and Walmart.
Ms. Spieckerman detailed a change in thinking on the part of digital native brands, from selling direct-to-consumer only, to acknowledging the importance of physical stores, to recognizing the importance of leveraging multiple business models.
"It does mark an under-the-radar shift that’s happening, to scale these brands through wholesale relationships rather than just through owned retail," Ms. Spieckerman said. "… Retailers and brand marketers are scaling now through business model diversification … If before it was sort of accidental where it seemed like they were stumbling into these other business models, I think now it’s going to start to become a lot more intentional. They’re going to start planning this diversification in early stages."
Digitally native brands, she said, now have the option of staying digital, pursuing wholesale relationships, opening stores or positioning themselves for acquisition.
In terms of acquisition potential, Mr. Cassar noted that the big CPG brands shifted toward looking at digitally native brands as opportunities, due to digital brands’ ability to innovate and gather robust data.
Ms. Spieckerman noted that where once retailers looked to buy, build or bridge in terms of new brands, the most successful now do all three.
"We’re entering into an era now where it’s going to be very much an ‘all of the above’ world," said Ms. Spieckerman. " ... digitally native brand are very much a bridge building opportunity or a buy opportunity."