How Direct-to-Consumer Brands Are Rewriting the Rules of Retail

As traditional brick and mortar retailers continue to struggle, there is a new crop of retailers emerging directly from the web. They are bypassing traditional methods of distribution (department stores and other retailers) to ensure better control over sourcing, manufacturing, supply chain, pricing, and overall customer experience.

In addition to focusing on creating great products, stand-alone brands are now able take advantage of more advanced technologies that let them offer more personalized and transparent shopping experiences online. Innovative tools such as social media, chatbots, and post-purchase emails let businesses better connect with their buyers, and in this evolving environment, it’s the brands that can deliver smart, customer-centric services that are poised to thrive.

Today’s online, mobile-savvy market was practically built for direct-to-consumer (D2C) retailers.

The Millennial Factor

Millennial and Gen Z consumers have come to expect transparency and accountability in their shopping experiences, and they’re constantly connected to the information they crave before making a purchase. According to Nielsen, 97 percent of Millennials own smartphones. That level of connectivity means these cohorts can learn about and shop for any product at any time, and they want as many details as possible so that they feel they’re making informed decisions about their purchases. Those details could range from manufacturing conditions and pricing transparency to shipping methods and the exact date to expect an order on their doorstep.

Beyond this thirst for information, the new class of Millennial and Gen Z power shoppers insists upon a seamless consumer experience across the board. With access to information, these shoppers don’t want to play retail’s game of promotional pricing. They don’t trust it and prefer straightforward pricing and transparency.

Bonobos, a men’s apparel brand with a sense of humor and excellent customer service, was one of the early pioneers in the D2C field. Whether customers wanted returns assistance or help finding a discontinued color or style, they could count on a Bonobos customer service ninja to deliver a positive experience. Unlike companies that restrict customer support personnel to scripts and problem trees, Bonobos empowered the ninjas to resolve customer issues in whatever manner they saw fit—and they won fans in the process.

Of course, at the root of any great customer experience is a great product. Because younger shoppers are becoming more selective about what they spend their money on, it’s important for brands to ensure they’re offering quality products that meet consumers’ expectations. Cuyana, a San Francisco-based fashion startup, has built its entire brand around this concept, selling fewer products in general, but investing more in the quality this generation is looking for. The D2C model is built to better execute on this ethos: brands are more equipped to maintain nimble supply chains and adapt quickly to customer demand.

In the age of the internet, D2C brands can also take advantage of a wide variety of channels, such as blogs, bots, and social media platforms, to create more personal experiences for shoppers. On Facebook, Instagram, and Twitter, for example, Millennial and Gen Z consumers have a direct line to the brands they want to interact and shop with. This gives D2C companies an opportunity to shine, whether that’s by engaging with happy customers and leveraging positive feedback, or responding to unsatisfied customers in order to right a wrong.

Cultivating Unique Online Experiences

Just like their brick-and-mortar counterparts, D2C brands have to find innovative ways to create novel experiences for their customers. The most successful brands are winning customers over by providing easily-accessible information about their mission, products, and services.

The way that retailers use visual merchandising in stores is very different from how retailers can communicate with their buyers online. Consider the amount of information the leader in this field, Everlane, is able to share on its product pages. In addition to composition, fit, and reviews, Everlane discloses its markups for each product by sharing its true costs (factoring in materials, labor, duties, and transportation), and contrasting its D2C prices with traditional retail prices. On every product page, there’s also a link to a profile about the factory where that product was produced.

When it comes to shopping online, transparency isn’t limited to just product. In a traditional retail experience, shoppers can walk away with the immediate thrill of having a new item in hand. Online shopping delays that “shoppers high”, but smart brands use the shipping process as a way to initiate post-purchase communications that can help them build upon their customer relationships. For example, some D2C brands are alerting their customers via email and/or through an app at each step of the shipping process, notifying them when orders are shipped, delivered, and received back at the warehouse. By using up-to-the-minute alerts and notifications, retailers can use this information about order progress to extend the excitement of every purchase.

D2C Success Stories

Starting a brand in the notoriously tricky retail environment is challenging, but it’s far from impossible, especially in the D2C world.

Warby Parker launched in 2010 with a simple premise: quality glasses don’t have to cost a fortune. D2C sales allow the brand to keep prices low while maintaining a one-for-one giving program, so customers can save money and feel good about their purchase, and keep customers informed about delivery progress throughout the post-purchase journey. Today, Warby Parker connects with customers through both its at-home try-on program, and a chain of physical stores across the North America. As of 2015, the seven-year-old company was valued at $1.2 billion.

Internet-based mattress company Casper launched in 2014 to disrupt the old-school mattress shop business model. Instead of confusing customers with dozens of mattress options, Casper sells just one style in six sizes, priced between $550 and $1150, and will deliver it to your doorstep in a simple box. Mattresses come with a 100-night money-back guarantee, so the purchase is less risky than the standard sleep shop buy. Thanks to partnerships with West Elm and Target, Casper can reach customers offline without the expense of dedicated retail space. As of April 2016, Casper was valued at $555 million.

Away, the luggage brand started by Warby Parker alum Steph Korey and Jen Rubio in 2016, has sold nearly 100,000 suitcases and is on target to become profitable this year. Because the founders built their product in response to customer surveys about unfulfilled luggage needs, namely around quality and pricing, they created the precise item the market was looking for. Between an aggressive social media marketing campaign, a collaboration with millennial favorite Madewell, and a dedication to end-to-end communication with their customers, the brand is quickly becoming one of the buzziest names in the direct-to-consumer space.

If you build a great product, customers will come. If you keep those customers informed and listen to their feedback, they will return. If you create an authentic experience that responds to their needs, they’ll spread the word. Retail as we know it may be changing, but there has never been a better time to be a direct-to-consumer brand.