Direct-to-Consumer Is Dying. It's Time for a New Paradigm

In the past decade, storied brands like meal-replacement Huel and men's grooming company Harry's built billions of dollars of retail businesses by using social media and digital-first advertising to sell directly to consumers online. Direct-to-consumer is a new type of retail.

Many high-street stores were forced to close as a result of the global Pandemic. Ooni, an outdoor pizza oven maker, saw their sales explode during the transition, with their annual revenue increasing from £1.7 million to £5.2 million. Around 60 percent of shoppers have used a direct-to-consumer brand in the past.

The market is changing quickly as the Pandemic slowly fades. Nike saw its direct-to-consumer sales grow 30 percent to $16.5 billion in 2011. The stock prices of some of the biggest, publicly listed DTC brands have dropped as much as 64 percent in the next four years.

Economic factors are behind the under performance. Retailers are being put under pressure because of inflation and squeezed supply chains. According to a report by McKinsey, rising prices are the number one concern for two thirds of UK consumers, with 70% saying that they have recently changed their shopping habits and are more open to buy cheaper brands.

There are other factors at play. Apple's new transparency feature, which allowed users to opt out of app tracking, made it harder and more expensive for brands to acquire new customers through paid social media advertising.

I call this iteration connect-to-consumer, because it will evolve into a new, more resilient iteration in the year 2023. Taking many pathways to reach customers at the same time is the new approach.

To adopt it, brands will need to be creative about how they tell their story and how they grow their communities. Gymshark opened a pop-up barbershop staffed with mental-health trained barbers to encourage men to talk about their problems while getting a haircut. War Paint is turning old stores into showrooms for online buyers.

There is a lot of experimentation on social media. TikTok Shopping is a new feature that allows users to link their TikTok accounts to their online stores, allowing her followers to buy directly from her online store. In the first quarter of 2022, orders on social media increased by four times.

Retailers have an opportunity to sell to YouTube. A British YouTuber named Gabriella sells stationery to almost one million followers on her channel. The United Stand, an unofficial Manchester United fan channel with over one million followers, sells merchandise in its community on both platforms.

New opportunities for brands are being created by Web3. If you have a token or NFT in your digital wallet, you can use it to get exclusive offers online or on the high street. Starbucks is giving customers exclusive perks through a rewards program based on the Web.

The retailers who will win in 2023 are the ones who are focused on building authentic connections to their customers. The tools to operate a store everywhere, reaching hundreds on the high street to billions on YouTube and TikTok, as well as niche communities in Web3 are now available.