#My500Words: Day 29 of 31 "The Innovation of Direct-to-Consumer Brands: Technology & Fashion"
“The fashion industry is going through what the music industry went through several years ago…people still want to listen to music, but we don’t go to Tower Records and buy CDs anymore. We download it online. People still want great clothes, they want great shoes and product. They’re just going to buy it in a different way”.
Like many other industries, fashion isn’t and will not be immune to the disruptions in business models and consumer behavior that the advent of digital innovations has created. Similar to the rise of e-commerce during the pre-Web 2.0 era, the Internet is once again flipping the fashion world upside down in what will be known as E-commerce 3.0.
Upstart brands are now capitalizing on the power of e-commerce, digital, and social media as a means to bypass the middlemen and sell directly to their consumers. Wholesale retail is being skipped entirely as brands are eliminating department stores and boutiques from their sales channels. Instead, they are choosing to sell their product online directly to their consumers.
This innovative business model is called “direct-to-consumer” and isn’t anything particularly new. However, the disruption and impact that it is having on the fashion industry has caused a lot of brands to re-think how they will sell and build relationships with their consumers in the future.
The direct-to-consumer business model is advantageous for both consumers and brands. Brands can sell directly to consumers via their e-store or website which enables them to keep their costs down, increase their margins while maintaining the quality and control of their brand.
No longer is the middleman needed, selling directly online allows brands to develop personal relationships with consumers and charge lower pricing for the same quality of products that are found in stores. Gone are the overpriced markups from retailers, brands can now be transparent and fair in their pricing.
The barriers to entry into the fashion industry have been significantly lowered due to direct-to-consumer businesses. Never before has it been easier to be an entrepreneur in any industry, especially fashion. Thanks to the Internet, you can design your own clothing, open up an online retail store, and market and sell straight to your audience.
In e-commerce 3.0, you no longer need the department store and can skip the sales cycles that end up in over production and huge mark-downs. Direct-to-consumer brands are now producing on demand, more efficiently and personally. The rules have been rewritten.
The Internet has shifted consumer behavior and is reinventing retail. Purchasing decisions are now factored into convenience, reasonable pricing, and quality. Meanwhile, consumer behavior has accelerated with an ever-increasing sense of immediacy. Consumers want quality products at the right price point and they want it now.
This need for immediacy is disrupting the traditional fashion calendar. No longer are people wanting to wait 4 to 6 months to buy a seasonal piece that they saw on the runway or on Instagram, they want the ability to buy it now. Traditionally, seasonal deliveries to retailers are never delivered on time and consumers often lose interest by the time a season hits the shelves.
With a growing number of online options for consumers, it’s necessary for brands to stick out from the crowd. Many have understood that the ‘direct to consumer’ model is a necessity to power “hype train”. It is a way to market directly to customers globally, while also getting consumer feedback in real time either via consumer surveys or other data collection or analytics on their site.
Old traditional premium brands are losing their appeal and market share to emerging direct-to-consumer brands that have been born out of the Internet. Unlike traditional brands, these new brands are able to be transparent to their consumers while offering a high-quality product that is just as good as the premium brands but at a lower price point – since they don’t have the markups of retailers.
These traditional premium brands such as Tommy Hilfiger, Calvin Klein, and Ralph Lauren are sliding in sales as their growth has now outpaced their own brand equity. They are creating cheaper products, with a lack of exclusivity that they once had and all at the cost of growth. But, yet it’s harder for these big brands to adapt to the new technology and trends since they already have the infrastructure in place that is set in the traditional ways of doing things.
“The internet has democratized brands”. Consumers now live in a digital world and don’t want to shop in the way of the old traditional retail business model. Digital first brands will lead the way in pricing high quality, tech-based, reasonably priced clothing.
The old ways of the fashion industry and the way that brands have operated are being challenged by the way emerging brands are using digital technology to find better ways to do things. The future of retail is going to look a lot different than it does today and in the past.
Even though E-commerce 3.0 is going to shift even more sales online, retail stores will still serve a purpose but it will be different than they do today. The future of retail is going to shift away from primarily being for sales and to strictly an opportunity to build consumer relationships.
Direct-to-consumer brands will see the rise of experiential retailing where consumers can engage with and have an experience with the brand in-store by offering workshops, free yoga, or any other brand related events or activities. The retail store will also be a place where brands can get consumer feedback by testing new products or having consumer come into the store to try things on etc.
By selling directly online to consumers, brands can now have complete control over the experience that consumers have with their brand and product. You can create and tailor your brand story in the online ecosystem while using influencer and social media to spread your message.
A direct-to-consumer business model gives you more control over your messages that you send and control over the personal experiences of your consumers. Consumers can build a direct connection to the brand, its ethos, and lifestyle.
“Although there’s a slew of new brands paving the way for a thriving direct to consumer market, it’s just going to take time to see an entire shift to a new retail system. The question is, what’s your favorite brand going to look like in 15 years? What about department store?”
The fashion world is ever changing with shifting trends year after year. Only the future will tell what holds for the entrepreneurs and consumers looking to just get an edge on their style.