The Digital Retail Future Is Here, Right Now
Early pandemic retail habits are becoming permanent. That's good news for DTCs.
By now we're all familiar with the countless studies and surveys showing that that consumer loyalty is being redefined by COVID. The pandemic is turning a new generation—many of them older consumers—into online shoppers with unexpected abandon. It's been interesting to watch as companies with great digital infrastructure have adapted somewhat effortlessly to the challenges of the landscape while others with less investment and focus, well, haven't done as well.
But head and shoulders above the rest of the jumble have been the digital-first companies and DTC brands, which were made for this moment...and, by design, any moment really. As the rules of loyalty get rewritten, the DTCs that have been capturing more fans in this environment are not only thriving, but starting to grow. This speaks to not just a trend, but a movement toward the arrival of a digital retail future.
This week, industry observers noted the emergence of a few major DTC brands branching out into apparel. The first in the category expansion game was Casper, the mattress darling which, in addition to wisely creating a bedding and lounging arrangement for people who work from home, also launched the Casper Rest Stop. At the Rest Stop, you can buy nap-adjacent apparel, plus general branded goods for Casper fans. Mattress sales have been booming as home improvements and home sales have been key areas of growth in recent months.
But Casper's foray isn't simply about a play for few extra stray purchases, it is DTC-themed in its expression of values. Similar to Chipotle Goods, which we previously covered, part of the proceeds from the Casper Rest Stop go to a relevant charitable cause—in this case, an organization that provides family shelter in New York City.
The other big brand to branch out os another DTC stalwart, Allbirds. The eco-conscious shoemaker released a small-batch apparel line consisting of a merino wool puffer, a T-shirt made in a partnership with XO, an antimicrobial treatment made from discarded crab shells, and a crewneck and cardigan in super-plush merino.
In this evolution, Allbirds has essentially staked a claim that it's craftsmanship is what drives them and that principle can apply to any product (i.e. not necessarily shoes). “We knew we wanted to be a real brand, and had this vision that we’d be an innovation company first, and a product company second,” co-founder Joey Zwillinger told Vogue. “And our products would solve problems for people in a natural way, and show the world that you don’t have to compromise on the planet for amazing products.”
This kind of movement, by both Casper and Allbirds, registers to us as the perfect mix between experimental and focused. It's not insane that an innovative bedding manufacturer would offer sleepwear. It's not arbitrary that a sustainability-themed shoemaker would find its way into other apparel.
These two cases studies also offer a reading of the retail tea leaves that show how shoppers are forming deeper bonds with new brands as old loyalties fray. This opens up an inherent opportunity to listen to a pitch from the new companies gaining ground. One big reason for that is more established brands have, for too long, tried to be everything to everyone.
Bigger Is Overbearing
One way that DTC and digital-first outfits have found their way into the hearts and minds of shoppers is through specialization, personalization, and vision. This runs from the product offerings to data collection and marketing. Consumers that like to do yoga can find a home that feels unique to them through a brand like Ghost Flower that is committed to one cause than they otherwise would at a behemoth like Reebok that sells too much yoga gear within a catalogue of too much other fitness stuff. In short, it's about identity.
"Mature markets regularly have many different segments, which a single brand cannot successfully capture without losing its identity," writes Ana Andjelic in her Sociology of Business newsletter in discussing why monolithic companies like J. Crew are struggling. "In order to address different market segments and serve the market as a whole, a house of brands uses its portfolio to build multiple presence and differentiate its offerings. These offerings meet segmented market demand in a more personalized way than a single mass brand can."
Also attached to this concept is the reality that there is much less joy to be had in the experience of physical retail. Or even forgetting joy, a basic sense of safety, comfort, and humanity. Over at 2PM, Web Smith explains how the new sanitary theater of retail resembles the security theater of flying after September 11th.
It seemed temporary, became permanent, and took a lot of the ease, comfort, and pleasure out of airline travel. "The direct-to-consumer industry is positioned to benefit from these new safety measures," he writes. "Customers prefer the joys of the physical retail experience. It’s how we’re wired to consume." He continues:
While online retail is but a fraction of the aggregate retail economy, this shift (one with no end in sight) will be a catalyst for its growth. When the dust settles, brands will see more of their business shifting to online channels. Retail is supposed to be mindless, enjoyable, and efficient. Those measures are no longer attributed to the physical spaces. With better online store performance and conversion tools like SHOP Pay, Google Pay, and Apple Pay: those attributes are assigned to physical retail’s digital equivalents.
This is meaningful. It speaks to the sudden appeal of digital experiences when the tactile, in-person purchase journey appeared as if it would be the standard and the norm for at least another decade. What's critical to understand is that this isn't a battle that was won by default. It's a battle that was won by making the experience of shopping digital seem easy, safe, virtuous, and fun.