Most DTC Brands Will Need an Offline Presence to Succeed

The hottest segment in retail is direct-to-consumer (DTC). In fact, reputation management platform Yotpo has almost completely repositioned as a technology provider for the DTC market.

Most people are familiar with at least some DTC brands: Glossier, Everlane, Allbirds, Warby Parker, Leesa, Casper, Bonobos, Away and so on. While it’s not true that 100% of DTC brands have stores, every single one of these brands has opened or is opening stores — or is in some third party showroom or store.

Yotpo CEO Tomer Tagrin told me last week that opening stores was the biggest trend in DTC marketing right now. The difference between these “born online” brands and traditional retailers is they’re much more judicious with site selection and store openings. In addition they see the role of their stores in the context of an overall multi-channel consumer experience.

They also recognize the importance of stores (or an offline presence) to the strength of the brand and long-term viability.

Tagrin and I informally discussed the future of retailing and he believes that future is all DTC brands and specialty retail with only a tiny number of general merchandise or department stores surviving. In other words, it’s Walmart, Target, Sephora (as a stand in for speciality retail) and DTC, according to Tagrin.

Last week in New York I also had a very interesting conversation with JCDecaux’s Chief Digital Officer for North America Mark Costa. He asserted that DTC brands that don’t have physical store locations are using out-of-home advertising as a kind of surrogate for a local store presence in different markets. I had never thought of that but when he said it, it rang true.

The most recent conventional wisdom is that there’s no brand loyalty. That’s too simplistic a statement. I would argue that brand is more important than ever.

If you’ve got a strong brand you’re not as likely to battle it out with competitors in paid search, paying inflated prices for clicks for category queries. You’re probably driving many more direct lookups.

The market is noisier than ever and it’s true that brands may be more vulnerable than ever (witness the recent Addidas social media disaster). However, having a recognized brand is critical to long-term success. That’s why DTC brands are opening stores even as traditional retailers are closing them down.

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