DTC brands are redefining the retail landscape from end to end. With the mind-boggling multiples and amount of investment flooding into DTC brands, the expansion of these businesses into third-party retail is becoming an important stream of revenue. The lifeblood of these business is online advertising on Facebook and Google, but as the cost climbs and online growth slows, digital brands need to consider new opportunities to increase brand awareness and drive customer acquisition. NPD shared some interesting, level-setting insight about DTC beauty brands at the CEW Year in Review and 2019 Trend Forecast event last week. According to NPD, digitally native brands grew at the same rate as traditional prestige brands, both up 6% from 2017 to 2018.
Target has been leading the retail pack, launching DTC brands including Flamingo, Casper, Harry’s, Barkbox, Quip, and Native, and are out aggressively pitching new deal terms according to Digiday. Win-win—perhaps? The arrangement allows Target to appeal to a younger consumer by retailing the millennial darling brands. These DTC brands get a bump in growth from full Target distribution and new customer acquisition.
“If you have a successful direct-to-consumer business going into Target, you’re armed with negotiating power and data to say, ‘Here’s what’s going to work well,’” said Mike Duda, the founder of investment firm and digital agency Bullish, which has worked with Harry’s and Casper. “You have heat behind you. And Target’s gone about this a smart way—there’s a level of flexibility now you might not have seen 10 years ago in how they work with brands.”
The business models of DTC brands do not accommodate wholesale margins, so retailers are rewriting the rules in order to tap into these buzzy digital businesses.
Read the full story in Digiday.
Photo: Harry’s via Target