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Dive briefs:
- The accelerated direct-to-consumer business model adopted by some of the biggest legacy brands during the pandemic is showing signs of slowing soon, according to a Circuit survey of nearly 600 business leaders. not.
- The survey found that 85% of business leaders surveyed have already switched to the DTC model, and more than one in ten (13%) plan to do so in 2023. Customer, research found.
- More than 242,000 searches for DTC products are expected to be initiated in 2022, an overall increase of 6% over the next year. States with the most interest in DTC products include New Hampshire, South Dakota, New Mexico, Oklahoma and Alaska. The most in-demand consumer goods to buy at DTC in 2023 include rugs, clothing and glasses.
Dive Insight:
According to Circuit’s research, the top reasons brands switch to the DTC model include lower costs, fewer middlemen, and maintaining better control over marketing.
Business owners felt that it was common for multi-brand retailers to pay less attention to individual brands when trying to manage the overall business. By selling directly to consumers, businesses are better able to collect important data that helps them maintain and grow their customer base. The DTC model can also benefit revenue.
“D2C product margins are much higher than wholesale,” said Matt Powell, an adviser to retail consultancy Spurwink River. “DTC gives brands complete control over how their products are displayed and gives brands control over pricing.”
The switch to DTC isn’t new, but research shows it’s growing rapidly for small to midsize brands. Over the past few years, especially during the pandemic, many prominent brands have steadily expanded his DTC business while also removing several long-standing retail accounts.
Back in 2021, dropped by nike Retailers like Macy’s, Urban Outfitters and DSW are all in favor of expanding their digital operations and opening smaller stores like the Nike Live Concept.
Other brands have followed suit. Among them are Adidas, Under Armour, Levi’sThe San Francisco-based jean brand has significantly scaled back its wholesale business over the past few years in favor of retail stores and digital sales. Similarly, Adidas said We aim to have the DTC business account for 50% of our sales by 2025.
While still believing in the traditional model of manufacturing and selling through third-party retailers, experts cite several reasons why brands should consider DTC for their business in the short and long term. However, this model also presents challenges. Delivery is the biggest hurdle for small businesses to switch to DTC. About 51% of small business respondents to Circuit’s survey say they struggle with managing order fulfillment.
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