The trend: Large, profitable brands and smaller, direct-to-consumer (D2C) retailers are trading strategies. Many large brands are pivoting to D2C at the same time that digital native brands partner with distributors.
More on this: Pandemic-related developments have driven both trends.
Analyst take: “Where a brand is in its lifecycle dictates its strategy,” said Suzy Davidkhanian, eMarketer principal analyst at Insider Intelligence. “Well-known brands are looking to cut back on wholesale to increase their margins, provide more control over distribution, and create an element of exclusivity. Meanwhile, digitally native D2C brands need to go wholesale to get more eyeballs on their product.” She adds: “While wholesale margins are tighter than D2C, rising customer-acquisition costs are driving brands to partner with a retailer (either being carried by them or doing pop-ups) to help them get more potential customers and, in some cases, help them figure out if they should launch their own brick-and-mortar store.”
Why it matters: Large brands benefit from years of work building awareness, reach, and customer loyalty. Taking steps to build a D2C business can allow brands to forge deeper relationships with customers, enabling them to gather data that helps with product development.