5 emerging trends in DTC ecommerce
2021 will see a continuation of trends that made DTC a huge success in 2020.
2020 was supposed to be the year that many Direct-To-Consumer (DTC) companies’ revenues flattened or fell. Many in the DTC space speculated that the market had expanded too quickly, becoming oversaturated. The “revenue wall” was bandied about.
Even insiders like Neil Blumenthal, co-founder of eyewear brand Warby Parker, seemed to think so. “It’s never been cheaper to start a business,” he told the New York Times in January 2020, but “it’s never been harder to scale a business.”
Instead, COVID-19 forced people indoors where they turned to DTC to satisfy their consumer spending needs. DTC companies reported record sales growth, for example outdoor furniture brand Outer saw a 1000% increase in sales over 2020. Personalized hair care startup Prose looks to have tripled 2019’s numbers.
2021 will see a continuation of trends that made DTC a huge success in 2020. With his finger always on the pulse of the DTC market, serial entrepreneur and DTC veteran Julian Fuchs gives his top 5 predictions in DTC e-commerce for 2021.
Sports and health saw huge growth in 2020 due to the pandemic. People couldn’t go to the gym, but they could exercise at home or outside. Coming into 2020, Peloton was supposed to have trouble scaling its business. By any measure Peloton had an outstanding year and looks to continue growing in 2021. DTC fitness business Gymshark which was valued at $1.45bn after US growth equity fund General Atlantic bought a 21% stake in it, saw an estimated 147% revenue increase in 2020.
“The growth these bigger companies experienced in 2020 is a good indicator of the growth potential for smaller players in 2021,” says Fuchs. “But it’s imperative you find an open niche. You don’t want to be making a stationary bicycle without massive differentiation.” Fuchs is taking his own advice with one of his products, Everfit, which targets the high-end jump rope niche.
Fuchs cautions to be aware of traditional companies launching DTC programs that might displace your unique product. Nike is aiming to grow the share of digital sales to 50% in the near future.
“I think this is the year that companies really start to use livestreaming,” says Fuchs. “Livestreaming is perfect for DTC. It helps you better connect with your customer and expand mindshare quickly.” Outdoor furniture brand Outer CEO Jiake Liu agrees. In 2020 Outer had 3 livestream events, which Liu says, “that it’s a 10x-ROI kind of activity.”
Livestreaming is already huge in China. Chinese e-commerce was a one trillion dollar market in 2020. Live streaming in China made up an estimated $60 billion in sales. Fuchs believes that Western brands can get ahead by learning lessons from China’s head start. For example, Fuchs says that, “Chinese brands are experimenting with different kinds of content to increase conversion rates. A curation of selected products has high conversion. Prize draws, limited-quantity and limited-time offers such as flash-sales can work well, but maybe not for many repetitions.”
3. Sustainable and Ethical Products
Millenials and Zoomers are willing to spend more money for products that support sustainability. Younger people make up a majority of the consumer base for DTC products. “You better have a sustainability angle in your brand,” warns Fuchs. LARQ Water Bottles donate a portion of proceeds to 1% for the Planet. Furniture company Burrow uses ethical leather sourcing for its leather products. All Birds’ brand identity is ethical footwear with a clever, “carbon footprint” tagline. Fuchs’ Klaeny is an ethical cleaning product that combats the plastic waste epidemic.
Fuch notes that, “COVID-19 reminded people what is important. It reminded all of us of our own mortality. More than ever it is important to have sustainable and ethical branding and products.”
4. Product diversification
“Diversification will be necessary for a number of reasons,” says Fuchs. First, there is more in-category competition. Fuchs laughs, “remember when there was only Casper? Now there is Purple, Leesa, Saatva, and a dozen more.” To make matters worse, due to COVID-19, more traditional retailers are entering the DTC space. Nike was mentioned above, but Under Armor announced it would shift to a DTC strategy too. Lastly, brands such as Warby Parker have saturated their initial markets and must look elsewhere for growth.
As DTC companies’ market share stays flat or falls, they will look for opportunities to expand their brand into other products. Thinkx is expanding into activewear, Ipsy into refreshments, and Bombas into underwear.
“The most important thing,” Fuch says, “is to find a category that is synergistic with your original product. It is vital you do not dilute the brand you have worked so hard to create.”
5. Influencers and Collaborations
Influencers will continue to be important in 2021, but there will be some changes. “We are seeing more mainstream celebrities collaborate with DTC brands,” says Fuchs. He points to LARQ Water Bottles teaming up with Draymond Green. It should be noted that this product also has a very heavy sustainability angle too. Taking a page from the streetwear and fashion world, collaborations will become more common. “Millennial and Gen Z consumers enjoy novel, limited-run products,” says Fuchs.
Influencers helped launch DTC brands like Casper and Warby Parker, but now influencers are becoming the DTC brand. Kylie Cosmetics, Truvani, and Laird Superfood were all launched by popular influencers. Fuchs sees this as the inevitable conclusion of using influencers in the first place. “Why shouldn’t influencers use themselves? Shopify and ShopBob give everyone access to high quality DTC infrastructure.”
“Influencers may start with an advantage in marketing,” Fuch says, “but without grit and a high quality product, any initial success will be short-lived.”