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Abercrombie & Fitch Wants You (Yes, You!) to Visit Its New Gateway Shopping Destinations

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Way back when, all the way back in the 1990s, Abercrombie & Fitch was the source for some very strange …

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Most Stores Don’t Accept SNAP Benefits for Online Grocery Shopping. This Company Wants to Change That

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The grocery delivery company Instacart was losing $25 million per month, until the beginning of the pandemic. Then in April …

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More Companies Are Selling Directly to You, At Least For Now

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The pandemic changed a lot of the ways that people do things, and some of those new habits have stuck. For example, when merely breathing in the same room as another person spelled dire peril, consumers understandably stopped shopping as much in brick-and-mortar stores. Online shopping grew to fill the void, and then some, with e-commerce sales increasing from $571.2 billion in 2019 to $815.4 billion in 2020, then to $870.78 billion in 2021.

It is not just consumers whose behavior changed though. Retailers and manufacturers had to adapt to this new world of consumption, as well—bolstering their e-commerce offerings and in some cases ditching third-party retailers to sell directly to customers themselves. In so doing, they have entered into more direct competition with sellers that have been direct-to-consumer—DTC—from the start, like the glasses company Warby Parker or AllBirds, which sells comfy, sustainable shoes. But these innovative upstarts now confront competition from companies with greater brand recognition, as they enter the DTC business. For example, Nike cut back substantially in the amounts of physical product it provided for Foot Locker, Amazon, DSW, Zappos, and other third-party retailers to sell. Instead, it moved the inventory to bolster its DTC offerings, in a move the company claims helped offset the decline in its wholesale business early in the pandemic.

According to Nike’s Chief Financial Officer, some 24 percent of Nike’s total revenue in the fiscal year that ended in May 2022 came through digital channels, including its website and smartphone app. As this calculation indicates, DTC is not limited to the web. Accordingly, Nike has plans to build out its DTC offerings even further, including a Jordan-only concept store to open in 2023, as well as more Nike Live stores, which are membership-based boutiques that offer unique merchandise and special experiences.

Along with Nike, food and beverage companies like Pepsi have entered the DTC market in recent years. Across these markets, the lines between the manufacturer, retailer, and distributor categories have grown more fuzzy.

But even as these big-name brands jump on the DTC train, it might be jumping the track. Some very recent figures suggest a big slow-down in online shopping. Warby Parker is the latest DTC brand to enter into downsizing mode, laying off 15 percent of its corporate workforce. Other DTC brands like Allbirds and Glossier, as well as Walmart’s DTC arm, have shrunk recently too. The reasons for this contraction might be the heightened competition in the market, or it could reflect the increased costs of Facebook ads and shipping costs. Alternatively, maybe the projections were wrong, and the customer bases for DTC products remain relatively small. In response, some companies have reoriented themselves yet again, away from selling directly to consumers and toward a stronger embrace of the wholesale route. Everything old is new again.

Discussion Questions:

  1. Why might Nike open its own DTC channels instead of selling its products to third-party retailers?
  2. Do you expect to see more or less DTC retailing, in the coming year or decade?
  3. Are some types of brands better equipped to handle the challenges of DTC than others?

Source: Akiko Matsuda, “Direct-to-Consumer Sales Are Fueling Supply-Chain Tech Growth,” The Wall Street Journal, August 6, 2022; Tim Gaus and Bill Lam, “Consumer Connectivity: Creating Customer-Centric Supply Chains,” www2.deloitte.com, August 2, 2022; Sara Bloomberg, “Shogun, a Direct-to-Consumer E-commerce Startup, Lays off Dozens,” The Business Journals, August 10, 2022; Gary Drenik, “Will Retailers Follow Nike’s Playbook? Why More Brands Are Moving to DTC Operations and Away from Wholesale and Marketplaces,” Forbes, July 12, 2022; Mayumi Brewster, “Annual Retail Trade Survey Shows Impact of Online Shopping on Retail Sales during COVID-19 Pandemic,” census.gov, April 27, 2022; Nicole Silberstein, “Nike to Double Down on DTC Following Q3 Gains, Plans Standalone Jordan Stores,” Retail TouchPoints, March 23, 2022; Jessica Young, “US Ecommerce Grows 14.2% in 2021,” Digital Commerce 360, February 18, 2022; Cara Salpini, “How Nike Is Using DTC and Data to Expand Its Empire,” Retail Dive, March 23, 2021; Alex Kantrowitz, “The Direct-to-Consumer Craze Is Slamming into Reality,” CNBC, March 14, 2022; Daphne Howland, “Warby Parker Lays off 15% of its Corporate Workforce, Citing Changing Consumer Behavior,” Retail Dive, August 9, 2022; Caroline Jansen, “DTC Brands Have Long Been Vocal about the Importance of Sustainability. Is That Enough?” Retail Dive, June 27, 2022