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Understanding Direct to Consumer Sales, Part One: The Retailer Perspective

Published on | RIA | Point of View

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We can't shy away from the fact that there are multiple pain points for retailers when it comes to DTC sales, so we'll begin by putting those issues on the table, and then hear the comments from 4 retailers who contributed their thoughts.

Store pain points, tied to DTC pushes, include:

Online exclusives: Taking advantage of the ability to offer a significantly wider assortment online, footwear brands are increasingly offering online-only exclusive colors in certain styles. For stores, this sometimes leads to a lost sale and disappointed customer. A store may take a customer through a fit process, see the consumer discover the exclusive style on their mobile phone, and be unable to secure that style.

Separate DTC/wholesale inventories: Most running brands have separate inventory batches for the DTC channel headed to consumers and B2B channels funneled to wholesale partners. Often, an item will be available for DTC customers but out-of-stock for wholesale partners. DTC delivery is also often significantly faster than B2B.

Online markdowns: When a brand discounts a certain color in a style online, it creates confusion with the consumer for a store selling that style at full price.

Varied approaches on Locally: Some brands link individual stores’ inventories to the Locally platform to let online consumers know their local store has the style they want nearby in their size. Others just highlight nearby stores carrying their brand.

Direct engagement by brands: The internet and social media has made it easier for brands to establish direct connections with consumers although this can lead to conflicts with local stores’ messaging. Social messaging or coupons from brands often send a customer straight to brands’ websites, making the brand a competitor to a local store partner.

Aggressive DTC plans: Supporting a brand with ambitious DTC goals may be counterproductive for stores, if the growth ultimately comes at the expense of local run shops’ market share.

On the upside, Matt Balzer at Reno Running believes the online DTC pushes by brands have been a “net positive” for run specialty, because they’re converting new runners. Many customers “just don't feel comfortable walking into our stores,” he said, and an online purchase is often the “first step in their journey” to becoming runners. Once they buy their first shoe and start running, they become emboldened to visit their local run shop to learn about the whole fit process, training tips, race sign-ups, group runs, and other community aspects.

Stores, Balzer believes, are then better positioned to turn runners into lifetime customers. He said, “At least in the ways that online exists today, it's just nowhere near as good as we are.”

As far as challenges from DTC expansion, his “dream scenario” is being able to service customers on selling floors with access to any run-related product that can be found online across brands. He added, “A few of the brands do that, not all of them.”

Generally, he is seeking clarity around what inventories can be accessed so he can plan his business. Situations such as a customer choosing an exclusive online color happen “infrequently enough” that’s it’s probably worth introducing a potential future customer to an in-store fitting even with the lost sale. He said, “I think there are more important things for us as specialty retailers to focus on that are within our control.”

Another perspective from Manhattan Running’s Trey Vernon, who believes running brands are offering “too many choices” across colors online. His store is only able to stock between three to six colors. Vernon believes the spike of color combinations is due to the “constant rotation” of newness required for online selling that’s at odds with the cycle of new footwear styles and updates. He said, “26 colors work great for the brand, and it works great online. It is miserable and horrible for brick and mortar.”

He believes stores should have access to the exclusive online colors. He is also somewhat frustrated that customers can be shipped product within three days while he often faces lengthy delays with at-once order shipments. He said, “Consistency and fairness is really what I want.”

Overall, he is wary of selling even top-selling brands with ambitious DTC goals that will likely take some of his store’s business. He said, “That’s not an easy choice, but I'm gonna sell the brands that aren't coming right after me and my customers.”

He also touted run specialty’s role in helping “legitimize” running brands and building running communities that would be lost if sales significantly shifted online. Vernon said, “If everything was DTC and there's no longer any more places to try on shoes, that would be a miserable existence.”

Running Lab’s Ken Larscheid likewise sees the lack of access to a brand’s online inventories and faster DTC versus B2B delivery hurting the customer experience on specialty store selling floors. He believes any challenges a store faces securing products are ultimately negative for brands.

“Why wouldn't you want to push as many people to local specialty retail as possible,” said Larscheid. “No one can duplicate the experience that we create in our store. We're the tip of the spear in terms of someone's experience with your brand. If they purchase it in our store, they get a great experience that's now attached to your brand. They can't get that experience even shopping on a brand’s own online store.”

He's also not a fan of the regular discounts of certain colors within styles that are increasingly being found on brand websites. Brand websites, he said, are able to tap a sales incentive he can’t access.

He believes the industry was working toward resolving omni-channel conflicts around 2019, but the pandemic derailed conversations around solutions. He said, “Some brands are making it very hard for us to take care of our customers and putting up barriers in certain spots. I don't think that that is good for run specialty.”

Daniel Greenhalgh at Skinny Raven agrees that the DTC pushes by brands create “more competition.” He said the “perfect solution” would be for brands to include local running shops in their DTC business, whether through Locally or another fulfillment model.

On the positive side, Greenhalgh notes that brand DTC elevates awareness around a brand’s product that supports in-store sales. He said of brands, “They do some of the lifting from a marketing perspective and DTC isn't cheap for vendors either. Customer acquisition is only getting more expensive.”

He also said DTC is part of “meeting [the customer] where they are” in today’s multichannel retailing environment.

He said Skinny Raven works to be transparent in communicating about DTC or other challenges with vendors, but particularly focuses on celebrating successes. He said, “I worry about what I can control, and DTC is not one of the things that I can control. However, we can focus on making ourselves more inviting to want to do business with and maximizing our partnerships with our vendors. If we focus on that, we give ourselves the best chance to win.”

We know this is a hot topic for many of our members, and we welcome your input. So let us know what you think by submitting your point of view
Your feedback will fuel subsequent Pulse articles, as well as provide the talking points for the DTC specific discussion we'll be holding at the RIA Summit. We're looking forward to hearing from you!  

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