6 North American DTC trends to watch in 2021

As we head into 2021, DTC brands will continue to grapple with the changes brought on by the pandemic , and in the long run, change is urgent. Dive Retail Dive has identified six DTC trends worth watching in 2021.

More traditional retailers are entering the DTC space

How can traditional retailers beat DTC brands? For some top retailers , the answer is to follow their lead. With less foot traffic in brick-and-mortar stores, retailers are taking inspiration from DTC brands on how to appeal to tech-savvy consumers.

Nike closed nine wholesale accounts last August to accelerate its DTC strategy, according to Susquehanna Financial Group. Under Armour has also reaped the benefits of this model , with DTC revenue growing 17% to $540 million in October.

Some large retailers have also established partnerships with DTC brands, such as Target, Sam's Club and Nordstrom .   

Online local brands see value in physical retail

At the same time, online sales are also trying to cooperate with physical stores to attract more traffic.

Target has brought in brands from Casper to beauty brand Versed. Nordstrom has partnered with Glossier, Away, Bonobos and Kim Kardashian West’s Skims body-slimming brand, among others. Crate and Barrel has launched a limited-run, exclusive collection with Parachute, available online and in its 65 retail stores.

Other brands have opted for pop-ups or their own permanent locations. Casper announced plans in 2018 to open 200 stores in North America, while Adore Me said around the same time it planned to open 200 to 300 locations over the next five years. JLL previously projected that online- native brands could have about 850 stores by 2023.

DTC brands expand their category reach

As consumers continue to work from home, demand for relaxation and self-care products continues to grow . For native online DTC brands such as Thinx, Ipsy and Bombas , expanding into these categories seems like a natural extension of their brands.

As top brands lose market share in certain categories, DTC companies will have an opportunity to expand their product offerings. Social distancing measures have made consumers more reliant on e-commerce platforms, and DTC brands are looking for innovative ways to retain new customers as they enter new markets .

Tech-savvy consumers will be attracted to DTC brands

One of the most immediate impacts of the pandemic on retailers has been the need for efficient e-commerce platforms — a capability that DTC brands already have. Last year, e-commerce sales grew to $795 billion, up from $600 billion in 2019, according to eMarketer.

While consumers are spending less time in shopping malls and more time on their devices , DTC brands have an opportunity to attract new consumers and increase their engagement . DTC brands’ focus on sustainability is likely to gain wider exposure on social media and continue to resonate with Gen Z and Millennials.

It will be easier for DTC to obtain investment opportunities

The pandemic has also impacted how investors think about the retail space, and specifically how they think about DTC. The dramatic changes in consumer behavior mean that demand for e-commerce has surged . According to eMarketer, all e-commerce will grow 32.4% in 2020 over the previous year. This has led to success for many DTC brands .

DTC brands and tech companies are in the best position to capitalize on changing consumer behavior this year . Whether certain categories are getting more of a boost than others is up for debate , but investors are clearly still interested in DTCs : DTC darling Allbirds raised $100 million in September , while outdoor furniture brand Outer nabbed $10.5 million in January .

Brands will continue to struggle with profitability

As more online companies begin to go public , trends are emerging around their profitability once their financials are made public .

Until the second quarter of 2020, Wayfair had been posting net losses since its public debut in 2014, while reporting growing advertising costs. The retailer announced a net loss of nearly $1 billion in fiscal 2019 , up more than 95% year-over-year , while its advertising expenses reached $1.1 billion during the period . Online retailers Chewy and Casper have faced similar problems.

During the pandemic , media advertising costs have fallen, which has brought some relief to these brands, but the solution is temporary and brands need to continue to find ways to reduce the high cost of acquiring customers online. In order to ultimately make a profit, brands will need to continue to find solutions to attract consumers (whether it is opening physical stores or forming partnerships with larger brands) and reduce marketing costs.

2021

North America

DTC