Why does a high-end suit cost $8,000? Is an Italian leather shoe really worth $500?
At the recent Social Retail Summit in Brooklyn NYC, panelists discussed topics that direct-to-consumer brands face when selling to the end user. Moderator Matthew Iles, founding partner of the ecommerce marketing agency Nine Lines, guided a discussion with founders of brands implementing direct-to-consumer distribution business models. They discussed the upside potential and noted the clear hurdles.
Keep Control of Your Brand
In traditional retail channels, products pass through many hands before they reach the end consumer. It’s easy for information about the product and the brand to get lost in translation. Melissa Mash, founder and CEO of handbag and accessories brand Dagne Dover, believes the biggest benefit of direct-to-consumer distribution is “the ability to control the entire customer experience. We get feedback and see what works instead of relying on info that buyers relay and worrying that my story won’t be told right.”
Shorter Turn Times
With so many links in the chain that connects manufacturer and end consumer, the time from idea to market can be lengthy. With the direct-to-consumer model, the timeline cuts in half, allowing for demand to be met more quickly. “I can build equity with my customer by providing them with a shoe they voted on 2 months ago; it allows us to build a collection every 60 days instead of every 4-6 months,” Eamon Walsh, co-founder and CEO of footwear company OneGround, explained.
Less Expensive, Not Less Quality
Consumers expect certain price tags for certain products. When the cost falls below their expectation, they think it’s too good to be true. This can lead to diminished brand perception and skepticism. “It’s a steep learning curve,” says Dorie Goldkin Smith (co-founder, Of Mercer), about educating the consumer. If quality is actually the same, how can Of Mercer’s prices be so much lower than high-end brands? To help answer this, breaking the product down can be a good strategy. “The cost of that $500 Italian shoe is really divided by twelve, or even sixteen. We educate our customer about all of the components of the shoe, and in reality this is the true cost,” says Walsh.
Show Don’t Shout
How does a brand that relies on lower prices as a big selling point avoid screaming, “We’re on discount world!” at their customer? Vashaal Melwani, co-founder, CEO & Creative Director of Combatant Gentlemen, got creative and showed the customer the value firsthand. Instead of screaming “low price” in their approach to marketing, he administered a blind suit test. Customers compared his $800 suit to an $8,000 Tom Ford suit, and the results were outstanding for Melwani’s brand. Nine out of ten customers chose Combatant Gentlemen’s product. Melwani admitted it is hard not to talk about the cost. “The customer needs to be retrained and learn what they’re really paying for that leads to the huge markup: overhead and a lot of bullshit in between.”
Receiving benefits from direct-to-consumer distribution doesn’t come without hurdles to overcome. Control is gained but so is responsibility. Low prices may not always have a positive effect on your brand, but with the right approach and education, this distribution strategy can be extremely profitable for your brand. Ultimately, you need to give particular importance to your brand story and communication strategy.