DTC brands like Casper, Harry's, and Native are now embracing traditional retailers like Target and Walmart — insiders explain why
Summary List PlacementThe term "direct-to-consumer," by definition, means cutting out the middleman. Over the last decade, companies selling razors, mattresses, clothing, luggage, dog food, and pretty much anything else you can think of, have built their entire brand ethos around the proximity of their product to the consumer. With this proximity came a value proposition: selling their products directly to consumers enabled higher quality products to be sold at lower prices than the "traditional" brands that are purchased by and distributed by retailers. Buying a razor from the shelves of your local Target was tired, buying them from Harry's website was wired. So why is it that recently some of the original DTC disruptors have been popping up in the very place they initially decried — the store? Read more: On the 'All Consuming' podcast, two hosts try out the DTC brands advertised to them on Instagram, and give listeners an insider perspective on marketing and modern consumerism Today, you can walk into that same local Target store and purchase yourself a Harry's razor. While you're there you can also pick up a Casper mattress, a stick of Native deodorant, a BarkBox dog toy, and a Quip toothbrush — all DTC brands that were previously online-only. Head over to Walmart and you can find its shelves stocked with DTC brands too. In the pharmacy aisles, you'll find tampons made by feminine care startup Lola and hormone tests from Modern Fertility. In the clothing section you can pick up a Bonobos button-down, and if you need a second Casper mattress, you can grab another one of those at Walmart, too. CVS also has a growing number of DTC brands in its stores, like Stryx and Public Goods. Retailer partnerships help DTCs expand their customer base One of the biggest reasons DTC brands are making this pivot is that consumers still shop at big box stores — in fact, they're shopping at them even more during the pandemic. And even though many DTC companies were built to be discovered through Instagram ads, the reach of major retailers like Walmart, Target, or CVS helps these brands find new customers beyond the urban millennials they initially targeted on social media. CVS has more than 8,000 stores across the US, Walmart has more than 5,000 and Target has 1,897. In the case of Casper, CEO Philip Krim said that diversifying the channels in which Casper products were available for testing and discovery was essential to the company's future success, after its underwhelming IPO in February. "Having multiple touchpoints for consumers, so they can shop and learn and consume our product however they would like — offline, online, or a combination of both — is important," Krim told Business Insider. The lure of exclusivity that a shopper gets when ordering directly from a brand's website is no match for the footprint and foot traffic of big box stores. For startup Modern Fertility, co-founder Afton Vechery said that to make its hormone and pregnancy tests truly accessible to women everywhere, the company needed to be available in pharmacy aisles — especially because some of its tests are extremely time-sensitive. Walmart offered the startup a footprint that enabled it to reach rural and lower-income regions of the country. "Walmart has an unparalleled commitment to accessibility and so do we," Vechery, told Business Insider of the company's decision to partner with the major retailer. "We want to meet women where we are." Wholesale deals help DTCs reduce their digital ad spend While wholesale partnerships mean that the DTC companies are selling their products to retailers for a lower price and making less on each item, the partnerships offer reliable sales during a time where acquiring and retaining customers via digital advertising has become oppressively expensive. Google, Facebook, and Instagram are now crowded platforms filled with thousands of DTC companies competing for ad space, which has driven up the cost of buying ads and acquiring customers for these digital-first brands. For many DTCs, the cost of acquiring customers has been their downfall. Athletic apparel startup Outdoor Voices was losing up to $2 million a month on customer acquisition in 2019. Casper's IPO was disappointing for the same reason. As an early-era DTC darling, it's financials indicated to the rest of the industry that for these shiny new companies to successfully grow up, they need to diversify beyond digital sales. For electric toothbrush startup Quip, which started as a digital-first DTC, retail is now the number one source of its sales. "We've seen a lot of success and growth in partnering with our retail partners and distributors on the brick and mortar side," Shane Pittson, Quip's Head of Growth and Marketing, told Business Insider. Pittson noted that the brand is able to attract new customers through the endorsement from a well-known store like Target — shoppers who are long-time Target fans will trust them on their choice to stock Quip. The brand also uses its packaging and in-store marketing around the product to introduce shoppers to the benefits of its subscription service. "We see a lot of new e-commerce subscribers who made their initial purchase at retail," Pittson said. For some DTCs, like dog toy subscription brand BarkBox, their bread and butter will always be digital sales. In the case of BarkBox, its digital offering is extremely unique — the company creates curated monthly boxes of toys and treats designed for customers' dogs that arrive in delightfully designed packaging — which can't be replicated through a brick and mortar experience. Still, Meghan Knoll, the General Manager of Super Chewer at Bark, told Business Insider that its partnership with Target helps introduce the brand to more consumers through sales of stand-alone toys and treats. For DTCs that want to achieve profitability, digital startups who have successfully navigated the retail partnership route might offer up a roadmap. Retailers can offer more options to consumers who want to shop their values Shopping in big box stores feels a little different these days, in part because of the DTC partnerships retailers have pursued. With new and smaller brands on the shelves at places like Target or CVS, shopping in-person has a new discovery element to it. This enables retailers to recreate the feeling of stumbling across a brand that feels "designed for you" on your Instagram feed right in their aisles. CVS saw its customers' preference for shopping smaller DTC brands and created more room on its shelves for startup health and wellness products through its CVS Launch program. "The growth of DTC products on our shelves on its own is a compelling data point that speaks to our customers' preference," Brian Eason, VP Consumer Health and Wellness told Business Insider. Consumers aren't just interested in discovering smaller brands, they're also prioritizing spending their money with brands whose missions speak to them. According to 5W's 2020 Consumer Culture Report, 83% of millennials find it important to shop at companies that align with their values. CVS also took note of this trend when building out its partnerships with DTC brands. "We've recently supported the expansion of new brands in women's wellness such as Honey Pot, which is a Black-owned, woman-owned brand that supports women and their health with plant-based, clean, natural, better for you products," Eason said. CVS also sells Public Goods, a home and personal care startup that prioritizes sustainability, consumer trust, and stripped-down packaging. Public Goods was born out of founder and CEO Morgan Hirsch's frustration with the "walls and walls of product" at his local pharmacy, so it's counterintuitive to its DNA that it ended up back at the pharmacy. But Hirsch said that Public Goods products are collected together in stand-alone fixtures within the pharmacy, so shoppers can walk in, beeline to the Public Goods' section, and get everything they need from one corner of the store. "Our CVS Launch team is empowered to position products and brands in a myriad of ways including in pop-up displays in aisles, individual displays, and on shelves next to competing and comparable brands," Eason said. This end cap and pop-up approach is popular with DTC brands who want the reach of wholesale partnerships, but still want to feel that their product is differentiated within the "walls and walls of product." And for the retailers, it creates an almost faux-boutique shopping environment that evokes a sense of luxury to shoppers. Everything old is new again. These wholesale deals are often billed as flashy "partnerships" in which the DTC says that its mission is "aligned" with that of the retailer, but ultimately they're what they always were: a reliable way to sell products, expand customer reach, and meet customers where they are. Buying your razors from a well-designed Shopify site might have felt novel at one point, but these days, the convenience and reliability of big box stores is king. Join the conversation about this story » NOW WATCH: Why thoroughbred horse semen is the world's most expensive liquid
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