Brands Increasingly Going Direct-to-Consumer in Canada as Pandemic Changes Fundamentals: Expert Interview

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Despite the numerous challenges that have restricted much of the retail industry over the course of the past two years, hampering merchants’ efforts and impeding progress, opportunities have also arisen for those in the position to take advantage of them. The digitization of the world around us, which has sparked a sharp rise in the consumer’s adoption of online channels to make purchases, has changed the way many within the industry are conducting their businesses. New processes and modes of product delivery and transfer are being developed in order to meet the growing expectations of an increasingly digital consumer. It’s a shifting retail environment that enables brands to get closer to those engaging with them. And, according to industry expert, Liza Amlani, it’s an environment that’s proving ideal for the development of direct-to-consumer (DTC) brand strategies.

“There are a few different factors that are driving brands to invest more into their DTC strategies,” she says. “Most notably, however, much of the work currently being done in this area is through the lens of getting closer to the consumer. A lot of brands are losing a lot of third-party data. It’s really changing the way brands think about product and the opportunities to leverage insights related to them in order to drive better decision-making. Capturing the right product insights goes a long way toward informing product creation, merchandising and marketing and promotion. As a result, a number of brands are attempting to own and leverage this data to close the feedback loop and build deeper relationships with their customers. It allows them to better understand what consumers want and develop the right product for them at the right time in the right channel. This really comes from direct insights from customers.”

Speed to market

It’s a shift in thinking among brands that’s been building momentum for some time, recognizes Amlani, but is one that she says has certainly been facilitated by impacts of the COVID-19 global pandemic and subsequent accelerated digitization of the retail industry. Brands like Canada Goose, Arc’teryx and others have benefitted tremendously from the growth of ecommerce and changing consumer purchasing preferences and behaviour. And, there are online marketplaces being introduced on a consistent basis which are meant to help consumers more easily find their favourite DTC brands. It’s changing the retail landscape considerably, suggests Amlani, who also points out the ability that it provides DTC brands in increasing their product cadence.

“Another force that’s prompting brands to develop or enhance their DTC strategies comes from their desire to accelerate their speed to market,” she asserts. “In order to do this, they need to be creating teams that really understand the customer and who are building the deeper relationships that are required. And, it’s not only important from a product and merchandising insights perspective. Some brands are beginning to use insights across multiple categories, helping to break down category silos, bringing everyone working for the brand onto the same page. Again, it’s all about getting closer to the customer in order to create and introduce the products they want as quickly and efficiently as possible.”

Digital transformation

Amlani goes on to explain that, in addition to helping brands gain control of their customer data and supporting them in increasing their speed to market, there are a number of other benefits that brands receive as a result of the development of an effective DTC strategy. Brands today, she says, are starting to assess whether or not they’re overly represented in the market. They’re also recognizing some of the wholesale nuances that a DTC strategy helps them avoid, like navigating the negative, devaluing impact adjacent brands might have on their product. One or a number of these factors are leading many brands to close or scale back some of their retail accounts, a move most noticeable by Nike’s decision to cutback some of the products that it makes available through Foot Locker. It’s been estimated that an astounding 70 per cent of the retailer’s sales in 2021 were directly generated through Nike product. Upon news of Nike’s decision, Foot Locker’s stock plummeted 30 per cent. Amlani says that it’s a trend that’s mounting, and one that she believes is leading many multi-brand retailers to increase their digital investment.

“This is really going to push a number of retailers to accelerate their digital transformations,” she asserts. “This is especially true for retailers with multiple banners that are buying the same product. The challenge inherent in that kind of structure is that when different teams are buying from the same product catalogue, they end up recreating things like item master and product knowledge, resulting in a lot of duplicated work that isn’t consistent across banners and channels. And so, brands like Nike and others who have been a little more forward in their thinking with respect to digital transformation are realizing that the retailers that they’re partnering with aren’t fast enough for them. As soon as Nike develop a product, it’s on their website, app and social platforms. For retailers who have not advanced their digital capabilities or updated their tech stack, there will remain a disconnect between them and their brand partners who are working in the cloud and with digital tools. It’s already leading some to reduce the amount of product they share with retail partners. And I believe it’s a trend that will continue for some time longer.”

Leveraging customer insights

Apple Store at Yorkdale Shopping Centre (Image: Craig Patterson)

It’s a situation that Amlani says will result in a number of multi-brand retailers being left behind if they don’t catch up to their brand partners and the fast-advancing digital curve. She suggests that in order to combat these challenges, some are simply increasing their merchandising strategy to encompass a wider breadth of brands that appeal to their customers and, in some cases, enhancing the representation of brands within their product assortment and mix that truly reflect the retailer’s community of shoppers. This approach, however, has its obvious limitations, only allowing teams to be as creative as the product that’s available to them. In order to really respond in the face of increasing DTC competition and success, Amlani says that multi-brand retailers will need to leverage their own internal innovation and ingenuity and understanding of their customers.

“Creating private label products is perhaps the most effective way for multi-brand retailers to compete in this evolving retail landscape,” she says. “But doing this requires a great deal of work and is an area that many retailers don’t even want to venture into. However, for those with the resources and creativity to be able to execute on this, private label represents a fantastic way for some to really start to take advantage and deepen their understanding of their customers. And, again, this is all about engaging with the consumer, developing meaningful relationships with them, listening to them, and closing the feedback loop in order to hone an awareness of the product they want. The direct insights that many have access to through their customer-base can be used to great effect, informing and driving important decisions around design and product development.”

Extended product life cycle

It could be suggested by some, perhaps in a bit of a knee-jerk kind of way, that the current state of the traditional retail model could be under threat as a result of shifting consumer behaviour and an ever-expanding digital retail ecosystem. Might it be the demise or diminishing of the distributor? Amlani doesn’t think so. Instead, she believes that the pressures being placed on multi-brand retailers by their DTC competitors is a natural evolution of the industry that will simply yield greater innovation. In fact, she adds that as a result of rising sentiment around corporate social responsibility, there may soon be a need for even more distributors in order to properly manage an extended product lifecycle.

“What we’re going to start seeing is a lot more activity in the off-price space,” she says. “And, we’re also going to see increased activity around product beyond its full-price journey. That’s where we’re going to see more distributors and their increased importance as they take excess product. As retailers and manufacturers continue to place greater emphasis and focus on reducing the waste they create and operating within a more responsible and sustainable retail model, it’s going to push everyone to think about the product and its journey differently, resulting in a longer product life cycle. It’s actually in the end going to drive closer, deeper collaboration between distributors and their brand partners.”

Investing in technology

In order for multi-brand retailers to achieve this, however, Amlani underscores the significance of their task ahead, highlighting the amount of work that’s required. It’s a situation that calls for resilience, self-assessment, forward-thinking strategy and a penchant to get as close to the customer as possible. After all, retail is about delivering the right product and creating delight for the consumer. And, according to Amlani, it’s a fact that goes a long way toward highlighting just how critical it is for organizations within the industry to focus more energy and invest further into the development of their digital initiatives in order to achieve their objectives.

“Going forward, it’s really important for multi-brand retailers to look at other brands within the industry and learn from them. Brands like Nike, Amazon and Walmart take risks around their investment in technology and the way they test and iterate with product, understanding that they have to consistently improve their speed to market. Those brands are obviously the benchmarks for this type of approach to retail. But there’s a lot that can be learned from watching the way they do things in order to satisfy their customers. To start down that path and realize the opportunities in front of them, retailers have got to ramp up their investment in technology and accelerate their digital transformation.”

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Article Author

Sean Tarry
Sean Tarry
Sean Tarry is an experienced writer who leverages his unique storytelling abilities to bring retail industry news and analysis to life. With 25 years of learning, including over a decade as Editor-In-Chief of Canadian Retailer magazine, he’s equipped with a deep understanding of the unique world of retail and the issues, trends, and innovators that continue to influence its evolution and shape its landscape.

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