Has DTC’s Heyday Passed?

A few years ago, direct-to-consumer (DTC) was the retail model everyone was talking about. It was bringing success not only to brands with fanatically engaged audiences like Nike, but small startups. It provided an unprecedented opportunity to go directly from an advertising interaction to a sale often without investing in a physical storefront.

Fast forward to today and sliding sales indicate that DTC might not be the panacea it appeared to be, although data by segment and timeframe paints a mixed picture.

DTC sales growth has slowed year-over-year, according to analyst Polly Wong, speaking to Forbes. Ms Wong, the president of the DTC agency Belardi Wong, sees customers in some spaces shifting back to stores after years spent shopping online.

DTC does, however, appear to be stronger than it was in 2021. May was DTC’s strongest month in 2023, with an increase in sessions large enough to offset lower conversions. The apparel category showed a 10 percent bump in DTC engagement and home décor was also up. Shoes and accessories remained flat.

Some experts have anticipated a DTC dropoff for a while. Wired reported last year that Apple’s new privacy protections raising digital advertising costs represented a threat to DTC’s effectiveness. Allbirds and Warby Parker’s stock drops were taken as further evidence of DTC slowing down.

DTC may also be impacted by an overall slowdown in e-commerce adoption after an unprecedented boom in online shopping brought on by the novel coronavirus pandemic.

The U.S. Census Bureau, at the end of May, found that while the e-commerce growth rate increased quarter-over-quarter in Q1 2023, to three percent, the overall growth rate was much lower than the 15 percent growth of e-commerce in previous pandemic-era years.

“E-commerce is not destined to naturally overtake in-store retail sales as the dominant sales channel, so it makes sense that its growth may slow down over time now that it’s attained a high level of adoption and sales,” Daniel Keyes, senior analyst of merchant services at Javelin Strategy & Research told Payments Journal, in a report discussing the Census Bureau’s findings.