In a world where it is hard for luxury retailers to get started thanks to slim profit margins, e-commerce is a blessing. When luxury brands get started, they can only produce in small quantities, which sends prices through the roof. High prices when you’re trying to establish a brand does not make it easy to get customers.
Where before, fashion start-ups had to find the money to establish a store, e-commerce allows them to bypass real estate and department store placements to market directly to their customers. They no longer have to sell their goods wholesale to get them in front of customers. This allows the brands to have higher margins as well as speak directly to their customers. In the retail world, the customer is owned by the brand, and it is beneficial to both company and customer to be able to communicate directly.
As some start-ups such as Everlane and Warby Parker have proven, the direct-to-consumer approach and online presence have great potential. The bigger profit margins allows more day-to-day marketing costs to get their goods in front of customers. They are in complete control of their brand, not subject to whims of retailers that can discount their products or give the brand a bad name with insufficient customer service. It is important not to have the brand diluted.
Many more established fashion labels are embracing the direct-to-consumer strategy, some even foregoing Fashion Week to establish a better approach to direct sales. They realize that the way people are consuming is changing. Websites are showing more traffic without even having any marketing towards them.
Large brands have it much easier than most. They have the resources to establish direct-to-consumer channels with marketing budgets to match. Do smaller brands have the same tools?
Warby Parker had an advantage in this market: when they started, the direct-to-consumer approach was more novel and not many people were doing it. Now that everyone is moving online, it’s harder and harder to get the kind of attention needed to make sales. Even once-free marketing channels like Facebook have cashed in on the trend, making it less profitable.
Since it takes more resources to get a customer these days, people in the paid marketing and growth specialties are going to be much more sought after.
While the industry in general is moving towards online commerce, there is something to be said for wholesale. Instead of paying for marketing, forming a wholesale partnership puts the clothing in front of consumers so they can see it in person and try it on.
Purely direct-to-consumer approaches can work for some companies as well. The argument for direct-to-consumer is exclusivity. The company itself being the only seller of that brand is good for quality control. For now, there is room for both strategies in the industry.