Inside Trends 2019: Digitally native brands get physical
1 February, 2019
Inside Trends examines the five key trends affecting the digital marketing industry in 2019. We provide an insight on each trend from spokespeople across our agency globally.
In discussion with Jessica Beldon, Director of Business Development
Watch the full interview here.
Digital transformation has disrupted the retail industry, hitting fast-forward on the evolution of the retail model. Direct to Consumer (DTC) brands are thriving, offering consumers a more seamless and digitally grounded experience than ever before. However, recently a new trend has emerged, digitally native brands are opening physical locations to complete their retail strategies. This offers a complete experience to consumers and gives brands the opportunity to collect even more data. As this blurring of the lines continues, the future of retail will be a hybrid and omnichannel experience, where digital and physical combine.
Though the digital world has grown exponentially, 86% of sales still occur offline and 90 cents of every dollar are spent in-store, an opportunity that DTC brands are eager to capitalize on. Consumers are still interested in having sensory interactions with products and want to touch, feel, see, what they are going to purchase. This is especially key for DTC products that sell niche items customers haven’t seen before, such as high-end jewellery, or a special kind of mattress. Materials, appearance and impression are important factors in a customer’s purchase decision. Introducing physical stores can also encourage discovery, intimacy and experience, and can be a crucial way to deepen the customer relationship. Additionally, the halo effect, which notes that new store openings drive a 37% increase in web traffic for brands, can be especially crucial for DTC brands.
Adding an “offline” layer to D2C brands can create issues with the user journey, especially around tracking and attribution. Many of these brands continue using innovative technology to drive their own unique version of the in-store experience, allowing them to maintain end-to-end control at every touchpoint. These data-led brands know so much about their customers, and they’re using first-party data to optimize store locations and make informed merchandising decisions. For example, experience led, showroom-type models help enhance customer relationships, while staying true to the brand DNA, leveraging technology to maintain connections. These stores appeal to typical consumers of DTC brands, individuals looking for high quality products, at attractive price points, from brands that share their values.
Apparel and beauty brands are leading this trend, with nearly 75% of DTC store openings falling under these categories. Fabletics, UNTUCKIT, and Warby Parker are examples of these trailblazers, as are Wayfair, Bonobos, and Glossier. Bonobo’s “guide shops” are set up for customers to try on and order clothes in-store, and the brand has found that customers spend around 20% more if they begin their experience in-store vs. online. Meanwhile, Wayfair uses its stores to offload excess inventory while boosting online sales in the process. An excellent strategy for brands selling durable goods, like furniture, or mattresses, to drive additional value. Glossier’s flagship store serves as an extension of online, creating an Instragrammer’s dream made physical, while allowing purchases to be synced online after trying them on in-store, and creating the ability for the customer to checkout whenever is convenient.
In 2019 DTC brands will be looking to expand their reach, increase their value, and find new ways to tap into their consumers, bringing physical locations to the forefront of their minds. It is estimated that over the next five years more than 850 stores will be opened by DTC brands.