DTC's great physical reset | WARC | The Feed

DTC's great physical reset

Direct-to-consumer brands emerged during the last decade, fuelled by digital advertising and cutting out the middleman from the physical retail storefront – but now, with advertising costs rising and many observing a correlation between store presence and online sales, a physical presence is becoming increasingly important.

Why it matters

Physical retail stores aren’t strictly advertising, but they can perform some of the same function – especially when it comes to introducing your brand to new customers.

It’s easy to forget that sometimes advertising isn’t about delivering a specific message to a specific audience. But the ability to advertise is in and of itself a communication, with studies showing that advertising in premium environments can drive perceptions of financial fitness and product quality. It’s possible that similar dynamics are at play with physical stores.

Though there was slender inflation in the cost of digital media between 2021 and 2022, finding new customers (and therefore growing overall penetration) is getting harder online, according to a report in the Wall Street Journal. 

What’s going on 

The WSJ reports on the once online-only Warby Parker, an eyewear retailer with a physical footprint that now generates 60% of its total sales from 200 locations.

In the face of increased digital advertising costs, some retailers are observing an online effect from the store. Warby Parker tells the newspaper that online sales typically triple when a retail location opens in a new market – and it’s not alone.

Coresight Research, also quoted in the news story, finds:

• A majority of digitally native brands in the homeware and beauty categories have opened up some kind of physical store (either permanent or pop-up).
• Almost half of digitally native fashion brands (footwear, apparel, accessories) have opened up a physical presence.

Profit

Interestingly, executives at the company note that stores are profitable, typically paying for themselves in under two years (20 months).

This chimes with research that finds ecommerce-first companies typically find it very difficult to achieve profitability, even when posting brisk overall growth. Retail locations appear to be helping some firms’ top and bottom lines.

Sourced from the Wall Street Journal, WARC