Direct-To-Consumer Brands and Strategies: A systematic literature review

The world of retailing has seen a recent industry decline, manifested in bankruptcies and store closures, so massive that it has been dubbed "the retail apocalypse." Some data, pre-pandemic, suggest that the industry crisis, exacerbated by covid-19, was already well underway. For example, store closures by the end of 2019 exceeded the number of store closures in all of 2018, reaching more than 9,000 in the United States (Unglesbee 2019). Retail bankruptcies increased 35% in 2019, to 23, and among the companies filing for bankruptcy was Forever 21, a clothing brand that popularized fast fashion, whose business was still booming in 2015, with $4.4 billion in sales (Thomas, 2019a; Wang and Kim 2019). This shift in the retail landscape has been attributed primarily to the rise of e-commerce, accentuated by the pandemic, and the decline of traditional retailers, caused by their primary reliance on brick-and-mortar stores as a sales channel (Thomas 2019b). In the current e-commerce context, there are brands that are effectively using social media to communicate with consumers are emerging brands that have been able to connect with the consumer on an emotional level, adding to its value proposition in addition to its physical attributes (Sherman, 2016). In this reference context several startups called Direct-to-Consumer (DTC) brands are on the rise leading them to reporting a sales value higher than the total of US ecommerce sales (Lipsman 2020). Direct sales in general can be described as sales, which are realized via vertically integrated distribution channels. The channels or distribution chains can look different: they can consist of several value chain stages such as wholesaling and retailing (e.g. flagship stores, outlets), which are all operated or at least controlled by the brand manufacturer, or they can be more directly connected to the consumer via sales persons or online shops (Leimstoll and Wolfle, 2021). Furthermore, a narrower definition limits direct sales to personal selling activities to private end-users (consumers) outside physical selling locations Those types of brands start their activities as a purely online business, leveraging digital channels for marketing and sales, consequently they can be defined as digital native brands. Specifically, they are defined as DTC brands because they sell directly to consumers, without intermediaries or "middleman" retailers such as stores. What differentiates these brands from traditional online brands is their specialization on a single or small set of related products, and innovations in product or business model (Jin and Shin 2020). This model of retailing a small assortment of products in addition to promoting a “quality over quantity” message on their social media channels, means that DTC brands encourage consumers to buy less products at higher prices to obtain quality fashion products instead of cheap fast fashion goods (Chapin, 2016; Sygiel, 2017). Through a steady base of loyal customers, these brands are establishing a foothold in the market (Zia 2017). DTC brands, that are digitally native vertical brands, where initially introduced to consumers online (Carnot, 2017; Dunn, 2016; Munford, 2017b) and use online “editorial content to connect with the consumer on an emotional level, distinguishing the brand not just by its value proposition, but also by its physical attributes” (Sherman, 2016, para. 6). Because of their digital focus, the majority of DTC brands do not have brick-and-mortar stores. Cutting out the middleman is a distinct element of DTC retailers, which allows the brands to keep prices low, while still providing consumers with high quality items. This adds another layer of connection between DTC brands and consumers, because it removes the retail middleman that wholesalers use to markup product prices (Spruch-Feiner, 2016). The relationship building power of DTC brands through their websites and social media gives such companies the ability to move beyond a purchase and into the consciousness of the brands’ patrons’ minds (Hellqvist, 2015; Spruch-Feiner, 2016). What, also characterizes the DTC brands is their relationship building power of DTC brands through their websites and social media gives such companies the ability to move beyond a purchase and into the consciousness of the brands’ patrons’ minds (Hellqvist, 2015; Spruch-Feiner, 2016). For example, if we take the luxury sector as a reference (where DTC brands have performed very well) those brands are using social media to convey brand ideals of minimalism, specialization, consumer-centrism and a refined, yet approachable brand aesthetic and build relationships with consumers (Munford, 2017a; Spruch-Feiner, 2016). The performance of these types of brands has not gone unnoticed and has led to increasing venture capital investment and the acquisition of these startups by incumbent retailers attest to the growth potential and value of DTC brands in the marketplace. In 2017, investment deals involving DTC companies rose to 196, more than 600% from 32 in 2010, this figure is a sign of recognition of the value and digital capabilities of DTC brands, as well as their appeal to consumers in an increasingly digital-driven market, high-profile incumbent retailers have acquired DTC companies (Chen, 2019).

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