Established apparel brands are increasingly adopting direct-to-consumer (DTC) sales strategies, a move that necessitates a significant transformation of their supply chains. This shift, aimed at fostering growth and reshaping business futures, involves mastering intricate retail logistics, including home delivery and stocking their own physical stores.
Gartner analyst Tom Enright emphasizes the need for a supply chain that mirrors retail more than traditional distribution. This entails a departure from bulk shipping to retailers and towards fulfilling individual orders, requiring a nuanced approach to logistics.
Logistics Investment: A Compelling Financial Case
The financial allure of DTC is strong for suppliers. By selling directly, they stand to capture the full retail value of their products, bypassing the margins lost to retailers. Levi Strauss, for example, is targeting a DTC revenue share of over 55% by 2027, up from 48% in a recent quarter. The company is expanding its store footprint and refining inventory management to maintain stock levels of in-demand items.
Adapting to Consumer Trends
The rise of social commerce and the influence of content creators on platforms like TikTok are propelling the DTC model. Brands are leveraging these channels to engage directly with consumers, often facilitating drop-shipping for retailers.
Skechers has automated its North American distribution center to enhance e-commerce order fulfillment. The company’s aggressive store opening plans underscore its commitment to growing its DTC business.
The Risks of Direct Engagement
While the DTC approach offers control and customer proximity, it’s not without challenges. Nike’s experience during the pandemic serves as a cautionary tale. The brand initially cut ties with some retailers to focus on e-commerce but faced inventory gluts and discounting pressures, leading to a strategic recalibration.
Balancing Control and Risk
The journey towards DTC is marked by the need for control over customer relationships and brand experience. However, companies must navigate the associated risks carefully, ensuring that their supply chain capabilities align with their strategic ambitions.
