D2C Retailers Wanted to Skip the Middleman. Turns Out They Need One

In the midst of the pandemic, the direct-to-consumer (D2C) model — cutting out the middleman, the wholesalers, even the physical storefront — seemed poised to shake up commerce.

Initially, the likes of Casper (mattresses) and Allbirds (footwear) among others, had focused on eCommerce and then moved to open some physical locations. Warby Parker, the online prescription eyewear firm, is another example. Back in 2022, the company set down a physical presence across a reported 200 standalone locations, and the tally now stands at about 270 stores.

More recently, Warby Parker opened an additional initiative: a “shop-in-shops” approach linking with Target at five locations to debut “Warby Parker at Target” outposts.  

The broadening of channels has not always borne fruit: Allbirds had expanded its store count and then pulled back those expansions, shuttering some locations as inflation raged and consumers cut spending. Quarterly revenues at Allbirds sank by double-digit percentage points, and the share price sank below $1 after a 2021 IPO that saw the company’s shares surge 91% to more than $28. 

Elsewhere, Casper struck a deal to go private, at a valuation that was half of its own pre-IPO range; in a quarterly filing ahead of that deal, it had seen D2C sales (its own stores and eCommerce) grow by 6.7% (at the majority of its topline), outpaced by the growth of retail partnerships that stood at 78%.

Peloton has been a high-profile D2C player, but amid its own headwinds had moved to wholesale and Amazon channels.

Nike Is a Bellwether

Last week, in our coverage of Nike’s results, we noted the continued shift from D2C and toward wholesale relationships. Nike Direct sales were down 12%, and a 15% slump in consolidated digital sales was a prime mover. But the company’s wholesale sales decline was more muted. Digital traffic is slated to be down double-digit percentages in the current fiscal year. Sales at its stores were down 2% year over year. 

The movement to have more wholesale presence, and pacts with the likes of Foot Locker, indicates a reconfiguration of channels, where D2C is part of the equation but not the major thrust it once was.

The combination of the D2C and wholesale models (and the availability via, say, Amazon), is an implicit nod to the fact that consumers want to find their brands on shelves in more “general” forms of commerce. 

The hybrid approach and its appeal has been underscored by PYMNTS Intelligence research into a global phenomenon, through the Click-and-Mortar shopper. As the data shows, 39% of consumers across the seven countries that we’ve surveyed use digital tools across their shopping journeys — but 71% of consumers stated that a brick-and-mortar location and interaction is integral to the shopping experience. 

“The thought of no shipping costs or waiting, along with the desire for in-person assessments of product quality and suitability, drive consumers to stores,” we found.  In addition, consumers want rewards to travel with them across channels, as the data shows that 71% of shoppers surveyed across the countries said they’d want to see coupons and other promotions offered in-store and online.

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