Unicorns of retail: How upstart D2C brands are changing the game

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Direct-to-consumer (D2C) retailers are fast gaining ground in an overcrowded market at a time when high street retail’s woes are only deepening. As iconic brands like Barney’s and Victoria’s Secret struggle in the US and Mothercare and Superdry report lacklustre results in the UK, it’s a group of D2C start-ups that are the talk of the town.

Glossier, the beauty brand charming users on both sides of the Atlantic was valued at $1.2bn this year. And it’s not the only one. Chic luggage brand, Away; slick sleep-specialist, Casper; and innovative fashion-rental business, Rent the Runway, hit similar valuations. All are D2C start-ups with less than five years of business under their belts. No surprise then, that they’ve been dubbed ‘unicorns of retail’. Their success is almost mythical.

So what’s behind it? Here are five ways in which the most successful D2C brands have captured the hearts and minds - and wallets - of their customers.

1. They have self-belief (and shout about it)

More than just a product or service, direct-to-consumer brands are selling something they believe in – a reason for being – and they connect their consumers with this in a meaningful way.

Away doesn’t just sell beautiful, well-designed luggage. It taps into the experience economy and millennials’ love for travel. Its social feeds are full of content that’s focused on the trips you can take, the adventures you can have and the memories you can make. By highlighting the experiences the product enables, Away has positioned itself to be in the business of holidaymaking, not luggage selling.

For Heist, its driving force is inclusivity. Its ‘modernising hosiery’ mantra is that it should be designed for everybody, whatever their shape and size. Glossier exists to democratise beauty. Casper is committed to improving sleep, not selling mattresses. Rent the Runway offers us no less than a fashion revolution, as well as a wardrobe beyond our wildest dreams.

These brands have a singular point of view. They are confident because they know exactly who they are. This drives their rapid growth and allows them to diversify credibly, without stretching their brand in a way that feels inauthentic.

Through a brand’s self-belief, it gives people something to buy into, rather than a place just to buy from. It’s a compelling reason for customers to pick one product over another, contributing to brand equity and loyalty in the long run.

2. They champion transparency

Not only do these brands have a higher purpose, they back it up with radical transparency.

For Glossier, this comes via skilful content creation and curation - a natural extension of its humble beginnings as a beauty blog. Fashion upstarts, Everlane and Reformation, demonstrate their sustainable credentials by exposing their supply chain to customer scrutiny, providing clear evidence that they are what they do, not just what they say.

Everlane and Away are also big on price transparency. The price difference between their products and competitors is clearly explained on their websites, demonstrating why their products represent good value.

These brands understand that their customers want authentic, ethical experiences. It is well known that millennials and Gen Z - the young, social-savvy customers these brands are targeting - want to express themselves with brands whose values align with their own. Digital natives are used to being able to fact check in real time, so spinning an old story doesn’t cut it anymore. Clear communication on pricing and sourcing and a demonstrably authentic message assures customers that the brand is genuine.


3. They’re more than digital-only

Although many of these brands may have started their lives online, quite a few are making the move into physical retail.

US real estate firm JLL predicts that over the next five years, D2C companies could open up to 850 stores. Casper has ambitions for 200 stores by 2021 and Glossier has experimented with highly experiential, Instagrammable pop-ups alongside flagship stores in Los Angeles and New York.

The strategies behind these spaces differ, but they all deliver interactive, social, educational experiences. This is a deliberate move away from retail’s traditional transactional model.

Studies show that physical stores still play an important role in the bulk of retail sales, especially for Gen Z and millennials. They’re an important part of the decision-making process and the most successful D2C brands capitalise on this, either through stand-alone stores or concessions.

Physical spaces bring online and offline worlds together to develop immersive customer experiences. They offer valuable opportunities to capture customer data - through the use of in-store technology. With the high cost of customer acquisition, stores can be a cost-effective way of introducing potential customers to the brand.  

We know this firsthand, having worked with Instagram-born The Couture Club, helping to bring its influencer lifestyle to life with its first ever physical store. It quickly became a lifestyle destination and a place for customers to hang-out before a night out.


4. They listen to their customers

More than any of the other traits that D2C brands have, there is one that really sets them apart from competitors – they’re good listeners.

They capture and intelligently use customer data - often something that they’ve done from day one. With these ‘listening’ capabilities, they are able to respond quickly to what customers are telling them. As a result, they have a detailed understanding of customer needs and are able to build stand-out, customer-centric experiences to meet these expectations. Listening to customers and acting on these insights is vital for D2C brands to continue to evolve and thrive.

Proudly customer-centric brand HelloFresh has moved into the global top spot in the meal kit product category and is challenging not only wholesale retailers like Amazon but also the big four grocers. Matt Fitzgerald, its VP of marketing, credits listening to the company's customers for this, proving that customisation and having a finger on the pulse of the market goes a long way.


5. They turn customers into fans

The D2C brands that do all of the above well – have a clear, compelling purpose, behave ethically, engage in both the real and virtual worlds and listen to their customers to deliver exceptional experiences – will build a fan club not a customer base. Disruptive beauty brands, Glossier and Huda Beauty, are masters of this.

Kevin Gill is group retail director at Start Design Consultancy.


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