Can today’s outdoor start-ups get by without retailers?
SNEWS looks at three direct-to-consumer-only outdoor start-ups and the challenges and opportunities that lay ahead in an evolving marketplace.
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As a new generation of consumers and technology emerges, a growing number of burgeoning outdoor brands are choosing to skip the middleman — retailers — and go 100-percent direct-to-consumer.
Heritage brands Eddie Bauer and L.L. Bean have long opted for direct-to-consumer selling via catalogs, e-commerce and stores of their own, but there’s been a recent rise of nascent brands pursuing the strategy.
As with any selling method, strictly going the direct-to-consumer route has its pros and its cons. While bypassing third-party retailers can cut costs and boost a company’s bottom line, new direct-to-consumer brands face the challenges of gaining customers, spreading brand awareness and inheriting responsibilities and risks otherwise taken on by retailers.
SNEWS looks at three newbie, direct-to-consumer brands in the industry — how they’re faring, and the challenges and opportunities that lay ahead in an evolving marketplace.
“For new brands and startup brands it’s potentially easier to kick off this way, but it’s certainly not without challenge,” said Noah Waterhouse, vice president of marketing and sales at Stio, a direct-to-consumer outdoor apparel brand out of Jackson Hole, Wyo.
Started by Stephen Sullivan in 2012, Stio represents a second coming for the former Cloudveil CEO, who had a bumpy ride in outdoor retail the first go around.
“Although I have a ton of friends in the wholesale channel, it’s also a very complicated business and very tough to maintain your brand’s voice,” Sullivan told SNEWS in 2012. “One advantage of going direct-to-consumer is that we plan to have quite a few more drops and less seasonality. That shortens the cycle quite a bit.”
Waterhouse sees a lot of benefits to the selling strategy, namely its margin benefit. When new brands can bypass the cost of having a middleman, they can boost their own profits and offer more competitive prices to the consumer. Direct-to-consumer brands also dodge sampling costs and longer lead times, which can be particularly steep for U.S.-based brands.
Moreover, small companies don’t have to face the barriers of entry that selling to retailers often poses. Instead of fighting to get in touch with the right person or spending time establishing the necessary connections and relationships to get a foot in the door of a store, brands can spend that time energy and money on building a direct relationship with consumers. With a plethora of access points — via websites, mobile, social media, crowdfunding sites, e-mails and, yes, even still print catalogs — the reach for start-ups can be wide without a lot of cost.
Customer feedback and changes to product also are more direct.
“One of the biggest perks is that product design isn’t influenced at all by what sold well the previous year or whether a retailer feels strongly about a particular product,” Waterhouse said. “Instead, we’re designing and building the product we want to make and that our consumers our looking for.”
It all leads to stronger relationships, where brands can understand customer needs more readily and reflect that in next year’s product. With a fast-changing consumer base, that contact and interaction becomes increasingly important.
“There’s now more of a challenge to get the online shopper’s dollar,” said Eric Lyons, CEO of Boulder, Colo.-based Mountain Standard, another new outdoor apparel brand that’s selling solely direct-to-consumer. “This is where we feel authenticity and value comes into the equation. Now, the consumer is trained to expect more from their brands.”
Indeed, those higher expectations and fierce market competition also present challenges for direct-to-consumer brands. While they have plenty of inexpensive direct access to consumers, so does everyone else. There’s the challenge of trying to stand out in a large crowd. In a specialty retail store environment, a brand may face a handful or two of competitors in its category on the shelf. On the Internet, it faces hundreds, if not thousands of competitors as consumers hop from site to site.
“Driving traffic to a website is very difficult,” said Dan Tiegs, founder of Portland, Ore.-based Wild Outdoor Apparel. “The web is so big and there are so many people on there. People make it sound like it’s easy, but that’s really not the case.”
All of a sudden, having specialty retailers across the country in your corner — helping tell your brand’s story, making customers stop and listen amidst all the noise — is worth something.
The direct-to-consumer hurdles are driving some brands like Wild Outdoor Apparel to broaden its initial business plan and expand into wholesale.
Tiegs admits that the margin one can get from selling online can be as much as double to wholesale. “You have to sell a lot fewer garments to make the same amount of money,” he said. But he hopes by coupling direct-to-consumer with more traditional wholesale routes he can reap some of the benefits of both worlds. They end up both serving each other, he said — when store traffic increases, web traffic usually follows suit and vise-versa.
From the start, Stio knew the importance of having a physical location as well as its online presence. It decided to do the brick-and-mortar avenue itself by setting up a small handful of stores to help establish the brand in local communities. It started in its hometown of Jackson Hole, Wyo., where it could gain not only local support, but outsider traffic as well from the influx of visitors the town draws from nearby Grand Teton and Yellowstone National Parks.
“Starting and opening in Jackson Hole gave us instant access to more people that live the lifestyle of the target audience,” Waterhouse said. It also adds to the authenticity story.
The brand will test its urban appeal with plans to open its second store in Chicago sometime this year.
Opening physical locations definitely helps spread the brand’s gospel, but it also introduces the additional risks that specialty retailers face. Tread lightly might be the best advice for direct-to-consumer brands, with GoLite serving as a good example. The outdoor brand switched to a direct-to-consumer model in 2012, and quickly grew to 20 stores across the nation. It was too fast. GoLite claimed bankruptcy in late 2014, eventually liquidating its inventory and closing all its stores.
Overall though, most of the latest direct-to-consumer brands are forging ahead. They also have a leg up on what is a growing trend, as traditional wholesale brands are increasingly adding direct-to-consumer channels.
“Some are further along than others, but everyone is focusing on it,” Lyons said. “I think you’re going to see more so from the new brands that don’t have those inroads with retailers and thus have the ability of truly implementing something different.”