Direct to consumer, also known as DTC or D2C, companies have been expanding in popularity, directly impacting the retail sector. The concept behind DTC companies is to cut out the middleman traditionally involved in selling a product – to remove the necessity for traditional brick-and-mortar stores. This allows for companies to offer their products at below-market rates compared to traditional consumer brands because with DTC products, consumers aren’t hit with in-store markups. However, many of these companies are also implanting new branding techniques to engage the attention of the younger generation, promoting environmentally friendly and quality products.
Today, there are estimated to be over 400 DTC companies, and that number is expected to grow. Recently, MediaRadar, a leading advertising intelligence and sales enablement platform, released data summarizing DTC spending by leading companies. The data revealed that DTC advertising increased 50% in the past year, with the top companies representing a major contribution to this growth.
ThirdLove, an online retailer selling bras, women’s underwear, loungewear, and nightwear, has been identified as one of the leading innovators in their industry, thanks in part to their successful implementation of the DTC model.
ThirdLove was founded in 2013 by husband and wife David Spector and Heidi Zak. After conducting some research, the two discovered that a large majority of women were wearing bras that did not fit, because their actual bra sizes fell between the standard, manufactured bra sizes. This finding prompted the new concept of ThirdLove. They partnered with bra designer Ra’el Cohen, who create an innovative design based on the original findings and the various sizes and shapes they measured.
ThirdLove’s mission is simple: To provide bras that allow all women to feel comfortable and confident. Since 2013, the company has expanded on their available products.
ThirdLove’s Business Model
ThirdLove did not grow from zero customers to millions of them by accident. Instead, it was their dedication to the DTC business model that had much to do with enabling their success.
The Company Targeted Their Niche
Understanding the data behind their product proved to an invaluable asset to their DTC model. They were able to understand consumer needs while creating a specific product to meet those needs. By using strategic methods for monitoring inventory, the company was able to reduce losses in the early stages of development. According to one of the company’s senior executives: “For us, fit is everything. We’re selling the right fit as much as the product itself. And yes, our data shows that between 70% and 80% of our customers wind up ordering a bra that is a different size than they initially believed they wore. In a typical retail environment, the emphasis may sound like it’s on fit—associates at Victoria’s Secret do wear those tape measures, for instance—but it’s really about selling you something that is in stock, whether it fits or not. We can stock a far greater array – we’re up to 84sizes, including half sizes. We’re not stuck with the constraints of a stockroom.”
They Used Social Media
Using online platforms, especially Facebook, has been a major asset in the launch of the company. Facebook, for example, has been deemed by some “the storefront for DTC brands.” Advertising directly to consumers on social media has allowed ThirdLove to cut out the necessity for a retail store, while continuing to promote their brand to a wide audience. Using the platform, the company could target the populations they needed for their brand, weeding out traditional methods that wasted money.
However, as the company has continued to grow, so have their business methods. As Heidi Zak, the co-founder, states: “You can think of Facebook as a storefront on the prime corner in the middle of downtown. You can do a lot with the real estate when you first open, but there’s only so much traffic. It’s the cream of the potential crop, and ultimately you have to grow beyond it.”
The Company Shifted Their Focus Accordingly
With a massive influx in the number of DTC companies hitting the market, staying ahead of the game is even more important than it used to be. Companies need to adapt to the changes and emerge with new models that will fulfill consumers’ varying demands.
With time, ThirdLove shifted its focus to other channels. They moved beyond traditional digital channels to increase brand awareness and to ultimately reach a larger number of potential customers. The company launched their first national campaign, which included out-of-home (OOH) and TV ads. In 2019, the company reportedly spent several million dollars on TV advertising.
In addition, they jumped on the trend of podcasts and became podcast advertisers. This is a unique platform that is seeing growth in listeners – from 2017 to 2018, podcast listening growth jumped 14% among women.
They Stick to the DTC Model
Many companies, when they begin to gain traction in their market, see a brick-and-mortar store as an avenue for expansion. However, the expenses associated with a store can have a dramatic effect on a company’s bottom line and often result in a downturn in their development. ThirdLove has remained true to the mindset that a solid DTC business can excel strictly on a DTC basis, although in 2019 the company opened one retail store (in Manhattan’s SoHo district) as a means of testing certain concepts with customers. https://www.retaildive.com/news/thirdlove-to-open-1st-retail-store/559077/
In addition to improving the bottom line, the DTC model has permitted the company to understand its customers more deeply than a traditional retailer can. With all online monitoring, the company’s team can realize each customer’s shopping history, what someone’s size is, the changes they have undergone since becoming a customer, and whether they have had issues with a previous purchase. This model, which they refer to as Fit Finder, has allowed them the luxury of being able to leverage data to give the best possible experience to the customer.
Benefits the Company Has Witnessed
The efforts that the team at ThirdLove has put forth have yielded great benefits in their bottom line, profits, and customer satisfaction. By using an almost exclusively DTC model, the company is not spending money on numerous retail locations, which ensures that they have complete control of their inventory. They are able to identify avenues through which their marketing is most successful and focus their attention in such directions. These steps are allowing them to continuously grow while improving their highly successful business model.