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The Model That’s Changing The Way Consumers Shop

Fashion

The antidote to fast fashion

The ascent of fashion that caters to the tech-savvy millennial has been nothing short of meteoric. From the rise of the “see now, buy now” model to brands refusing to be boxed in by the confines of the traditional fashion week calendar, the last few years have seen a definitive transformation in how the fashion industry has attempted to modernize itself to accommodate the way consumers shop now. And now, the labels that have rejected the notion that success depends on prime shelf space at a covetable department store and have made a name for themselves through word-of-mouth and social media are now adopting a non-traditional sales model that prioritizes the customer and promises to shake up the fashion world: direct-to-consumer.

A seeming response to the disconnect between the consumer and fashion week calendar, direct-to-consumer businesses have surged in popularity recently by placing the consumer at the forefront of their missions and delivering products to customers six months after first seen on the runways. By selling directly to clients via websites and standalone storefronts, this business model has shifted the fashion industry's focus from the magazine editors, influencers, and fashion bloggers who occupy the front seats at fashion week shows back to  the consumers who actually buy the clothes and don't want to wait months for a style to appear in the stores.

“Direct-to-consumer means that the customer really is central to everything we do. That’s a shift—we’re not designer-centric, or brand-centric, or distribution-centric. The customer calls a lot of the shots in our business,” says Maggie Winter, co-founder and CEO of AYR (which, in the subtlest of winks, stands for All Year Round), an impossibly cool brand that designs with the independent women in mind. “There is no doubt that the fashion calendar is completely antiquated. Major department stores don’t control the game anymore. There are many more players and many more fields to play on. The fashion cycle doesn’t trickle down from top to bottom, it’s radical, it’s global, it’s instant.”

Omitting department stores and mega-retailers altogether isn't an entirely new trend. Fashion start-ups have always been cutting out the middlemen and avoiding department store-induced markups and wholesale costs out of financial necessity. It's the host of well-established powerhouses with major followings—like Reformation, Everlane, Bonobos, and Warby Parker that have skyrocketed to fashion fame from website beginnings—that opt to stay out of department stores by choice and serve their consumer first and foremost that is newsworthy. What's more, big brand names like Michael Kors and Coach have recently started pulling back products from department stores, citing profit losses as a result of department store promotions and deals that significantly devalue their products (though they do make for those steals we all love).

“Many consumers don’t fully realize how significant the wholesale margin is, and, consequently, how much a product is marked up when they purchase it,” says Karla Gallardo, co-founder of Cuyana, a premium apparel and accessories label with a store in L.A. and a pop-up in NYC. “For example, we are able to sell our buttery-soft, beautifully durable Italian leather totes at $175, versus $500-plus via wholesale, because that middleman margin is cut out.” The extra costs associated with third parties can range from cuts department stores take for carrying the product and prime shelf location, middleman margins, shipping and travel costs associated with distributors who deliver the products to location, and licensing fees that all contribute to higher costs that the consumer will end taking on for the same product.

“Traditional luggage companies design their products and then mark them up, with some licensing companies adding on their markup, and then the company wholesales their luggage to a retailer who then marks it up again—by the time it gets to the customer, it’s priced at as much as 10 times of what it costs to make,” says Steph Korey, co-founder and CEO of Away, a smart luggage online business with a concept store in New York City. “If we went the traditional route, a bag of the same quality would cost $600 to $1,000. Ours range from $225 to 295. 

This model has similarly allowed brands to continue working with the best manufacturers and craftsmen without worrying about the costs that the consumer will have to take on, ultimately leading to more accessible luxury quality goods and jobs for traditional artisans. “Our business model allows us to partner directly with the workshops and sell directly to the client; there aren’t any extra third parties involved in that flow, which means there are no extra markups on pricing,” says Cheryl Kaplan, president M.Gemi, a U.S.-based shoe line handcrafted in Italy by family-owned workshops. “Thus, we can price our shoes at half the cost of traditional luxury brands that are produced in the same workshops as M.Gemi.” Shilpa Shah, the other half of Cuyana, agrees that a “narrative of craftsmanship is a special one that has resonates deeply with the consumer.”

It makes sense. As an antidote to fast fashion and mass production, a “responsible shopper” has emerged, one who wants to participate in the time-honored craftsmanship traditions and engage in more sustainable shopping habits. “We are not tied to anyone else in terms of margin or buying cycles, so we really have the bandwidth to try and make our shoes more sustainably. That's the thing getting our team out of bed every morning,” say Tim Brown and Joey Zwillinger, co-founders of one of the most Instgrammable lines of sneakers, Allbirds, who have set out to make sustainable sneakers out of merino wool and made a name for themselves, in the process, after launching their Kickstarter in 2014 and selling $120K worth of shoes in just four days, proving that there was a demand for such a product.

Of course, with fashion freedom like that, it's not that surprising that many brands who are direct-to-consumer also happen to be charitable and concerned with the environment. That liberty is also what makes the model the most personal experience for the shopper. “We are in constant dialogue with the clients via email, phone, text and, of course, in person. That constant informative and intimate feedback loop allows us to ensure that we’re creating product and experiences that truly resonate,” says Kaplan. That feedback can inform everything from future designs decisions to inventory adjustments and even customer service improvements, a crucial component of the modern-day shopping experience. Consumer expectations today are higher than ever. They demand a better experience and want to interact with brands that resonate with them,” says Jen Rubio, co-founder and creative director of Away. By selling directly to consumers, we can execute exactly to our vision of a perfect brand experience end-to-end: product development driven by direct research and feedback, a seamless online experience, day-making interactions with our team, etc. The opportunity to build relationships with customers is unparalleled when no one’s standing between you.

In addition, real-time feedback can influence production even before the wheels are fully spinning. “It happens a lot where we post fresh new pieces that are still in production on Instagram straight from the photo shoots, without having those pieces online yet, and our mailbox immediately starts to pile up with customers wanting to purchase those pieces,” say Sharona Cohen and Nave Avimor, co-founders of California-based favorite Genuine People. “That’s when we understand we should increase production quantities and move things faster.”

In other cases, adjustments based on consumer demands can be more easily made. Brooklinen—a 2014 Kickstarter, born after Rich and Vicki Fulop couldn't find “simple, cool, beautiful bedding at an accessible price” on the market, that's become a buzzy home brand adored for its sumptuously soft sheets—have added envelope closures to their pillowcases and long-side and short-side tags on fitted sheets so the consumer could know which end was which—both changes were made based off customer feedback. We’re always listening and tweaking to incorporate what they say into our products and operations, and it makes us better overall,” says Vicki. Our customers help us perfect details large and small, and it’s thrilling to be able to be agile and make those changes and to then tell them, 'Look, we did it. You can have this now!'”

With direct-to-consumer businesses, it's possible for consumers to even contribute to the creation of entirely new products. For example, for its upcoming spring collection, Cuyana crafted a backpack because customers have been asking for one for years; Away created their most popular product, The Bigger Carry-On, after customers wrote to them to say they wanted something bigger than the original Carry-On model; and M.Gemi added half sizes for the Cerchio sneakers after customers asked for a more precise fit. “We are constantly mining feedback on fit, on color, and on the product broadly so we can continuously improve. Importantly we don't need to wait, on fashion cycles or wholesale contracts, to make those improvements. We can literally make running changes to our product, and we have done so, say Brown and Zwillinger.

It can't be argued that in recent years, it has gotten easier for smaller businesses to build a name for themselves sans placement in a department store thanks to the rise of visual social media. “It’s a major channel for how people discover our brand, and for communication,” says Fulop. “People share how they are styling and experiencing our product, give feedback, ask us questions, and we get to share our inspiration and whatever is happening or might be coming down the pipe.” Beyond serving as possibly the first meeting point between consumer and brand, it allows for consumers to again influence the direction of designs. “Being able to instantly share what’s currently in production or simply our inspiration is a big advantage since we hear and listen to our customers and it helps a lot to refine our fashion-forward collections,” says Cohen and Avimor.

What's more, social media establishes a strong brand vision, something that's crucial in the oversaturated fashion marketplace where connections are few and attention span is notoriously short. Just think of Glossier, a direct-to-consumer two-year-old beauty brand with a cult following that has made a name for itself on Instagram. You can't think of the brand without thinking of the artfully captured pastel-hued bottles and quirky jars popping up on your newsfeed. “We’re able to tell the Away story in our voice across all of our channels and give customers a much more thorough understanding of the brand they’re engaging with. In today’s noisy world, this authenticity and genuine desire to have a conversation with our customers really resonates with them,” says Rubio.

AYR too considers social media a legitimate place where consumers can make a connection with a brand, free of formal curation and an obligation to buy that websites inherently have. “Social media, especially Instagram, is an extremely intimate and immediate platform. It’s not so polished and processed—it’s a place where your personality and identity really resonate,” says Winter. “So it’s great for us, as a young, small team. Instagrams are the anti-billboards—there’s a personal quality that’s true to the medium.”

While direct-to-consumer brands mainly exist in the digital space, most recognize the importance of connecting physically with consumers, via pop-ups, standalone stores, or events. “We’ve done a couple pop-ups, and I think they’re a great way to do something extraordinary and special to connect with customers,” says Fulop. “They aren’t the way we necessarily would go about selling a product, but they are a great avenue for another way to personally connect with customers.” Kaplan agrees that beyond the monetary value, it's important for a consumer to physically connect with a brand to establish a successful long-term relationship between the two. “It’s just as important for clients to engage with M.Gemi face-to-face as it is for them to engage online,” she says. “The client can become better acquainted with the brand, and us with them.”

Cuyana says that pop-up stores are also a great way to test a location and audience for a potential brick-and-mortar location. In fact, the brand permanently set up their Venice store after a successful six-week pop-up run in 2015. “Pop-up stores have been a successful strategy for us to test retail. We want to bring our retail experience to as many of our customers as possible and continue growing our presence in cities around the country, and eventually the world,” says Gallardo. Most recently, they've hosted ones in Chicago and Washington, D.C., to get to know the market, with more on the way in 2017. And even brands who haven't hosted many pop-up stores recognize the importance of a physical presence, if only a temporary one. “As a fashion-forward brand that was purely created on the foundations of the high street fashion, it is not only an opportunity to express our creativity and strengthen the brand concept, but it is also vital for us to offer our customers the enjoyable experience of shopping in-store, trying and feeling the collection, and connecting to the brand in a different way,” say Cohen and Avimor.

With the shoppers forming more of a relationship with brands over social media in real time, one can see how direct-to-consumer model can seem like a more appealing option for the digital consumer rather than waiting six months for the fashion calendar to catch up. Fulop refers to the model as “the evolution of retail” and “more modern way to do business.” Shah adds to that sentiment: “This model allows brands to be more innovative and to provide unique experiences—whether online or in person—that are personalized and memorable. The consumer has gotten used to being able to 'see now, buy now,' and it will be hard to reverse that back to the traditional fashion calendar.” Besides the organic shift to reflect the modern day, some point to the unique products that have filled marketplace gaps as the driving force behind the success of direct-to-consumer businesses. “Advances in technology have made starting a business in this way very easy, and it has upended industries from eyewear to mattresses. Ultimately, though, it is less about the model and more about the problem you are solving for your community, and that will always be the most important thing for any new business,” say Brown and Zwillinger.

At the end of the day, Korey believes that it's the bringing back of customer to the forefront of the experience that makes the direct-to-consumer model the future of fashion. “Going directly to the consumer is the most forward-thinking way to build a long-lasting brand that has valuable customer relationships,” says Korey. “Nowadays, there are direct to consumer brands in almost every single category you can think of. But what it comes down to, and what I think is more important than the distribution model, is building a business that puts customers first.”And as the more independent and modern businesses are catching onto that, they will have more of an opportunity to prosper, both creatively and financially. 

“The truth is, it’s just easier for newer, smaller brands to adapt to the way our world is changing. Larger legacy companies simply can’t keep up with the evolution,” says Winter, who wisely points out that it doesn't mean that the digital space will ever replace the physical one, confident that it will instead add to it and allow for more options and choices for the consumer. “In a way, it’s like falling in love. There are a lot more ways to fall in love now than there were perhaps 10 or 20 years ago. We communicate through technology. It doesn’t replace the good old-fashioned locking eyes across the room—but it exists, so why not use it?”