These legacy brands are investing more in the DTC space to increase profit margins, become more consumer-oriented, and have a digital-first approach.
#5 on The Hot List | Growth Score: 99.1
Nike is a trailblazer in the DTC space. They have moved away from wholesale operations and reduced the amount of inventory they send to Foot Locker, their closest retailer relationship, in favor of expanding DTC sales. By 2025 they aim to have 60% of their business be made up by DTC.
The pandemic pushed brands to invest more in their websites and DTC sales, and as a result, many brands have seen the benefits of the DTC space and stuck with the platform. Nike cites stronger customer relationships and wider profit margins as key benefits to DTC sales. The DTC model also cuts out the middleman, often allowing brands to lower prices and benefits customers who have inflation on their mind.
#12 on The Hot List | Growth Score: 98.3
Comparing 2021 to 2019, Under Armour has seen their DTC sales increase while their wholesale sales have declined. As a result, they’ve invested more in a DTC-focused model.
When the pandemic was shaking up the retail space in 2020, Under Amour said they would begin to exit 2,000 to 3,000 stores in North America to focus on their DTC sales. Their DTC focus is seen as a key driver in bouncing back from their 2020 lows.
#17 on The Hot List | Growth Score: 98.3
When the pandemic increased their digital sales, Crocs committed to shifting their strategy with hopes that their digital channel will make up half of their anticipated $5 billion in revenue by 2026.
In addition to undergoing tremendous digital growth, Crocs has also focused on new products and collaborations to drive revenue. Their sandals have been a lucrative product for them and they expect sandal revenue to grow 4x between 2020 to 2026. Crocs has also partnered with celebrities and other brands such as Balenciaga and Palace Skateboards to drive growth.
#42 on The Hot List | Growth Score: 97.0
Adidas plans to reach a 50% DTC business by 2025. CFO of Adidas noted that consumers are more interested in shopping directly from brands than from multi-brand retailers, and the brand wants to take advantage of that DTC opportunity.
While Adidas anticipates that the focus on DTC will bring them higher revenues and margins, it comes with with new challenges as well. Moving to a DTC-led business model means handling shipping, product returns, holding inventory for longer, and navigating supply chain issues.
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The Charm Team