Direct-to-Consumer Model Poises Challenges for Brands and Retailers

This month’s Fashion Friday podcast series by Euromonitor International takes a closer look at the direct-to-consumer model in the fashion industry. An industry which has always been characterised by several intermediaries between manufacturers and consumers and now is being challenged by consumers paying a lower price by circumventing these intermediaries.

International trade agreements have reduced importing fees and have increased delivery speed in a way that leverages the continuous trend growth. Manufacturers are taking advantage of lower cost of production in certain regions and export at a cost that consumers in higher income countries accept.

Historically, players have constantly undercut the lowest prices in the market. Esprit is well-known for its mass production and lifestyle-products. Thereafter, C&A and H&M penetrated different European markets with lower cost but equal quality products. The same accounts for Zara a few years later and recently Primark entered the market with shockingly low unit prices. Nowadays, D2C manufacturers are the ones establishing new prices in the bottom range. Despite long delivery times, that can take up to 4 weeks or even more, consumers prefer making planned purchases. Lower prices and higher quality within the price range motivate them to do so.

Without intermediaries, manufacturers have greater margin to play with the price as well as to increase fabric quality without compromising on the total cost. Even expensive natural fabrics such as cashmere and silk are increasingly seen in the market.

Digitisation and ecommerce, with more transparency in the process, can bring consumers closer to major players that rely mostly on store-based business models. Also, marketing can be a crucial aspect since these manufacturers are small and dispersed, which makes them difficult to be identified by online shoppers. Nevertheless, finding the right balance is the key challenge as these parallel activities increase total cost of retailers and brands costs.

Written and created for FashionUnited by Euromonitor. Explore more fashion related podcasts by Euromonitor here.

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