# Direct to Consumer: the rite of passage for retail in 2022 Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-02-15 Category: BUSINESS Category URL: https://financedigest.com/category/business Meta Title: Investing in Direct-to-Consumer: Opportunities and Meta Description: Discover the latest trends in the Direct-to-Consumer sector from the Consumer Research Director at finnCap Group. Learn about potential growth strategies and URL: https://financedigest.com/direct-to-consumer-the-rite-of-passage-for-retail-in-2022html ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/istock-1091838428-1736816243493-compressed.jpg) _By_ **_Nigel Parson,_** _Consumer Research Director, finnCap Group_ Direct-to-consumer is the biggest trend in retail today, but it is proving difficult for investors to make money from this secular shift at present. 2021 was a bumpy year for the DTC London stock market debuts. Most companies that listed on AIM or the main market [ended the year below their IPO admission price](https://www.financedigest.com/uk-house-prices-end-2022-on-a-weaker-note-after-pandemic-boom.html "UK house prices end 2022 on a weaker note after pandemic boom"), with only CMO Group and Marks Electrical trading ahead. The likes of THG, ASOS, Boohoo and AO World, which listed in 2020, also saw their [share prices](https://www.financedigest.com/netflix-cuts-prices-in-some-countries-to-boost-subscriptions-shares-drop.html "Netflix cuts prices in some countries to boost subscriptions, shares drop") under pressure in the autumn of 2021. However, the pipeline for new DTC company listings remains open for [business with several big](https://www.financedigest.com/smishing-is-a-new-virus-plaguing-big-business-conversational-commerce-to-the-rescue.html "‘Smishing’ is a new ‘virus’ plaguing big business – Conversational Commerce to the rescue!") names including GymShark expected to IPO in early 2022.  There are also continued growth opportunities for existing listed DTC businesses in 2022, and we can expect share prices to recover for those who can convince investors of their ability to develop a strong growth strategy which can be continually evolved to keep [pace with changing consumer](https://www.financedigest.com/2021-predictions-less-fraud-shifting-consumer-behaviour-and-accelerating-pace-of-innovation.html "2021 predictions: less fraud, shifting consumer behaviour and accelerating pace of innovation") interests. The DTC sector came of age in 2020.  The pandemic accelerated ecommerce [growth – far more quickly than anyone expected – and DTC brands already trading successfully](https://www.financedigest.com/how-to-steer-a-startup-through-growth-successfully.html "How to steer a startup through growth successfully") online were well-placed to capitalise on the surge in online spending.  Trends are now ‘normalising,’ but there is no doubt DTC enjoys a greater share of consumer expenditure and a much larger and more receptive customer base to target.  Selling direct enables brands to take real ownership of the customer relationship and leverage user and behavioural data to enhance the [retail experience and provide a more personalised consumer](https://www.financedigest.com/france-leans-on-retailers-to-help-consumers-cope-with-food-prices.html "France leans on retailers to help consumers cope with food prices") journey. DTC companies all follow similar trajectories from inception but, quickly, they must decide whether they are a brand or a retailer. This is a key milestone in the rite of passage for DTC companies. If the company is the brand owner then, ultimately, it will become channel agnostic, wanting merely to be close to [customers when they are near to making purchase](https://www.financedigest.com/britains-nationwide-curbs-cryptocurrency-purchases-by-customers.html "Britain’s Nationwide curbs cryptocurrency purchases by customers") decisions. If a company is a retailer then it will want customers to come to its website first and the products become secondary. Their end-destination is to become a marketplace of choice for a defined target audience. When DTC [companies have made their choice at this crossroad, companies should decide on the growth](https://www.financedigest.com/ultimate-growth-for-sme-finance-company.html "Ultimate growth for SME finance company") strategies they would like to pursue. In 2021, we saw the DTC companies in our research universe employ a number of successful growth strategies including the use of [subscription models](https://www.financedigest.com/the-rise-of-the-subscription-model.html "The rise of the subscription model"), omni-channel development, innovation and new product development and the use of social media influencers. We expect to see these strategies continue and evolve in 2022 alongside new ones. We expect to [see more DTC companies adopting the omni-channel distribution approach this year which combines the DTC online channel with a retail](https://www.financedigest.com/uk-retailers-see-40-jump-in-boxing-day-shoppers-springboard.html "UK retailers see 40% jump in Boxing Day shoppers -Springboard") channel. Many DTC brands face the [problem of not having a clear customer](https://www.financedigest.com/australias-qantas-apologises-to-customers-for-operational-problems.html "Australia’s Qantas apologises to customers for operational problems") journey. Shoppers don’t want to visit thousands of websites for [products in the same way](https://www.financedigest.com/5-ways-to-sustain-productivity-when-the-clocks-go-back.html "5 ways to sustain productivity when the clocks go back") they don’t want to visit thousands of shops. We believe the omni-channel approach allows companies to offer [consumers a more balanced portfolio and a more relevant product](https://www.financedigest.com/two-thirds-of-consumers-would-prefer-to-deal-with-a-single-provider-for-insurance-products.html "Two-thirds of consumers would prefer to deal with a single provider for insurance products") offering. Revolution Beauty has executed a strong omni-channel growth strategy, [selling its products via its e-commerce operations](https://www.financedigest.com/mcdonalds-to-sell-russia-restaurants-to-local-operator-rebrand.html "McDonald’s to sell Russia restaurants to local operator, rebrand") and in both physical and digital makers through wholesale relationships. The company has built a strong presence in the UK and the US through partnerships with beauty retailers. Its products are stocked in 800 Superdrug stores in the UK and in 1,200 stands through Ulta, the largest US specialist beauty retailer. Recently, the company has also expanded its distribution through [digital partners](https://www.financedigest.com/veraviews-welcomes-hoopla-digital-as-a-demand-partner.html "VeraViews Welcomes Hoopla Digital as a Demand Partner") including Beauty Bay, ASOS, Zalando, boohoo, Prettylittlething, Lookfantastic and Amazon. We are also seeing more [legacy retailers](https://www.financedigest.com/retailers-weighed-down-by-their-own-legacy-systems-survey-reveals.html "Retailers Weighed Down by their own Legacy Systems, survey reveals") trying to get in on the DTC space. The pandemic forced traditional FMCF branded companies and bricks-and-mortar [retailers to embrace](https://www.financedigest.com/rethinking-retail-banking-embracing-a-customer-centricvalue-proposition.html "Rethinking retail banking: Embracing a customer-centricvalue proposition") e-commerce with many companies having to ramp up their digital activity in a hurry, learning as they go.  As DTC companies are [developing omni-channel routes to market](https://www.financedigest.com/concrete-placing-booms-market-notable-developments-geographical-outlook.html "Concrete Placing Booms Market: Notable Developments & Geographical Outlook"), bricks-and-mortar operators can do the same. Indeed, there are many examples of FMGC and retail companies which have enjoyed a surge in DTC business. Hotel Chocolat for example is evolving rapidly from a UK store-led brand to a [globally](https://www.financedigest.com/how-a-british-brand-catered-to-hnwis-can-maintain-its-position-within-the-global-luxury-sphere-and-even-grow-in-these-current-circumstances.html "How a British brand catered to HNWIs can maintain its position within the global luxury sphere, and even grow, in these current circumstances") ambitious digital-led brand selling a broad range of cocoa products. In 2019, the company was a predominately store-based retailer with 116 stores in the UK, two ‘test sites’ in the US and two joint-venture locations in Japan and an ‘unusually high’ proportion of [digital sales](https://www.financedigest.com/digital-sales-transformation-is-key-to-faster-higher-revenue.html "Digital sales transformation is key to faster, higher revenue") at 19% in FY19. By FY21 70% of the company’s revenue was generated through digital, [partners and a digital](https://www.financedigest.com/miq-partners-with-seenthis-to-advance-sustainability-in-digital-advertising.html "MiQ Partners with SeenThis to Advance Sustainability in Digital Advertising") led strategy delivering 102% year-on-year growth in the US in Q122, with 27 locations now open in Japan. Even Primark which only sells through shops is boosting its digital team. The retailer is investing in [digital marketing and personalised messaging as well as a new information website where customers will be able to explore the range in more depth and see local stock availability](https://www.financedigest.com/igtb-launch-digital-transaction-banking-available-as-saas.html "iGTB launch Digital Transaction Banking available as SaaS"). Looking ahead, the entire DTC segment is buzzing with many new initiatives in development. One key initiative is [Embedded Finance](https://www.financedigest.com/why-embedded-finance-will-be-integral-in-the-future-of-b2b-marketplaces.html "Why embedded finance will be integral in the future of B2B Marketplaces"), where companies offer customers access to credit through their online platform. Recent research by Accenture, in partnership with open banking platform Plaid, found that 87.5% of [non-financial companies that have begun to offer financial solutions had increased engagement](https://www.financedigest.com/how-can-fintechs-better-engage-zillennials-with-their-financial-health-the-answer-lies-in-speaking-to-them-in-their-own-language.html "How can fintechs better engage Zillennials with their financial health? The answer lies in speaking to them in their own language") levels and 85% said they had attracted new customers. Initiatives such as buy now, [pay later are on a steep rise](https://www.financedigest.com/unicredit-shareholders-urged-to-reject-ceo-orcels-pay-rise.html "UniCredit shareholders urged to reject CEO Orcel’s pay rise") in every market. Another interesting area will also be the use of metaverse shopping and Non-Fungible Tokens (NFTs), unique cryptographic tokens that exist on blockchain and cannot be replicated. Metaverse is one of the biggest developments in the DTC industry at present. It is a vision where all digital experiences and objects – social media, markets, and games – are connected in one huge digital universe. It could include real-life elements like products and events and could exist with its own laws, currency, and communities. NFTs could change the market for artists for whom NFTs are [opening new revenue streams](https://www.financedigest.com/innovation-is-the-path-to-revenue-how-financial-organisations-can-open-up-alternative-revenue-streams.html "Innovation is the path to revenue: How financial organisations can open up alternative revenue streams"). Instead of only being able to sell a piece once, [creators will be able to set the terms of secondary sales](https://www.financedigest.com/youtube-in-challenge-to-tiktok-to-give-shorts-creators-45-of-ad-sales.html "YouTube in challenge to TikTok to give Shorts creators 45% of ad sales") using smart contracts. We’ve already begun to see this with Nike’s recent acquisition of RTFKT, a company which leverages NFTs to [create virtual products](https://www.financedigest.com/4-tips-for-creating-a-calm-workspace-to-boost-productivity.html "4 tips for creating a calm workspace to boost productivity") including sneakers. DTC is rapidly growing not just as a [sector but as part of many retail companies’ business](https://www.financedigest.com/new-business-launches-to-support-it-professionalsfacing-mission-critcial-sector-challenges.html "NEW BUSINESS LAUNCHES TO SUPPORT IT PROFESSIONALSFACING MISSION CRITCIAL SECTOR CHALLENGES") models. Although the investor sentiment towards DTC companies has not been helped by poor recent share price performances, we think there will still be investment appetite for these [types of businesses](https://www.financedigest.com/types-of-business-partnership.html "Types of business partnership") in the year ahead for those companies which demonstrate they can deliver on their growth strategies. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---