Looking back five or ten years almost all new shoe brands were so called D2C brands, Direct to Consumer, and often made a big point of being such. Now it seems like the pendulum is about to swing as many of these brands ditch their original set-up and also use traditional retailers. Are D2C shoe brands becoming a thing of the past?
Given what this website focus on and given that it’s the industry that I know well, this article looks at quality shoe brands, but a lot of it is the same also for many other product categories. Looking back at the 20th century, the standard way for any shoe brand was to sell through retailers. It was of course logical, given that to reach people you needed to be where they were, physically, and to be able to do that you needed intermediates. Stores.
If you sold internationally, you went through wholesalers or agents, since you needed another intermediate that could be there closer to the stores that sold your footwear. There were of course exceptions, like mail order companies that used brochures to reach their customers, really big companies that could run their own stores in many places etc., but mainly that were how things were done.
This meant that a whole retail system where all needed parties got their share of the total price was established. For decades someone who wanted to start a shoe company didn’t really have to think about how they should run their business, they only needed to focus on the products and branding, if one simplify things.
Enter internet. Enter e-commerce. Everything was thrown up in the air, and after a few years where the shipping companies played catch-up the new reality was that anyone from anywhere could reach any customer anywhere. Not only did this new reality add a new way to sell, it created new ways to run businesses. When you didn’t need to be located in physical brick and mortar stores close to customers, shoe companies could skip that step of the retail system, and start selling directly to consumers. D2C.
Now, there’s only a small part of all shoe brands who actually own their own factory, so in reality one can say that almost all those who sell “directly” in fact are middlemen. And what’s a bit special for the sector of quality men’s footwear, is that it’s a low margin industry where the mark-ups through the traditional, old-school retail system was relatively low. I’ve written more in-depth about this in this article.
Nonetheless, looking back the past decade or so a vast majority of all new quality shoe brands have been brands that don’t use traditional retailers – be it brick and mortar or webshops – but who sell only through their own channels, online of course and in some cases also through their own physical store(s). And many of these branded themselves as “no middlemen” D2C brands and made a point of being more affordable due to less parties that need to get paid. They were to “disrupt” the industry and used those graphs showing how “traditional retail mark-up” meant more than double the price for the same quality product, and so on. Not all D2C brands pushed themselves this way, should be said, but it was very common.
The past couple of years, a new development has taken place. Many of the D2C brands all of a sudden started to appear at retailers. Could be at high-end department stores, large multi-brand online stores and similar. Prices usually had gone up a bit by this point, but certainly not double the price, which would point to the fact in the article mentioned earlier being more correct than the brands’ marketing.
The process these brands go is quite the opposite of how things used to be. Before, brands that had become big through retailers had started to take home more and more of the sales, to get a higher part of the margins themselves, especially through selling through their own stores. The former D2C brands went the other way around. Started off with their own online stores and ended up expanding to retailers.
It’s an interesting development. The old-school brands and those who often called themselves “disruptors” end up in the same place in the middle. Since many of the more successful D2C brands when it comes to growing turnover often did so at a loss, meaning that even if one could continue to find new customers, it cost. So a way to continue to grow and reach new customers, hopefully at a lower cost, would be to be represented at large retailers. It’s certainly not bad for the brands to be represented at famous retailers, it strengthens them and likely will increase their own direct sales as well. It can be seen as a different way of marketing.
So, will the pure D2C quality shoe brands go away going forward? Not necessarily. Even if the digital world is tougher nowadays and for example organic growth in social media is much harder, it’s still more common that new brands that are launched go that route selling only through their own channel(s). For the same reason as the now big former D2C ones once did, it’s the easiest way to do it. But it may well be that the new standard is that those D2C brands that manage to grow and make a name of themselves in many cases will go the route towards retailers eventually. Maybe also more smaller ones need to go this route to find new customers. The “disruptors” and the old heritage brands end up more similar than any of them might have thought.
Great analysis as always, Jesper. Do you think the whole social media thing gave many brands an unrealistic expectation of their actual potential customer base? In terms of both quantity and quality? Also, as a Chinese, it is interesting and a bit funny to see that many European/international brands are so similar to each other from design to marketing to price, whereas in China, brands are diverging on these fronts. Usually it’s the other way round. For example, Oct Tenth now has an increasingly big and successful RTW line, with more emphasis on fashion to attract a bigger and more diverse audience, while keeping a stable MTO/MTM client base. ACME goes full high-end with different lines, a bit like Corthy or Berluti during the heyday of department stores. Gordon Jimjun gets less and less attention nowadays, I guess at least partially because they keep changing their domestic pricing and service pack (eg. what kinds of changes can be made to standard models, standard-sized trail shoes or MTM ones, etc.) and doesn’t really have a marketing or customer service team. Also, now there are more mid-end (~USD 200-300) brands from bigger factories who usually also do OEM for international brands. All of the brands mentioned above, except Gordon, are now listed on Taobao by both their own store and also some menswear/luxury goods specialist stores. Since it is the same platform, pricing of brands’ own stores and specialist stores is largely the same.
While I understand now more and more young people, under the influence on social media, are looking to buy bespoke-like quality shoes and menswear for RTW price (afterall, I was one of them just a few years ago), I find it more important and valuable to have a connection and mutural understanding with those who make and mend the things you own, whether they are owner-manager or the actual craftsman. For this reason, and also maybe because I’m getting an economist’s training, I believe it won’t necessarily be a “bad” result if some, or even many of these D2C brands won’t survive the competition, or if the outcome of the competition isn’t lower price and higher quality. It is more joyful for me to find out that I now live driving distance from craftsman such as Steve of Bedo’s Leather Work and Sunny of Cobbler & Co than finding a “good deal” online for shoes or clothes.
Zian: Thanks for the kind words! And for your interesting thoughts on the Chinese brands. Working a lot with bespoke shoemakers, one of the best things with that is the personal relationship one have. Totally get that few have the possibility to buy bespoke though, just saying it’s one thing I appreciate with that.
Zian and Jesper, what is that wrong about wanting bespoke quality for RTW prices? Some brands from Asia are willing to do it.
ML: Don’t think Zian said it was anything wrong with that? And I certainly didn’t say anything about this.
Then people have to have realistic expectations, there’s quite few of the Asian brands who in full have actual bespoke quality of the make, finishing etc. But I also think it’s great with the options of a bit more basic fully handmade shoes, often from Asia, that one can find nowadays.
Jesper, thank you for clarifying. Could you provide makers from Asia who offer bespoke quality at RTW prices?
I agree that basic offerings also expanded a lot, and pose additional pressure. Yet I still remember the time a couple of decades ago, when you can get imperfect C&J at 99GBP, because very few people were into shoes of this kind. What in your opinion has sparkled so much interest in the shoemaking recently?
ML: The main ones I’d say is Acme, Winson and Oct Tenths top line. If one talk the more affordable ones, comparable to European premium Goodyear welted RTW brands in pricing.
Many many reasons, I’ve written a lot about it on the blog through the years.
Jesper: Winson is known for its quality, yes, Acme seems more like GG to me, but I see that their RTW line is strong now – though I am concerned that pricing is not far away from GG, and many models are more expensive than Edward Green.