How DTC brands can prepare for turbulent times

How DTC brands can prepare for turbulent times

Current inflation rates are unprecedented this year, getting up to 40-years high in a lot of the countries: 8,1% in Europe and 8,6% in the US, according to Trading Economics. This affects all the industries, including fashion: Gap just cut its full-year earnings forecast on Thursday, joining Kohl's, Tapestry, Estée Lauder, Walmart and Target, which have all done the same throughout the month. How can DTC fashion brands prepare for turbulent times ahead?

For the majority of the shoppers inflation means prioritizing essential goods and low priced items. Shoppers may have been going mainly after the materials and style before (where DTC brands have really strong game). Now it’s all about price and durability.

Quality over quantity

It’s hard to compete on the price tag, especially for quality DTC brands, when the materials come from premium sources, items are often handcrafted and each piece is unique. So you should highlight in your marketing the other part: quality. Make your shoppers understand that one quality item will last them years, and essentially is a better investment than fast-fashion clothes which will be thrown out after one season (if not sooner). Change your marketing message to include durability and quality of your brand and tell shoppers that in the long term they are saving more by shopping with you.

Pricing elasticity and testing

If you have to raise prices because of materials becoming more expensive, understand your customers’ price elasticity. “Price elasticity” means how flexible you can be with your pricing until your customers will go shop somewhere else. For some items you can raise prices higher, and because of their quality, uniqueness or just pure love shoppers will be ready to continue purchasing from you. For others, even a small raise can lead to leaving you for a competitor. Ideally, you can already map your items on this scale and change prices accordingly to stay profitable and not lose customers.

But if not, it’s not too late to start experimenting; remember to start small though not to scare away your customer. A counter-example would be a clothing retailer Bella Dahl which tried to mark up its t-shirts by $20 per unit, but when sales sharply dropped, the apparel company walked back the price increase. You’d want to introduce changes gradually: be strategic about the segments and the products where you do increase prices and make it is communicated clearly as to WHY it is happening. After some time you will be able to understand in which categories you can raise prices in case you need to. What can help you reach higher price elasticity with your customers? Uniqueness, which we already mentioned several times during this article. If shoppers just can’t get the same style or items anywhere else, they will be ready to pay more. You may try releasing a limited drop or a collection where items are priced extra (which has been an adopted practice for years for many of the luxury brands).

Branding and loyalty

However, branding also plays a big part (yes, even during times like these). When shoppers trust and love your brand, they will also be ready to pay premium. Storytelling, connecting with customers and building good reputation can translate into very tangible revenue numbers during inflation. Just have at look at Dr.Martens, who have raised prices 6% and still continues to grow thanks to its loyal fanbase.

Marketing the right way

When it comes to choosing the right way to deliver your brand and messaging to the customers, omni-channel is the way to go. Gone are the days when you could just launch a Facebook campaign and enjoy incoming traffic and sales. Now it’s not just “trendy” to be on many channels: it is necessary in order not to lose any customers who might prefer just one specific media channel.

Live commerce is still picking up traction, but that also means that the space is not as saturated (at least in the EU and US). If you already have active communities on social media then it is even easier for you to start incorporating elements of commerce, mixing it with live streaming. Think TV shopping from the 90s but an upgraded version: people like to actually see the products “in action” (for fashion especially), and it’s a great new channel for you to try. Another social media tactic that you should definitely add to your plan is influencer marketing. Again, now it’s not about just doing mass mailing to bloggers and hoping someone will pick up your offer. Ideally you would be working with them through a specialized platform like Make Influence where you can manage, analyze and optimize your campaigns. Affiliate marketing falls under the same umbrella: you pay to partners who promote your products a fee from every sale they bring.

Partnership marketing is also a trend: you might imagine that there are other brands who struggle to get new customers. Of course, they should not be your competitors; ideally it’s a “complementing” brand which products are used by the same audience as yours: think sneakers and shoe cleaning kits. If you manage to build such relationships, you can advertise to each other’s audiences for a low (or zero!) cost: everybody benefits.

Work on retention

Retaining a customer has always been cheaper than acquiring a new one, so retention becomes increasingly important during these times. You probably already have some retention practices at hand, but now is the time to really dig into the strategy: work with intent-based communication (using the products viewed and added to cart as triggers), build different cohorts based on number of purchases and their frequency and create specific communication for each group; incorporate how-to videos, thank you messages.

All of this ensures that the customers feel valued, your offers are relevant to them and they continue shopping with you and don’t go off in search for a cheaper alternative.

Run the numbers and review the costs

Speaking of more “physical” things to consider: review your supply chain (once again, even after all the recent changes with the pandemic and chain disruptions). Build several plans for different scenario as the only thing you can be certain about is that no one really knows what will happen next. But while making plans be ready to be agile, as the situation may change and you will need to adapt quickly.

Now is a very good time to revisit your budget for the year and make sure the numbers are aligned with your priorities. Although it is tempting, you should not start spending a lot to acquire more customers quicker, sacrificing CAC (Customer Acquisition Cost) and eventually running out of budget. Slow does it, especially when everyone else is rushing.

Be smart about discounts

The winners in the current market situation, according to Klover, might be the retailers with bargains: and so it is very tempting to start running discount promotion to attract shoppers. But be smart about them — this cohort of customers will expect continued lower prices and it is going to be very hard to build a strong relationship with them. So make sure you have a sound plan of how you’re working with discounts, for which categories you choose to apply them and how high they should be to still bring you profit and not devaluate the products.

Silver lining?

Fortunately, we have some good news for you as well. Another crisis which was dictating the situation on the market for the last 2 years (yes, COVID, we’re looking at you) seems to be if not over then not as strong as before. People are going back to the offices, prefer meeting in-person: and they need to refresh their wardrobes. There is a rising interest for both ready-to-wear clothes for everyday activities and attire for special occasion: which is a trend fashion DTC can capitalize on.

Inflation doesn’t seem to slow down, the times are difficult for small business in many industries, fashion included. However, the tried and tested approaches still work: produce quality clothes, build your brand and community around it, care about your customers and look for new ways to get you name out there. Be careful about your budget, and plan for long-term strategies rather than quick fixes.