Five years ago, Parachute’s model came straight from the DTC playbook: Sell bedding and bath linens at a cheaper cost compared to competitors by designing products in-house and working directly with factories to keep manufacturing costs low. Then, use a Shopify site and Instagram ads and nix expensive retail partnerships with department stores, thus those cost savings back to the customer and into product development.

Today, Parachute’s business looks quite different. It has six stores, and just raised $30 million to open 14 more by 2020. Its media mix has shifted to include out-of-home and direct mailers. There’s even a print catalog. To drive more people to the brand, Parachute also signed onto a retail partnership with wedding registry site Zola. It’s as if Parachute grew up and turned into its mother.

“The direct-to-consumer landscape is becoming more competitive than it was five years ago, as more people are marketing their brands online,” says Ariel Kaye, Parachute’s CEO and founder. “So, what differentiates you is the store experience, the human touch, the online-offline connection, and being where your customer is.”

The direct-to-consumer category, as a whole, is beginning to transform to be a lot like the traditional retail industry it set out to disrupt. At least, the ones who have a chance at scaling will. Next year will see a shakeout: Digitally native brands have to mature into mainstream retailers, or fade out.

“For a while there, the DTC strategy was a no-brainer. But it’s now so saturated that the cost of media and returns could destroy your business, and a growth plan becomes more challenging,” says Jeremy Bernstein, CEO of the agency The Science Project. “So, what’s going to be the difference? Great brands and businesses will survive just like they always did. The only thing ‘DTC’ will ultimately signify is a market entry strategy.”

It started with stores. Anyone still living the digital-or-bust fantasy needs only to look at the numbers to realize online is just one piece of a mature business. For Parachute, customers who shop in stores spend 10 times more on average than customers who have only shopped the brand online. That trend holds true for other digitally native brands across categories have reported a lift in overall customer spend, both online and off, in the markets where they’ve opened physical stores, including Away, Allbirds, Casper, Eloquii, Warby Parker, Everlane and Reformation.

The category as a whole is on track to make a sizable dent in retail’s physical landscape: Real estate firm JLL projected in October that digital brands will open 850 stores in the next five years.

“Businesses today have to embrace the fact that the world is a more fragmented place than ever before, and it requires nimbleness, reacting quickly, and taking advantage of data to make decisions around the consumers themselves,” says Julie Channing, the CMO of Allbirds, which has three permanent stores. “There’s been a lot of talk about the rapid pace of change but that’s the new norm. When we see something working, like a store experience, we expand around that.”

But physical retail was just the first shoe to drop. Wholesale is the white flag signaling that the DTC dream is dead. Some brands – like Allbirds — are still holding out. But other digital brands, like Harry’s, Quip, Casper and Everlane, have started selling wholesale through retailers like Target and Nordstrom. The footprint is sometimes smaller, and the terms of the deal may differ, but at its core, the strategy is still to sell on borrowed shelf space.

“The lines will continue to blur between modern and traditional brands. If you peel back the onion on Casper, you’d see traditional brand-like economics and expansion channels and partnerships,” says Scott Friend, managing partner at Bain Capital Ventures. “But that’s great — only a handful of brands are going to get to this scale of operating at this level, and they’ll be permanent fixtures on the consumer landscape. There will be lots of others that don’t make it that far.”

To be fair, deep inside, DTC brands do have some markings of a different internal makeup than traditional companies. Rooted by their online presences, they have a direct line to customer data, and the supply chains to respond quickly, making product develop smarter. Store openings are informed by that insight. With digital foundations, these brands can avoid the familiar trappings — bloated inventory and discounts, way too many stores — that impaired yesterday’s weather-worn retail class.

That makes a big difference when it comes to scaling modern businesses.

“I’m glad we paced ourselves [opening stores],” says Kaye. Physical retail still only makes up a small fraction of Parachute’s business, but even as it opens more, Kaye believes the store network will stay smart. “We have a lot of data and we can make the best decisions about where to open them because we have that validation.”

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