The Pricing Blog by Omnia Retail

In 2019, as a retailer, a D2C brand, or a pricing expert; if you heard the statistic that, in 2022, 64% of consumers will make regular purchases directly from brands, you’d likely wonder what could possibly take place...

In 2019, as a retailer, a D2C brand, or a pricing expert; if you heard the statistic that, in 2022, 64% of consumers will make regular purchases directly from brands, you’d likely wonder what could possibly take place in between those years for D2C shopping to become the majority choice for consumers. Direct-to-consumer, commonly called D2C, has jumped leaps and bounds in the last few years thanks to the traditional relationship between brand and retailer experiencing a reckoning with covid-19 lockdowns and closures that spanned two years. In essence, the new face of D2C e-commerce was born out of a need for survival amongst brands, from tech to fashion, who were staring down the barrel in 2020 with closed retailers, supply chain issues and sitting stock. On the other end, stay-at-home consumers were searching for a way to receive goods directly to their homes. Today, D2C sales, including established brands and digital natives, are estimated to reach $182.6 billion in 2023 and, overall, D2C sales have increased by more than 36% from 2020 - 2022 in the US. Despite these successes, D2C - both online and offline - has also suffered from the global inflation crisis of 2022 that left brands contending with 10.1% inflation in the UK, 6.1% in France and a 31.7% increase in energy prices across the EU. Facing increased competition, residual inflation, and a crackdown on sustainability practices, how does D2C fare for 2023? As we explore this growing sector of global e-commerce, Omnia looks to paint a portrait of its current state, as well as our predictions and expectations for the year ahead. Established brands will dominate revenue in 2023, showing the major shift big brands have made to D2C Despite showing impressive growth over the last few years, revenue for digitally-native vertical brands (DNVBs) will take a backseat to the more established brands that have made the move to D2C in recent years. In 2023, digitally-native brands are expected to earn $44.6 billion in revenue while established brands will earn much larger revenues, taking home $138 billion. In 2024, these numbers are expected to rise to $51 billion and $161 billion respectively. However, that doesn’t mean any less focus should be placed on the digital side of a brand’s sales stream. Although it is notable to see how well digitally-native brands are doing in the retail landscape, it is more noteworthy to see just how many established brands have made the move to D2C while some have circumvented the retailer route altogether at inception. Tech and home appliance brands like JBL, Phillips, Dyson, Bosch, and Miele, and sports brands like Nike, The North Face, Patagonia, New Balance and Under Armour have gone D2C - and these are just a handful of international brands that are making the move. In Europe alone, D2C e-commerce has grown by 23% between 2021-2022, with Germany leading the way as it remains Europe’s most sophisticated nation regarding logistics, infrastructure and a supply chain network. In addition, 57% of multinational companies worldwide gave “significant financial investment” in their D2C strategy, while another 31% added “moderate investment”. In the US, the amount of D2C brand consumers are set to increase to 111 million shoppers in 2023, making up 40% of their population. Globally, D2C-specific shoppers are at 64%, up 15% from 2019. Source: Insider Intelligence - D2C Brands 2022 Talk to one of our consultants about dynamic pricing. Contact us Why more consumers are choosing D2C over retailers When we see brands experiencing double-digit growth in their D2C channels, we know it’s because consumers have been making a conscious and active decision to go to the brand they love and trust directly. According to Statista, the leading reason consumers choose to shop directly from a brand, at 49%, is better pricing. In second place is free delivery at 47% and free returns at 35% in third place. Free delivery and returns were made industry-standard by Amazon before the covid-19 pandemic arrived, and have become the expectation of most consumers who specifically choose online shopping over a retailer for the reason of convenience and speed. Source: Statista 2023 However, despite what many consumers think that they are getting a cheaper price directly from a brand, this is often not the case, which is why brands need a thorough dynamic pricing tool to offer a better price - not always the cheaper one - for the brand’s consistent growth. As Omnia`s pricing data show, the necessity for a dynamic pricing solution is twofold: Brands have to contend with their entire retailer network. On average, a brand’s product will be sold by more than 1,000 shops on multiple marketplaces and comparison shopping engines in a national market, which the D2C channel must compete with. Secondly, prices are volatile; meaning that on average the lowest market price for a third of all products for any assortment will either increase or decrease on a daily basis. A dynamic pricing tool gives a brand the ability to react to market changes and consumer demands. The need for market insight is, therefore, vital for a brand. D2C in 2023: In the face of increased competition, new brands will need to find a way to stand out Gymshark, a UK-based sports apparel brand founded at first, in 2012, to digital customers only, has been labelled as a “challenger brand” for one simple reason: It’s found success in creating products around neglected areas within sportswear; one of them being the interests of the everyday gym-goer, instead of the successes of famous athletes. Nike, Adidas and Reebok, who have largely encompassed their ethos, identity and marketing around the famous athlete, from Rafael Nadal to Shaquille O’Neal to Cristiano Ronaldo, have peddled the dream of sporting victories to billions of consumers who - for the most part - can’t or won’t achieve that level of sporting success; although it is nice to fantasise. Instead, Gymshark looked to focus their communication and overall identity on the wants and needs of the daily sport-lover and gym-goer who has a 9-to-5, or a family at home. In addition, the brand has focused on creating gym wear that isn’t only for model-like physiques or for fully able-bodied consumers. The online store shows people one would actually be sharing the leg press machine - not Tiger Woods. Now valued at €1.39 billion only a decade after its inception, the lesson that Gymshark can offer longstanding brands with a D2C channel is to not tell consumers to challenge the status quo with sharp taglines (“impossible is nothing”; “just do it”) but to actually do it themselves. By 2025, the sportswear market across the globe will be valued at €395 billion, with a growth rate of 8-10 percent, showing just how much potential there is within the market to rise above the fray. “Activewear start-ups have found success by creating hyper-specialised products and marketing to local communities first,” reports Business of Fashion. Not dissimilar to Gymshark, Off-White, the brand created by Virgil Abloh, learnt to fill an almost non-existent high-fashion-meets-streetwear gap. The creative director sadly passed away in 2021, however, his vision for meeting a misunderstood or neglected part of the streetwear market caught the attention of Louis Vuitton which led to his appointment as the luxury brand’s menswear artistic director in 2018. Off-White is still in production today. “In a large part, streetwear is seen as cheap. What my goal has been is to add an intellectual layer to it and make it credible,” said Virgil. Strategic partnerships are also part of Off-White’s game plan to succeed in this niche, collaborating with both ends of the spectrum - from Jimmy Choo to Levi’s to Sunglass Hut to Nike. Whether a brand is within the activewear or luxury category or not, we see opportunities for D2C players to focus on a niche in their segment or, like Gymshark and Off-White, look at the needs of consumers buying from those categories to see where they aren’t being met. How D2C brands can prioritise long-term success and growth in 2023 Rely less on digital marketing spending for growth In the early years of Facebook and Instagram, it was easy for brands to rely on sizeable marketing budgets to push growth. As consumers consumed content that was both organic and paid for, brands could rely on these platforms for sales and awareness. In addition, digital marketing on these channels used to be more affordable than it is today: On average, the cost per impression (reaching one person equals one impression) on Facebook cost $14.9 in 2021 versus $7.8 in 2019. The cost to advertise also gets more expensive if there are more ads within a segment, making the increasing competition among D2C brands in food, clothing, or tech even more costly. The smarter alternative to funnelling funds into digital marketing is to have an all-rounded approach that involves social media with user-generated content, tips and “how-to” video content; strategic partnerships with brand ambassadors; personalised email marketing and subscriptions; as well as omnichannel in-store experiences. How D2C brands spend money to acquire customers matters over the long term with strategic, disciplined spending being better over the long term. Focus on quality customer data British mathematician Clive Humby said in 2006 that “Data is the new oil”, which is a statement that has proven to be true over the last few years. Research firm Magna Global found in a study they conducted that 83% of consumers are willing to share data - such as retail preferences, location, age, and marital status - to access discounted or personalised services. In addition, McKinsey reports that 80% of consumers want personalisation from retailers, which is a lesson the D2C sector could learn using customer data. Using quality customer data, D2C brands can build stronger relationships with customers, based on their personal preferences, when it comes to new product launches, sales, returns and delivery, and more. D2C can also optimise pricing and product assortment, as well as help brands understand the customer journey online. Hire the right talent Finding and retaining quality talent will be key to achieving long-term D2C success. From branding to e-commerce to digital to customer experience (CX/UX), having professionals and experts in these arenas is a non-negotiable point. Firstly, companies can look to see who, in the team, has the knowledge, credentials and skills to push forward the D2C agenda while offering them leadership positions or promotions. Another way to secure strong talent is to acquire professionals from existing scale-ups that have shown to be strong competitors in the market. First-party data and underserved niche markets will be D2C’s best friends in 2023 Over the last three years since D2C experienced its most growth, we’ve been pleasantly surprised at the sector’s resilience, considering it is up against e-retailer and marketplace behemoths like Amazon, eBay, Bol.com, Walmart, and Target, as well as social commerce marketplaces under the Meta title. Both brands and consumers have shown an almost stubborn competitiveness in forging their own way within retail and e-commerce. However, 2023 will not come without its challenges for D2C brands: Gaining and implementing strategies with first-party customer data will become more vital for growth while Apple and government regulators work to make third-party data a thing of the past. In addition, as the competition increases within D2C, brands will have to find ways to rise above the fray to stand out. In categories like skincare, beauty, or sports apparel where mostly established brands own the customer, new and emerging D2C brands should grab underserved niche markets by the horns.

The line between creative inspiration and infringement can be thin, dotted, or invisible at times. This was one of the lessons that Adidas had to learn this month when it lost its $8 million lawsuit against American...

The line between creative inspiration and infringement can be thin, dotted, or invisible at times. This was one of the lessons that Adidas had to learn this month when it lost its $8 million lawsuit against American fashion label Thom Browne over the use of parallel stripes in their designs. The German sportswear giant, who filed the lawsuit in 2021 saying that Thom Browne’s use of the stripes infringed on their trademark logo, believed that the use of the striped design was “confusingly similar” to the one presented in their logo. In 2020, global fashion brand Zara was sued by a smaller luxury label, Amiri, for copying a design of jeans without permission to use the design that included pleated leather panelling and zippers around the knee; after which the two brands decided to settle. And, more recently, French luxury brand Hermes has sued NFT artist Mason Rothschild for creating and selling NFT digital images of their famous Birkin bag, saying that the name of his work, entitled “MetaBirkin”, appropriated the Birkin trademark. At the crux of these lawsuits, along with many others, is a conundrum of creative expression, trade infringement, artistic licence and consumer confusion that affects D2C brands both small and large. As the fashion category within retail is so often pushed forward by something as ambiguous as creative expression, is there a defined lane that brands must stay inside of to avoid causing a fashion collision? Are fashion and beauty brands blurring into a homogenous cauldron of shared creativity? Do fast-fashion brands like SHEIN, Revolve, H&M and Zara get away with copycat behaviour because of their overall size and influence in e-commerce? Copyright and intellectual property laws may favour fast-fashion giants “Designers could not claim protection for any and all sweaters simply because they happen to make sweaters. But they can copyright the creative aspects of their work that make it different from the norm, such as a unique pattern,” says lawyer and Editor-in-Chief of The Fashion Law Julie Zerbo. “The reality is, in most cases, it's perfectly legal to knock off a dress design,” says Zerbo, which is why Amiri’s case against Zara resulted in being settled out of court as Zara made the case that the skinny jeans were “generic, ornamental and not distinctive” enough for Amiri to act on protectable trade dress rights, according to their legal representatives. In a similar instance, Nigerian designer Elyon Adebe found a replica of one of her crochet sweaters on SHEIN, the Chinese fashion brand that is the most-installed shopping app in the US; which seems to have copied the design and the colour scheme. The handmade garment was priced at $330 while the sweater on the e-commerce giant was priced at $17, catering to the Generation Z (aged 11 - 26) market that has largely contributed to SHEIN’s success. The copied sweater was removed from SHEIN’s website after Adebe posted about it on social media. The fact that many fast fashion behemoths are able to infringe, borrow or take inspiration from smaller D2C brands without much financial or social recourse leans toward a point made by Eleanor Rockett, author of the academic paper “Trashion: An Analysis of Intellectual Property Protection for the Fast Fashion Industry” published for the University of Plymouth, who said fashion is an industry “with copying at its heart” but further thickens the grey area when saying, “Intellectual property protection must strike the appropriate balance between inspiring innovation and restricting imitation.” She also references a theory that suggests copying spurs on innovation instead of stifling it, by saying that the more a trend or design goes viral, the faster it becomes irrelevant, in turn making for ripe conditions for more design innovation. European copyright law offers wider protections than in the US Rockett states how lax the intellectual property laws are in the US, which is supported by Zerbo’s thoughts above, and that the openness of them actually encourages copying and hastening the fashion cycle so that new designs can be made. In Europe, however, the requirements needed to be protected by copyright law offer far more coverage in the sense that there are only two requirements to meet: The design’s originality. It must be proven it is the creator’s own intellectual property The design must have the ability to be expressed in an exact and objective manner by an individual American law only offers protection if there are distinguishable features on the garment while European copyright law gives brands and designers wider protection. For example, in 1994, French luxury label Yves Saint Laurent (YSL) sued Ralph Lauren for copyright infringement. YSL’s dress was black, full-length, made of silk, had gold buttons, no pockets and a narrow lapel. The Ralph Lauren dress was black, full-length, made of wool, had black buttons, included pockets, and a wide lapel. YSL still won despite the dresses in question having unique characteristics, and took home €323,000. Find out more about how Omnia can help brands with price monitoring. Read more Are fashion and beauty brands blurring into a homogenous cauldron of shared originality? Shared originality - something that can’t quite technically exist but is tending to spread within fashion and beauty retail. Just this week, Nike sued Lululemon for patent infringement, accusing Lululemon of using some of Nike’s flyknit technology in their lifestyle sneakers. Although both brands produce sportswear and lifestyle shoes and clothing, their markets, branding, identity, ethos and marketing strategies are completely different; however, something that used to be a uniquely Nike product is now - kind of - Lululemons too. In addition, prior to this, Lululemon did not include any shoes as a part of their offering, making the fly knit look-alike their first venture into offering sneakers. In the past, Adidas has been accused of using fly knit technology in their Primeknit shoes too, adding fuel to the fire that proprietary designs and formulas that are used, borrowed or outright stolen make for a market that lacks individuality. While the shoes may not look similar, it is the fly knit technology patented by Nike in 2013 that Lululemonhas allegedly infringed upon, which is a knitted textile used in Nike's running shoes. Credit: @lululemon Instagram Credit: @Nikerunning Instagram Eventually, will everything look the same to consumers? Because branded items are losing their distinctiveness, consumers may opt for an item that looks similar to one they truly want, but is cheaper, thus increasing the competition within pricing. Brands are now not only competing on a product level, but on a pricing level because said products are becoming homogenised. The same can be said within beauty which has seen an explosion in market saturation in the last five years. If Chanel and MAC release liquid concealers within just a few months of one another that both offer pore-blurring technology, the product is no longer bespoke and the consumer can begin to choose a winning product on a price level, pushing forward the snowball effect that stepping on another brand’s proprietary technology only leads to a price war in the market. Although brand individuality is blurring, consumers can enjoy the unintended benefits When it comes to pricing, it works in the consumer’s favour when brands with similar products compete; keeping prices steady for shoppers. If there was no competition in pricing, there would only be monopolies; stifling opportunity and competition for new, smaller brands. When Andrea Saks from “The Devil Wears Prada” was on the receiving end of a scathing monologue from Miranda Priestley, played by Meryl Streep, for making a snarky comment about high-end fashion, she learnt that the “lumpy blue sweater” she was wearing wasn’t an exemption from the fashion industry, but very much a cog in the machine of it. Priestley's point was that fashion is not only cyclical, but shared, easily influenced and even more influential. Fashion is an industry full of brands and trends that either intentionally or unintentionally step on each other’s toes when it comes to designs, formulas or technology; all in the name of attracting and holding consumer demand. This is not to say that trademarks are up for grabs, and brands have the right to protect what they have built. Ultimately, the consumer must decide how they go about navigating the flock of brands that are all starting to look like doves and this is at times where dynamic pricing for D2C brands plays the biggest role for the consumer.

Consumers who enjoy shopping from the beauty category have long been used to two main pillars to choose from: Luxury brands like Dior or Yves Saint Laurent, and drug store brands like Revlon, Essence and Catrice which...

Consumers who enjoy shopping from the beauty category have long been used to two main pillars to choose from: Luxury brands like Dior or Yves Saint Laurent, and drug store brands like Revlon, Essence and Catrice which are found in pharmacies. Recently, a third pillar, made up of new-age makeup and skincare companies such as Drunk Elephant or Fenty Skin, has arisen and shown intimidating potential to the status quo within beauty. However, alongside the wave of new beauty brands aiming to disrupt the industry with reformed ingredients and packaging policies, there has also been an increase in the number of famous actors, singers and social media influencers who have released beauty products and skincare lines, overwhelming the industry as a whole. It begs the question of if there is enough space for all of them to thrive. It also takes us to another point: Do we really need another celebrity beauty product? How are these new beauty brands different? And, are long-standing luxury brands affected by the hype about indie brands? Here is a look at how the world of beauty is doing in 2023 and beyond. The rise of celebrity and “Instagram” beauty brands For decades, the only association celebrities or supermodels had with makeup or skincare brands was the fact that they were the face of it: Kate Moss for Rimmel; Cindy Crawford for Revlon; or Beyonce for Neutrogena. Nonetheless, there was a defining knowledge amongst consumers that this was not their personal brand but simply an endorsement. Since around 2015, however, the rise of brands created and owned by celebrities include ranges from Kylie Jenner, Rihanna, Selena Gomez, Ariana Grande, Kim Kardashian, Jennifer Lopez, Victoria Beckham, Pharrell Williams, Kate Moss, Scarlett Johansson, Hailey Bieber and now even Brad Pitt and Travis Barker have entered the field. With a revenue industry expected to be $571 billion in 2023, endorsements and campaigns are no longer what celebrities want - they’re more interested in owning a piece of the billion-dollar pie that industry leaders like Kylie Cosmetics, valued at $1.2 billion, and Rihanna’s Fenty Beauty, valued at $1.4 billion, have managed to gain. Charlotte Palermino, a qualified esthetician and the co-founder and CEO of Dieux, a US skincare brand founded in 2020 that focuses heavily on sustainable ingredients and packaging, says, “It feels like there is almost no thought to the execution but that the main goal is to simply make money,” in reference to the haul of celebrity beauty brands. This trend has coincided with the growth of platforms like Instagram and TikTok that make for well-oiled machines that directly reach millions of consumers each minute of the day. The Instagram account for Fenty Beauty received more than 45 million engagements (likes, comments, shares) on its posts in the year of 2021 while the account for Kylie Cosmetics received over 64 million. And, remember, this is just one of the many social media platforms that celebrities are using to attract a loyal fan base for growth and revenue. Instead of paying for an expensive TV advert to run during prime time viewing, celebrities simply photograph, film and post from their personal and branded Instagram and TikTok profiles, which is not only essentially free to create but allows the everyday consumer into the lives and beauty routines of the ultra famous. For celebrities, this combination has catapulted their brands into the same stratosphere that long-time brands like Covergirl and L'oreal have existed in for decades in a short period of time. An Instagram beauty brand is not the same as selling on Instagram When we talk about Instagram beauty brands, we’re not simply referring to brands that are sold on the platform. Beauty has experienced a radical surge in new brands being born out of the Instagram era which means aesthetics, beautiful packaging, and even font selection are vital to the virality of a product. Instagram beauty brands are minimalistic, sleek, and colour-coordinated, with a focus on not trying too hard to impress. In addition, how strategic a brand is with their Instagram feed layout adds to the virality and legitimacy of it. Instagram brands have a larger focus on being photogenic so that consumers will want to follow and mimic their page, and ultimately buy their product. There is also a stronger focus on connecting to consumers on a deeper level by posting user-generated reels and tutorials to show how the product can be used by anyone at home. We see here how Fenty Skin, which is part of Fenty Beauty, uses a minimalistic design for the packaging and sticks to a particular colour scheme in their content strategy. Above is Beauty of Joseon, a Korean beauty brand that gained rapid popularity on Instagram between 2020 - 2022 thanks to its simplistic branding and cleanly-curated feed. Here we see Rhode, the skincare line from Hailey Bieber, which remains true to the ‘Instagram brand’ philosophy of uncluttered packaging, post-worthy selfies and lifestyle shots, a modern font, and a dedicated colour scheme. What new beauty brands are trying to get right Clean Beauty For decades, established beauty powerhouses have made little to no effort to improve their sustainability efforts and to answer questions on their animal testing policies. However, in the last five years, the trend of “clean beauty” has skyrocketed like a bullet out of a gun, forcing older beauty houses to contend with new, indie brands that make clean beauty central to their identity, marketing and long-term strategy. To be clear, clean beauty refers to products that are cruelty-free, vegan, sustainably made, and with ingredients that are safe for you and the environment. Beyond that, clean beauty may involve excluding ingredients like fragrance which can be irritating to the skin, as well as toxic ingredients that may be carcinogenic. Sustainable Production and Packaging Outside of the bottle, sustainability within packaging is a large focus for indie brands. However, it’s not as simple as ensuring your packaging is plastic-free or recyclable. Indie beauty brand leaders constantly have to walk the tightrope of creating a product that not only does what it claims to do, but remains within a respectable price range for consumers, all while having to factor in the cost of eco-friendly and ethical production processes, delivery, and packaging. Despite these challenges, new-age beauty brands have much stronger policies on eco-conscious packaging, using materials like paper, glass, airless packaging, and aluminium, compared to the global behemoths that have dominated beauty practices for the last century. Sustainability as a core element of a brand’s identity has also become essential to consumers, as a THG Ingenuity study shows that 74% of consumers are willing to pay for more for a skincare product that has sustainable packaging. Direct to consumer In 2023, the total amount of online sales completed in the beauty and personal care market is estimated to be 27%, and is expected to increase to 33% in 2025. Of that, 63% of online purchases will be done via a smartphone instead of a laptop by the same year. With this growth rate, more consumers are choosing to engage with a brand directly instead of heading to a large beauty retailer. It is no surprise, then, that most new-age beauty brands have started out with a D2C ecommerce-only model before even considering moving to brick-and-mortar retailers. They have bypassed the traditional ways brands would typically get lift-off within a market by recreating the rules for themselves. In this sense, D2C brands can receive first-hand data on what their shoppers like and dislike; they can pick up the pain points of the online shopping journey; and they have full control over their packaging and delivery practices. Should luxury brands be worried? Luxury brands have seen fads within beauty before when every celebrity from Britney Spears to Jennifer Lopez had their own fragrance in the early 2000’s, however, this trend was premised on a cultural obsession with celebrities, supermodels, tabloids and their lifestyles. In 2023, things are different: Two key factors for a successful beauty or skincare brand are transparency and authenticity. Actor Jared Leto told Vogue Magazine that he “has never been interested in beauty products,” and then released a body care line with 12 products. With new celebrity brands popping up at least once a month, consumers end up feeling overwhelmed, confused and frustrated facing a saturated market. As the up-and-down hype of a new celebrity brand comes and goes, consumers will want to turn to something trustworthy and made of quality, and this is where luxury brands have a chance to shine by reaffirming their relationship with consumers. Regarding indie brands such as Drunk Elephant, Dieux, Glow Recipe and The Ordinary, luxury brands may have to step up their efforts to be more sustainable and transparent about their production processes, who make up their C-Suite, how their packaging is made and more. For the most part, luxury brands have thrived on having an air of mystery and exclusivity about them which may no longer work for younger consumers. The more transparent you are as a brand, the more millennials and Gen Z shoppers, who make up the bulk of the consumer pool, will trust you.