What: Digitally native brands will continue to adapt and evolve in 2021

Why it is important: even though online retail accelerated with the Covid-19 crisis, making DTC brands uniquely positioned to weather the disruptions in retail, they will continue to evolve and reshape for the long-term

Retail Dive looks at the DTC space and decipher height trends that will shape this business model in 2021. Trends include:

• More traditional retailers enter the DTC arena: With less foot traffic in physical stores, retailers took inspiration from DTC brands on how to approach tech-savvy consumers.
• Digitally native brands see the value in physical retail: over the years, DNVBs realised that in order to scale their businesses and succeed in the industry, they need to enter brick and mortar in some capacity.
• DTC brands extend their category reach: As top brands lose market share in certain categories, DTC companies have the opportunity to expand their product offerings (to respond to the demand for casual and self-care products for example)
• Tech-savvy consumers will be drawn to DTC brands: While consumers spend less time in malls and more on their mobile, DTC brands have opportunities to appeal to a new demographic and retain the ones they already have.
• Securing funding could be easier, at least for some: The pandemic also impacted how investors view the retail space and how they think about DTCs. E-commerce is projected to post a 32.4% increase compared with 2020. Therefore DTC brands and tech companies are well-positioned to receive funding from investors
• Exit strategies get more complex: Once brands grow, they begin eyeing their next move. Some brands have pursued acquisitions by larger retailers while other brands have chosen initial public offerings. A new popular option is going public by way of special purpose acquisition companies (SPACs).
• Leadership turns to retail vets as founders step back: As popular DTC brands scale much larger than their startup days, founders have taken a step back, and retail veterans have moved into C-suite roles.  The shift of founders away from the day-to-day of their brands isn't likely to end, as successful DTC brands continue to expand and recruit leadership that can help them reach the next growth stage.
• Brands will continue to struggle with profitability: Media costs came down during the pandemic, but the solution is temporary and brands need to continue to look for ways to mitigate the high costs of acquiring customers online. In order to eventually turn a profit, brands will need to continue finding solutions to attract consumers and bring marketing costs down.

8 DTC trends to watch in 2021

Related items:

• How DTC brands will approach physical retail in 2021
• One big way Direct-to-Consumer retail is changing