As we discussed in last week’s edition, 2024 has been another volatile year for retailers across categories as the industry contends with value-oriented consumers, consolidation and other headwinds. One sector that has gone through waves of transformation over the past few years has been digitally native brands (DNB)/direct to consumer (DTC) retail. These brands expanded their physical footprint in lock step with both favorable and unfavorable retail conditions, which has resulted in a variety of performances.
Some brands have found their physical footing, while others have faltered due to location selection, expensive real estate, mismanagement and misalignment with their consumers. As we reported in the spring, some digitally native DTC darlings have ultimately had to walk away from a physical footprint. It’s a stark reminder that success in physical retail isn’t a given just because brands find their footing in the digital world.
For the digital natives that have found long-term success, there is a connection between value, good product, and a physical footprint that aligns with consumer needs. Using Placer’s foot traffic estimates, we compared a group of once “buzz-worthy” digital natives, including Warby Parker, Away and Allbirds, to see how they’ve performed against the backdrop of 2024. Each of these brands, at one time, represented a new approach to their category, whether in accessories, footwear or beauty. Many of these brands continue to open new locations, which may also impact their foot traffic growth numbers, but there are underlying factors behind each performance.
Looking at year to date foot traffic, Warby Parker and Away have increased their visitation year-over-year, while Allbirds has had a more challenging performance (admittedly, Allbirds' year-over-year foot traffic has been impacted by store closures). Warby Parker traffic is up an impressive 24% in 2024 compared to last year, and certainly sets the benchmark for digital native retail performances. The brand has benefitted from its perceived value by consumers and its ease of shopping experience compared to other vision retailers. Warby Parker is a standout among digital natives in part due to its commitment to perfecting the in-store channel, especially for a product that has a lot of consumer touchpoints and need for knowledge and product recommendations.
Warby Parker and Allbirds, two of the most recognizable brands of this cohort, have pretty similar visitor journeys, with one key difference. Visitors to Warby Parker are most likely to visit from home and head home after the shopping experience, showcasing it as a true destination for consumers. In contrast, while the highest percentage of Allbirds visitors do head home post-visit, shoppers are more likely to hit the store while they’re out shopping and visit other stores after spending time at Allbirds. Allbirds, comparatively, might be one stop in a visitor's shopping trip for browsing or buying, but consumers don’t necessarily see it as a destination retailer. Some of this behavior can likely be attributed to the categories these retailers play in, but it does underscore how much Warby Parker has infiltrated the retail customer journey.
Away has regained some momentum in 2024, after bouts of internal challenges and a rollercoaster of a luggage business. There has been increased competition in the luggage category with entrants like Beis and luxury brands like Rimowa and Paravel enticing shoppers. Beyond that, luggage demand halted during the pandemic and luckily caught a tailwind with the rise of the experiential economy in 2023, although the brand struggled to capture some of the increased demand that year. Away has added new categories this year, including soft-sided luggage, and updated its core luggage products last year. As evidenced by Warby Parker’s success, providing a product that has a high level of perceived value compared to alternatives is critical, especially this year as consumers of all levels are more discerning. Away appears to have followed suit, and the increase in visitation in 2024, especially against a 2023 that brought so much focus on travel, is quite impressive. And, it also illuminates some of the struggles that Allbirds has had in finding that balance and perception with its visitors.
How do digitally native DTCs move forward? There are quite a few cautionary tales, but ultimately uniqueness and value are also the most important factors for consumers visiting these physical stores. As shown in our data, each of the three brands highlighted attract a majority of visitors in Ultra Wealthy and Educated Urbanite cohorts. With attracting higher income consumers, if DTC brands can get the value equation right and keep themselves top of mind, there is a lot of potential to unlock in this sector of retail. With many major retailers consolidating or merging this year and beyond, there is an opening for DTC brands to stand out and better compete. But, as we’ve highlighted, even with all of the correct components, getting it right isn’t always easy.
