Digitally Native Shoe and Apparel Brands Sales Expected to Grow 20% – Footwear News

Amid fierce competition, digitally native vertical brands (DNVBs) in footwear and apparel have carved out a path for success.

Brands like Allbirds, M.Gemi and Rothy’s are among the wave of companies born online within the past decade that have upended traditional retail practices, forged direct consumer relationships and crafted strong brand identities. Despite the turbulence in the broader shoe and clothing categories during the pandemic, successful DNVBs have survived and even thrived thanks to their e-commerce prowess and relatively resilient supply chains.

Because of this, Coresight Research predicts sales by U.S.-based footwear and apparel DNVBs to reach $8.4 billion in 2021, an increase of 20% year-over-year. The research and advisory firm sees the country’s footwear and apparel market growing 1.6% overall for the year, putting digital natives well ahead of their less agile competition.

Today, DNVBs account for a relatively small slice of the overall market (6.2%, according to Coresight), but that share is growing larger by the year.

Still, increased sales don’t necessarily translate to increased profitability, as demonstrated by Allbirds’ initial public offering filing last month, in which the sustainability pioneer revealed that its net loss grew from $14.5 million in 2019 to $25.9 million in 2020, even as revenues jumped from $194 million to $219 million during the same period.

Many standard practices for DNVBs — offering fast, free shipping; courting customers with digital marketing campaigns; expanding into new categories and channels to grow the business — are extremely expensive and have become even more so during the pandemic due to choked supply chains and rising costs. And while, by definition, these companies have their roots in e-commerce, a wide swath have also branched out into brick-and-mortar — an expense that tends to be as much about marketing (bolstering the brand’s legitimacy and visibility) as it is about making sales in-store.

These kinds of costs have led some analysts to question the notion that selling direct-to-consumer is a sure path to higher profit margins. A report this week from BMO Capital Markets analyst Simeon Siegel estimated that DTC margins are about 1,000 basis points lower on average than wholesale gross margins, due in part to expenses related to fulfillment, logistics, heavy marketing and technology.

Despite these obstacles, DTC offers some compelling advantages that continue to lure even traditional wholesale brands, including a high degree of control over branding, distribution and pricing, as well as a direct line of communication with customers.

“Brand perception remains key to brand equity; where and how a product is sold can be as important as the quality of the product itself,” Siegel wrote in the report.