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How the Direct-to-Consumer Model Is Driving Retail Supply Chain Innovation

By Susan Pichoff, GS1 US

Small but mighty, direct-to-consumer (DTC) apparel brands are quickly earning more of the U.S. consumer’s hard-earned dollar. Within the next five years, 81 percent of shoppers will likely make at least one purchase from a DTC brand, according to Diffusion. Additionally, one third plan to make at least 40 percent of their purchases with DTC companies within the same timeframe.  

Promising convenience and a unique experience, DTC brands are forcing an undeniable shift in retail operations. More retailers are seeking to partner with DTC brands in order to add an appealing new dimension to their digital portfolio. For example, Walmart now sells popular clothing brands Bonobos and Modcloth, which helps them reach a new audience, while the brands benefit from built-in exposure and showrooming opportunities. For each side to benefit, a standardized approach is needed to fully leverage data acquisition and to accurately fulfill consumer orders. Here are three ways standards can support a successful retailer/DTC brand collaboration.

Streamlined data sharing

DTC brands are digitally-native brands — their strengths lie in data acquisition. Each search or purchase a customer makes is documented and becomes valuable to personalizing future shopping experiences, and even predicting what those shoppers will want next. Retailers looking to compete with Amazon, which has long been regarded as the leader in optimizing the utility of consumer data, partner with DTCs for greater visibility to consumer and shopping behavior data.

To effectively utilize this data, both parties have a common interest in the format and quality of information that they receive from each other, too. Incomplete, inconsistent, and/or erroneous product data can lead to out-of-stocks, costly returns, and ultimately, customer frustration. GS1 Standards enable smoother systems interoperability. By working together, using a single data formatting system of standards along with unique product and location identification, trading partners can reduce costs and optimize operational efficiencies. Different from cumbersome data silos, a standards-based framework helps all partners effectively share a single product data set, in a uniform way — contributing to a truly data-driven and error-free experience.

Unique identification for an endless aisle

Perhaps one of the biggest benefits of a DTC collaboration, from the retailer perspective, is the opportunity to save costs in handling and storing products by never actually taking ownership of the inventory. Using a single system for product identification, as opposed to a variety of proprietary numbering systems, can help the partnering companies streamline the fulfillment process and achieve the seamless, endless aisle experience that consumers have come to expect.

The key to universal product identification is the Global Trade Item Number (GTIN), which is also the number located under the traditional UPC barcode symbol. It is assigned to each physical product and is invaluable to omnichannel inventory management and sales. Beyond the barcode, a GTIN forms a fundamental link between online listings and the physical product, and products with a unique GTIN have a better chance of surfacing in search engine results.

Nimble supply chains

Often with a focused product line, such as the fair trade online startup Pact Organic now being sold at Target, DTC brands inject retailers with fresh additions to reinforce their relevance. However, the transition from being solely direct to taking on new retailer partners adds supply chain complexity.

Standards have enabled the traditional brick-and-mortar retail evolution toward successful flexible fulfillment omni channel strategies, and DTC brands can achieve the same level of scalability by adopting the standards-based processes. Managing DTC-allocated inventories for multiple retailers would be inefficient without GS1 Standards, particularly without the adoption of Electronic Product Code (EPC®)-enabled item level Radio Frequency Identification (RFID) tagging. RFID helps brands and retailers have access to real-time SKU-level inventory visibility, leading to more successful matches between what the consumer searches for and what is in stock.

This is how it works. RFID tags carry serialized GTINs, which gives brands the critical intelligence they need to know and exactly what they need to provide for each retailer partner. Serialization through RFID allows for specificity — instead of the system telling them they have 3,000 pairs of mittens in stock, they can have access to greater granular detail about the products, such as 3,000 pairs of sequined mittens, 1,000 in black, 1,000 in white, and 1,000 in purple. This is the SKU-level inventory accuracy that can help a DTC brand truly deliver once it has taken on the added role of inventory manager with a retailer partnership.

Ultimately, DTCs are known for blazing their own trails through retail and upending traditional thinking. By contrast, the standardization of data and processes embraces uniformity and leverages it for consistency. Adhering to standards can help brands and retailers create an efficient foundation from which they are able to build their own unique offering and differentiate themselves to win over today’s consumers.