Unlocking Revenue Potential: The key to maximizing DTC sales

Unveiling the Significance of DTC Revenue

The digital realm continues to reshape the way consumers engage with brands giving them a unique opportunity to embrace Direct-to-Consumer (DTC) strategies and unlock new avenues of growth. In order to thrive, brands must dissect the dynamics of their competitors’ DTC sales versus those through partnerships.

“Successful competition starts with knowing not just how much your competitors make, but how they make it.”
In this report Grips, a leading provider of transactional e-commerce intelligence, dives into the realm of revenue generation and illuminates the importance of understanding DTC influence.

Peering into the Revenue Landscape

This comprehensive analysis meticulously scrutinizes the share of revenue derived from the  DTC operations of 40 leading brands across six prominent product categories.

One of the most compelling findings is the wide variation in the share of revenue derived from DTC among different verticals. For instance, the average laptop brand analyzed in this report receives just 24 percent of revenue from DTC while DTC drives over half of the revenue for the average shoe brand. There are also significant differences in the way that individual brands within a given category approach their online sales strategies. Understanding these nuances provides valuable insights that will fuel your successful growth in today’s dynamic market.

Your E-commerce Mission Has a Guide

Successful competition starts with knowing not just how much your competitors make, but how they make it.

With our game-changing intelligence tracking over 65,000 brands across 45,000 domains, you’ll be empowered to make informed strategic decisions that lead your brand to sustainable success. From identifying potential market gaps to capitalizing on untapped revenue streams, Grips will serve as your guide in navigating the intricate e-commerce landscape.

Among leading footwear brands in the United States, Grips estimates that roughly half of their e-commerce revenue comes via their own DTC site. And while no individual retailer accounts for a greater share of revenue than their respective brand.com, there is a wide range of DTC revenue shares.

For instance, Allbirds, Olukai and ON demonstrate a strong reliance on DTC, capturing over 75 percent of their US e-commerce revenue from their websites underscoring the success of cultivating a loyal base. Conversely, brands like Vans, Puma and Converse get less than a 40 percent of revenue from DTC, signaling a preference among their base for purchasing through retail partners or third-parties.

Nike, which made headlines in 2017 when it cut its retail partners by half in order to focus on DTC–a decision on which they’ve recently reversed course–gets 52 percent of revenues from Nike.com, putting them right in the middle of the pack with Ugg, and New Balance.

Interestingly, there was a discernible tendency for brands with higher DTC shares to maintain relatively higher average prices on their websites suggesting these brands may leverage their direct relationship with consumers to implement a premium pricing strategy and/or exclusive merchandise sold at higher price points.

Another trend to note is that brands with strong DTC shares like Allbirds and Teva also tend to exhibit relatively high conversion rates (CVR). This suggests that brands with well-established DTC channels and compelling online experiences attract and convert customers more effectively. Meanwhile, lower conversion rates for brands like Asics and Puma point to a potential problem with their online experience which they should examine and improve in order to drive higher conversions, ultimately boosting their DTC sales.

Even in a less crowded categories, Grips sees a wide variation in the share of e-commerce revenue that leading brands generate via DTC. In the vacuum category, for instance, Dyson stands out with DTC accounting for 60 percent of the brands online vacuum revenue. Meanwhile, Bissell gets just a fifth of its US revenue from Bissell.com.

Dyson and Oreck exhibit a shared emphasis on premium pricing, especially on their DTC sites. In fact, Dyson is not only the highest priced brand, but, according to Grips, the average price of a vacuum purchased on Dyson.com is 34 percent higher than one made on a retail site. While the DTC-premium is not unique in the vacuum category (or any other category, for that matter), Dyson is succeeding at getting a higher price from consumers than other brands, a strong sign of the high brand recognition and quality perception that Dyson enjoys.

Dirt Devil, Bissell and Hoover, on the other hand, are more effective at converting visits into sales. Their DTC conversion rates, which are nearly double that of Dyson and Oreck, are likely driven by their lower price points which make it easier for consumers to click the “buy” button. Interestingly, Bissell is the only brand in this category to post a lower average price on its website than on retail partners overall. This tactic likely encourages more price-conscious shoppers to form a direct relationship with the brand.

These trends underscore the dynamic nature of DTC revenue generation. Brands opt for diverse pathways to success, tailoring their approaches to individual strengths and market positioning. While some emphasize premium value, others cultivate active customer engagement. The vacuum industry’s landscape exemplifies how strategic choices shape revenue dynamics and consumer experiences in the evolving digital marketplace.

Revenues among prominent US beauty brands reveals continued diversity in strategies and performance, but one thing is clear: DTC is a dominant source of revenue. Among the 10 leading brands included in the analysis, all but one (MAC) received a majority of e-commerce revenue from DTC.

Il Makiage, with no authorized retail partners, still generates 100 percent of revenue from DTC. ELF, one of the first digitally native beauty brands has since expanded to retail partners, but it still receives two-thirds of revenue from DTC. Newer DTC brands have been quicker to expand distribution which is illustrated by the fact that Kylie Cosmetics and Tarte have a 52/48 split (DTC vs. retail.)

Established brands like Mac, Clinique and Mary Kay maintain a significant DTC presence, leveraging their reputation to drive DTC sales. In fact, the latter two brands along with Il Makiage enjoy the highest DTC conversion rates of the 10 analysed beauty brands in this report reflecting their strong online presence and robust customer engagement. Interestingly, Kylie Cosmetics posts one of the lowest conversion rates of the analysed sites suggesting that while the brand has a significant DTC share and a dedicated online audience, there might be opportunities for them to further optimize their online shopping experience and customer engagement strategies to improve their conversion rates and align more closely with industry norms.

Pricing strategies remain varied among the brands. ELF is a budget-friendly option with an overall average price of just $7.30, but the brand posts an even lower average price of $6.16 on ElfCosmetics.com. Tarte and MAC also opt for a discounted DTC price likely appealing to price-conscious consumers. La Mer and Two Faced, on the other hand, maintain significant DTC price premiums, emphasizing exclusivity and product differentiation. In fact, consumers pay, on average, about 32 percent more when buying either of these brands via DTC than they do when buying from a retailer.

Luxury fashion brands face unique challenges in the digital age. They must maintain their exclusive image while adapting to changing consumer preferences. Grips data highlights that DTC channels have become essential for reaching and engaging with luxury consumers

On average, luxury brands see lower shares of revenue coming from DTC than most other categories. In fact, none of the four leading luxury apparel brands analysed here received more than 40 percent of their US e-commerce revenue from DTC with Chanel’s DTC share of just 17 percent.

But compared to other categories, these brands see a much greater disparity in the average price that consumers spend directly with them versus what they spend when buying the brand from a retailer. This is driven by selection and assortment with luxury brands only allowing their finest pieces to be purchased directly from the designers allowing them to maintain a sense of exclusivity and status.

For instance, the average price of a Chanel apparel item purchased online is $948. But an item purchased on Chanel.com is more than three times that coming in at $4,173. Gucci also posts an average DTC price premium of 300 percent and Valentino’s DTC price is 2.3 times higher than their retail average. Coach, which operates a successful, but separate outlet (CoachOutlet.com) has DTC prices that are closer to retail but still about 60 percent higher, on average.

These higher prices have an impact on conversion rates, which hover around 0.8 percent for Gucci, Valentino and Coach and just 0.4 percent for Chanel (whose average price is over three times higher than competitors). While this rate is lower than other categories, it aligns with luxury fashion’s customer base, which tends to be more discerning and less impulsive.

Going forward, luxury fashion brands will continue to be challenged as the seek to grow their DTC revenue having to decide between leverage their reputation to command premium prices and making luxury more attainable.

Laptops are other category where retailers generate the majority of e-commerce revenue. Among the four PC brands included in this analysis, Dell stands out with the most substantial share of US e-commerce revenue (43 percent) coming from Dell.com. Conversely, HP’s laptop DTC share is remarkably low at just seven percent, reflecting a focus on retail partnerships in its distribution strategy. For both Lenovo and ASUS, DTC accounts for roughly a fifth of online revenue in the United States.

Dell also had the highest average DTC price of $1,300, which is 2.1 times higher than the Dell laptop e-commerce average, indicating consumers buying from Dell.com are buying more expensive laptops than those purchased through your typical retail partner. This was also true for other brands, but the DTC premium was the highest for Dell.

HP had the lowest DTC premium with the average price of a laptop purchased from HP.com coming in just 31 percent higher than average. And while that may seem to be a tactic employed to drive more DTC revenue, it doesn’t seem to be working for HP given their low DTC share. The lower premium may also be due to a lack of premium products driving consumers to HP.com in the first place. While Dell, Lenovo and ASUS all list their higher price gaming laptops on their main DTC site, HP maintains a separate domain (Omen.com) for their premium gaming machines. This may ultimately be having an impact on HP’s DTC share and premium.

Conversion rates among these brands remain consistent, hovering around 0.4 percent and 0.5 percent. This consistency across brands suggests that conversion rate is not disproportionately affecting any of the brands’ DTC revenue in either a positive or negative way. While CVRs are modest in comparison to other sectors, it aligns with the considered nature of laptop purchases, where consumers engage in thorough research and evaluation before making a decision.

In this final section, we’ll look at the DTC revenue and drivers of leading backpack and bags brands, which highlight a range of strategies.

For starters, the Grips  data reveals varying DTC shares among these brands. Digital native brand Cotopaxi stands out with a significant 75 percent DTC share. While the brand has been adding retail partners to drive growth, it still remains DTC dominant, signifying its strategic focus on direct sales. Herschel follows closely with a substantial 58 percent DTC share, showcasing its commitment to the DTC channel.

The North Face, while still receiving roughly a third of it’s US e-commerce bag revenue via TheNorthFace.com, has a more balanced approach between DTC and other distribution channels.

Each brand adopts distinct pricing strategies for their DTC offerings. Herschel bags are the most affordable overall with an average price of $48. While bags purchased on Herschel.com cost slightly more, the price is still low enough to deliver a stronger conversion rate than The North Face and Cotopaxi, which post an average price of $140 and $86, respectively, which contributes to slightly lower conversion rates. Interestingly, the price of a backpack or bag purchased on TheNorthFace.com averages 25 percent lower than one purchased on a retailer, suggesting the brand wants to emphasize DTC accessibility without compromising on quality.

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