The direct-to-consumer economy shows no signs of slowing down. Fashion retailer Express is launching its own DTC brand to catch up.
- 40-year-old fashion retailer Express is jumping on the direct-to-consumer bandwagon with its own line of health and wellness products called UpWest.
- The line includes clothing, sleep aids, CBD products and home products from other manufacturers.
- UpWest hopes to stand out by building a community with branded content and events as direct brands Goop and Glossier have done in a big way.
- Legacy companies launching their own direct brands may have a leg-up on the supply side but don't necessarily understand demand as well as DTC brands do, DTC investor Nik Sharma said.
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The swift rise of direct-to-consumer upstarts has forced legacy brands to rethink their businesses. Among them is 40-year-old fashion retailer Express, which is launching a direct-to-consumer wellness brand called UpWest.
With UpWest, Express is trying to take a crack at the $4.2 trillion global wellness industry, said Jamie Schisler, UpWest CEO. The line includes clothing, sleep aids, CBD products, and home products like candles and bath salts from other manufacturers.
"Express is a legacy brand with a long history, but it needs to continue to grow," Schisler told Business Insider. "UpWest helps us get up to speed with the direct-to-consumer trend and changing consumer sentiment, offers us a new segment of consumers we can reach, and lets us grow shareholder value."
Express's net sales declined 2% to $2.1 billion in 2018.
UpWest is taking a page out of DTC brands' playbooks
UpWest has a team of 11 and handles its own inventory, merchandising and design, and platform (Shopify), but uses Express for areas like supply chain, logistics, and HR. Like typical DTC brands, it will sell its products directly online, and doesn't plan to sell in Express stores, said Schisler.
UpWest hopes to stand out by building a community with branded content and events as direct brands Goop and Glossier have done in a big way. Its website will feature shopping recommendations and it is using meditation-themed events in Austin, Chicago, Columbus, Denver, and Nashville to promote the new line.
UpWest will donate 1% of sales up to $1 million annually to like-minded charities including Mental Health America, Freedom Dogs of America, and Random Acts.
"The world doesn't need another clothing brand," said Schisler. "But there has been a cultural shift within consumer's minds in terms of what they are looking for from brands. They're looking at brands to offer solutions, which means that brands need to be not just transactional, but transformational."
P&G, Verizon, Kellogg's and others have also incubated DTC brands
As the DTC economy grows, legacy companies are trying to catch up. P&G has acquired DTC companies, Coca-Cola has invested in buzzy startups, and others like Verizon and Kellogg's have built direct brands like Visible and Happy Inside, respectively.
Express decided to built its own DTC brand because they can help each other, Schisler said. Express can learn how to work faster from UpWest while the latter can tap Express for manufacturing and distribution.
"The capital structures of acquisition deals is often structured to satisfy current ownership," he said. "This made more sense for us."
Legacy companies launching their own direct brands may have a leg-up on the supply side, but they don't necessarily understand demand as well as independent DTC companies, said DTC investor Nik Sharma.
"Legacy companies only understand what SKUs sell, but they don't always understand the consumers and how they shop," he said.