How DTC companies are creating sustainable advantage

Sustainable consumerism is escalating and all consumer companies, regardless of their business model, need to reflect this shift in both behaviour and marketing. Consumers will not want to keep buying products that are unsustainable, and the circular economy is becoming more normalised.

Direct-to-consumer (DTC) companies have tended to resonate strongly with Millennial and Gen Z consumers who are increasingly geared towards products aligned with sustainability. Vintage, or second-hand clothing was one of the first segments to work well for DTC companies seeking to trade in this space. Second-hand clothing is projected to make up 27% of consumers' wardrobes by 2023, up from 21% in 2020, according to the Boston Consulting Group.

Vinted, Europe’s largest online consumer to-consumer platform, claims to have more than 45m global members, and around 300m items listed on its platforms. In June, Etsy announced the acquisition of Depop for $1.625bn. Depop's 2020 gross merchandise sales (GMS) and revenue were approximately $650m and $70m, respectively, each increasing over 100% year-over-year. According to Depop's monthly brand awareness surveys, it has high prompted awareness for the Gen Z demographic within the resale sector; approximately 90% of Depop's active users are under the age of 26. Depop is the 10th most visited shopping site among Gen Z consumers in the US. Starting first in the UK and moving into the US and Australia, Depop now has a community of c.30m registered users across nearly 150 countries.

Electronics is also a good example where positive trends are driven by several tailwinds such as increasing consumer acceptance of circular economy models, inflating prices for certain consumer technology, slower rates of innovation, and decoupling of handsets from carrier contracts. In 2019, 53.6m tonnes of electronic equipment, or e-waste, as it is known, was discarded globally, according to the UN’s Global E-waste Monitor. Europe contributed c.22% of this, and it’s estimated that the average European citizen generates more than 16kg of e-waste per year. Globally, e-waste is expected to more than double to 110m tonnes by 2050.

This message has been echoed by independent research commissioned by musicMagpie, a leader of re-commerce in the UK and US in the circular economy of consumer technology (including smartphones, tablets, consoles, personal computers), books and disc media (including CDs, DVDs and games). musicMagpie values the market for ‘pre-owned’ consumer technology, disc media and books in the UK and US at c.£9bn per annum. Part of the business’s growth strategy is ‘Magpie Circular’: a new corporate recycling service for businesses looking to increase their sustainability efforts while also generating income.

And lastly, looking at the food and drink category, as issues around sustainability and food waste have become ingrained in the consumer psyche, targeted meal-subscription services like Oddbox have emerged alongside mainstream brands such as HelloFresh, Gousto and Mindful Chef.

With DTC the biggest trend in retail today, the various efforts of DTC brands to deliver sustainability to future proof their business are worth monitoring closely.

This article is based on finnCap consumer sector research which can be downloaded here in full to institutional subscribers to our Research Portal.