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Why DTC Brands Need a New Kind of Factory

Direct-to-consumer brands do things differently, and many of them need factory partners with a similar mindset.

According to Joseph Heller, founder and CEO of cloud-based on-demand manufacturing services provider The Studio, facilities that serve DTC brands must be set up to accommodate much shorter turnaround times, smaller quantities and often greater degrees of customization—while still keeping an eye on the bottom line. This laser focus includes everything from sampling to production.

Heller also encouraged factories to consider the possibility of owning some of the product development responsibility in conjunction with their DTC brand partners. “DTC brands are often under pressure to come up with new designs to entice customers,” Heller explained. “Factories oftentimes have more experience with products than designers at DTC brands, and can help inspire designers with new ideas, or even provide actual design development for brands.”

Former Stance CEO Taylor Shupe launched next-gen apparel manufacturer FutureStitch in China’s Zhejiang province with the goal of not just improving factory production efficiency but “innovating a new platform in manufacturing.” Just completed in October, the 300,000-square-foot facility itself reads more like a cultural destination than the place where 300 workers convene to crank out top-quality socks for Stance (its largest client). The space features a basketball court (enjoyed by a 40-strong employee league) and color-soaked art galleries to enliven the design-forward structure conceived by one of China’s top architects.

Shupe said he wanted to challenge the “archaic thinking” around manufacturing’s enduring reliance on cheap labor and paltry working conditions by building an upscale environment in an attempt to reverse the “direct correlation” between production output and worker retention—which hovered at 10 months to 12 months.

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To streamline procurement, Shupe said he’s considering building a mill on-site so as to better control the supply chain. He echoed Heller’s points on technology; FutureStitch, which is currently operating at one third of its capacity and in talks with numerous well-known DTC brands, relies on the cloud to expedite communications and connectivity, and even built a proprietary CRM platform.

FutureStitch factory China
Inside the FutureStitch factory, where artwork depicts some of the quirky prints and designs featured on premium socks for a top customer, Stance. FutureStitch

When they’re just starting out, newbies to the apparel space learn the difficult lesson that “making clothing is really…hard,” said Lawrence Lenihan, co-CEO and co-founder of Resonance NYC, a new manufacturing model that helps designers bring their visions to life—without any minimums attached.

A lot of new DTC brands don’t quite grasp just how challenging manufacturing can be. “There are tons of intricacies to perfect a product,” Heller said. “You will become exponentially more successful if you become an expert in your product and surround yourself with best-in-class factories, product development people and operations people.”

Reshuffling the deck to service DTCs can present a challenge for large, established factories. Because many emerging DTC brands aren’t ready to place the MOQs that traditional factories demand, these manufacturers can create small, highly custom orders on quick schedules only if they can treat many such orders as one big order, Heller said. Doing so requires complex software, tracking hardware and often an on-site employee to oversee that technology’s integration.

Like these other manufacturing innovators, J. Kirby Best, CEO of on-demand production firm OnPoint Manufacturing, believes DTC brands could very well be the future of apparel production—though there’s a caveat, he said. Over time, retailers will evolve toward the showroom concept where consumers can come to experience, touch and try on product that will be fulfilled quickly from a centralized warehouse, he explained.

Millennials, and even Gen Z, are showing their disdain for the endemic waste and destruction inherent to many large and lengthy apparel supply chains, Best added. “I think they’re going to drive a lot of this.”

By contrast, Shupe believes wholesale isn’t going away anytime soon but that DTC brands will make up a larger share of the retail mix over time. “Thirty years from now we may not even buy clothing anymore, we may just be renting it,” he added. “The connection to the brand at that point is going to be critical.”

Any forward-thinking factory understands that the long-established model of very large brands purchasing massive quantities for as far as 18 months in the future is a dying one, according to Heller. The future landscape will be far more complex and could involve factories selling direct to consumer themselves much like Italic or partnering alongside DTC brands.

“Traditional manufacturing of massive quantities and long lead times will still exist for specific use cases,” Heller said, noting that some factories will find allies in small brands past the startup stage. “It’s probably safe to order white socks in certain quantities and optimize for price in terms of quantity and speed.”

The point, Heller continued, is that the future will require factories to understand that they will need to serve a range of business models and DTC will be a very important part of that mix.

Factories oriented to DTC brands can be important partners in their scaling plans. FutureStitch’s Shupe said the company has many of the tools in place necessary to help DTC brands ramp up their businesses. It aids clients with sock designs, for example, which is “actually more challenging than you think.” The factory also handles fulfillment for brands with shipping and logistics needs and retains an in-house innovation team that works primarily on material science at the yarn level in addition to new printing methods and other techniques.

DTC-centric factories can teach legacy players a thing or two.

For one, responsive manufacturing is the only way brands can beat Amazon and other mega-retailers that offer basic and everyday clothing, or even rip-offs of major brands but much more quickly, Heller said. “While traditional brands should invest in better e-commerce, last-mile tech, et cetera, they can close the gap tremendously by offering relevant, unique gear. Customers are willing to wait and put up with inconvenience for that,” Heller said, noting that the block-long lines for new Supreme drops are proof of this consumer truth.

According to Shupe, traditional brands and retailers should understand that if you compensate workers fairly and treat them well, you’ll wind up with a better product. But beyond that, Shupe said consumers are showing a tremendous “product-centricity” and a growing interest in sustainability. “Doing something right for the right reasons really translates to the consumer,” he added.

Factories using traditional models might want to take note of the efficiency opportunity afforded by new manufacturing models which “make things that don’t sit on shelves but go direct to the consumer,” said Best. “When you are focusing on one-offs, you can’t afford to make three mistakes. You can’t do three samples to make one product.”

Read Heller’s tips for vetting factories, and learn more about the ways in which direct-to-consumer brands are changing every facet of the industry in Sourcing Journal’s Direct-to-Consumer Takeover report here.