Concept Study: Driving ROI for DTC Retail Brands

A leader in multi-channel inventory management and retail planning solutions, 7thonline has been empowering retailers to drive ROI across channels for 25+ years. With artificial intelligence and machine learning embedded into the core of the platform, 7thonline enables data-backed, integrated decisions that directly impact the bottom line: smarter allocation and replenishment to minimize markdowns and lost sales, reduced overproduction and excess inventory, dynamic in-season decisions and more. 

Based on various metrics such as revenue and gross profit margin, our team is able to conduct concept studies to show the impact of our platform for various brands; the concept study includes aggressive, likely and conservative scenarios to calculate the return on investment for our direct-to-consumer and wholesale solutions. 7thonline’s ROI model was developed by Kurt Salmon, part of Accenture Strategy, based on an independent study of 7thonline’s clients to serve as a benchmark for investment evaluation for retail executives.

For brands with direct to consumer channels, acting on new opportunities that improve inventory productivity amplifies ROI through proactive OTB decisions, maximizing full-price sell-through based on an item’s highest propensity to sell and smarter allocation/replenishment driven by localized demand. Using 7thonline’s demand forecasting and consumer-centric selling tactics for DTC operations, we ran the following numbers for a detailed ROI analysis.

According to the ROI analysis, a brand with an estimated $1.5B annual revenue is projected to see the following:

• Over five years, the additional revenue realized could be up to $56.5 million (aggressively) due to more accurate demand forecasting and consumer-centric merchandising.

• Conservatively, the brand is slated to see an additional $8 million in profit margin due to improved full-price sell-through rates set by localization, in the first year with a 6X ROI. 

• Using AI for operational efficiency saved the brand nearly $4 million in inventory carrying costs for just the first year in the conservative analysis.

For a $500M brand, we ran a conservative ROI analysis of using 7thonline’s DTC solutions to find the following:

• By decreasing markdowns and minimizing lost sales through smarter allocation, the brand can (conservatively) expect $3.8 million in additional revenue within the first year.

• Conservatively, the analysis projects a 242% ROI in the first year due to an increase in revenue and decrease in SG&A and inventory carry costs—valued at a net benefit of $2.8 million.

• In year five, the brand has reached over 18X on ROI, with a cumulative benefit of $26.3M, while the annual net benefit has nearly tripled from year one. 

Our AI-native system utilizes proprietary vertical-specific models and industry best practices to drive value for all brands and retailers across wholesale, DTC and ecommerce channels regardless of size. As brands continue to grow, our platform not only scales to their business needs but also realizes more potential, boosting returns for multi-channel brands. 

Discover more concept studies for wholesale brands and multi-channel brands.

To learn more about 7thonline’s AI-powered DTC planning and store allocation solutions, email us at info@7thonline.com or book a demo with the team.