Why digitally native natural brands are rocking retail

As e-commerce grew steadily over the last few decades, doomsayers predicted brick-and-mortar’s eventual extinction. Then when the COVID-19 pandemic turbocharged online shopping, many felt physical retail’s death was all the more imminent. 

Well, now that the COVID-era chaos has calmed, it’s clear these alarmist projections were off-base. Because in 2024, old-school, in-person shopping is neither dead nor dying.

“Brick-and-mortar is instilled,” says Steve Hoffman, founder and president of Compass Natural, a public relations and marketing firm serving natural products companies. “Just like how rock and roll is not dead, vinyl is not dead, people still go to stores—period.”

In fact, across many industries—natural and organic products included—brick-and-mortar retail is positively thriving.

“That’s where the volume is,” says Benji Fitts, director of customer education at SPINS. According to Fitts, SPINS’s expanded natural channel alone, which generates $41 billion annually, is made up of 2,500 brick-and-mortar stores nationwide. The conventional MULO channel consists of 110,000 stores while the convenience store channel comprises 150,000 stores.

“Physical retail is where America spends most of its money,” Fitts says. “Do you know anyone who doesn’t shop at a grocery store? No. Do you know people who don’t buy things online? Absolutely.”

As further proof of physical retail’s merit, Hoffman points to Amazon’s acquisition of Whole Foods Market in 2017. “The biggest online seller in the world was trying for years to have a brick-and-mortar presence with Amazon Fresh,” he says. “Whole Foods suddenly gave them 250-odd locations that they’re now integrating with Amazon Prime.”

Whole Foods Market Chicago

Crossing over, cashing in

With brick-and-mortar alive and kicking, more and more digitally native natural CPG brands are realizing that retail is a smart play.

“There is value in the digital universe, and there is value in the real, physical universe,” Hoffman says. “You want to reach people wherever they are, so any brand today needs to be thinking omnichannel.”

Increasingly, DTC natural CPG companies are doing exactly that. Brands that launched online during the pandemic, as well as preexisting brands whose sales surged because of it, are actively pursuing omnichannel strategies that prioritize physical retail.

Many crossover companies are racking up big wins on-shelf—and not just at natural products stores. Even supplement brands, historically hemmed into the natural channel, are finding success at conventional supermarkets, big-box retailers and even drug stores, where consumers increasingly shop for these products.    

According to Pure Branding’s latest PureSegmentation research, the percentage of supplement users who purchase at least some of their supplements from large mass retailers jumped to 48% in 2024 from 38% in 2020. This trend also tracks with Nutrition Business Journal’s 2024 sales projections, which have the mass market selling more supplements than the natural channel for the first time ever.

“Savvy DTC brands are aware of this opportunity and want to expand their piece of the pie,” says Samantha Brewster, vice president of growth marketing and account management at Pure Branding. “Retail is an enticing path toward mass awareness and growth.”

One smash-hit crossover is MaryRuth’s Organics, which launched online in 2014. After blowing up on Amazon and its own e-commerce site, the family-focused supplements brand entered Whole Foods Market in 2021—and nabbed enough sales to earn the retailer’s prestigious Rookie of the Year award. Since then, MaryRuth’s has expanded into Natural Grocers, Sprouts Farmers Market, Walmart, Target, Publix, Kroger, Wegman’s and Sam’s Club.

Another recent success story is Ritual, beloved for its sleek, Instagram-worthy clear-capsuled supplements and radical transparency. Founded in 2016, Ritual also made its retail debut at Whole Foods, in 2022, then entered Target this spring—and it’s definitely nabbing attention in-store.

At Target, “Ritual products are inserted among legacy his and hers multivitamins but have a much higher price point, and they look completely different on shelf,” Brewster says. “Even if you’ve never heard of Ritual, you can tell they’re a DTC brand just from their look.”

There are countless other DTC-to-retail triumphs throughout the natural products industry, though most are on a smaller scale than MaryRuth’s or Ritual. More commonly, brands begin their retail journeys at local, regional and specialty independents before breaking big with a national chain. Regardless of the exact trajectory, the new doors that retail can open for DTC brands are increasingly hard to ignore.

How retail expansion behooves brands

Expanding into brick-and-mortar can yield a breadth of benefits for brands. First and foremost, it elevates exposure to a wider audience of shoppers.  

“For brands, expanding to retail can unlock a much bigger segment of the market,” Fitts says. “Potential customers who are not using social media or not targeted by your marketing and algorithms are shopping every day in these stores. The volume gains can be massive.”

Having a retail presence also typically increases trial. “Consumers tend to buy natural products in person first,” says Tahaji Felder, senior accelerator program manager at Target. “They want to engage with a product and look at the rest of the assortment on-shelf. So, being on a retail shelf is great for a brand.”

Additionally, regarding supplements specifically, “most consumers already have a favorite product that they’re familiar and comfortable with, so getting them to try a new supplement takes some time,” Felder says. But by being on-shelf, she explains, brands give shoppers “the opportunity to engage with their product—to look at the ingredients, feel the packaging, compare it to what they currently use—in person, where they can digest information a little easier.”

These perks are particularly pertinent in today’s inflation-plagued economic climate. “Consumers have less discretionary income today,” Felder says. “The average wellness product costs $10 or more, and that’s a lot of money for consumers. So you really have to convince them to at least try your product, and the easier way to do that is to be on a retail shelf.”

And then, once they’ve secured placement, digitally native brands may even have “a leg up compared to legacy brands that have been on-shelf for decades,” Brewster says.

What’s that advantage? “DTC brands tend to more deeply understand their consumer,” she explains. “While legacy brands have been distanced from their end users by retailers, DTC brands have been able to study their shoppers, and most have an active—and often personalized—dialogue with them. As they enter retail, they are equipped with this consumer knowledge, which can inform how their brand looks and feels on shelf.”

As another bonus, having a retail presence can reinforce consumer confidence in a DTC brand. “One-third of supplement users feel that seeing a brand at their favorite retailer actually lifts their trust in that brand,” says Brewster, citing Pure Branding’s 2024 PureSegmentation research.

Felder agrees that a retailer’s “approval” of a digitally native CPG carries a lot of water with shoppers: “It signals to the consumer, OK, this could be a potential good brand to try.”

The Vitamin Shoppe

Retailers reap rewards too

Just as DTC brands benefit from retail expansion, retailers can benefit from onboarding these brands. 

“Brands with a successful DTC strategy can bring in new customers that may not currently be shopping in the store,” Fitts says. “Therefore, the retailer can gain some market share from the competition.”

Beyond that, digitally native brands can demonstrate a solid track record from online sales. “By showing a positive DTC sales trajectory, the brand’s market-fit hypothesis can be proven,” says Fitts. This proof, he adds, can make that company less risky to take on shelf than a brand with minimal or zero prior sales history.

Another potential perk? Innovative digital brands can elevate a retailer’s cool quotient, showing shoppers that the store is progressive and dialed into their needs. 

“Many DTC brands lead with a hero need state, which can add depth to the shelf, [whereas] legacy brands often have a full A-to-Z portfolio,” Brewster says. “Promoting a specific need state, like sleep, with focused DTC brands demonstrates innovation and increases shop-ability.”

Tim Avila, president of Systems Bioscience Inc. and a longtime New Hope Network advisor, also touts this advantage. “There is a lot of true innovation and really interesting categorical development happening out there,” he says. “Brands that have a specific niche—be it urinary health, women’s health or catering to a specific community of interest—could be interesting to a retailer, particularly an independent retailer.”

Challenges and risks with retail expansion

Despite the umpteen upsides of launching into retail, the transition is not necessarily easy, nor is success guaranteed. There are real roadblocks and risks to navigate—and almost always a lot for brands to learn.

“The challenge in going omnichannel is now you have to support omnichannel,” Hoffman says. “You might have your online business model down to a T, but now you have to learn to operate a new business model in a new channel of distribution.”

A big piece of the learning curve entails grasping all of the costs associated with retail that aren’t part of the DTC equation. Most emerging brands are on a tight budget, Felder says, and they’re often unprepared for the myriad costs tied to inventory, supply chain, manufacturing and more—costs that can look very different across categories. Retail brands also need to budget for trade marketing, something that many DTC companies aren’t equipped to do, says Hoffman.

On top of all of those costs, distributors and brokers charge fees that can cripple DTC brands that aren’t expecting them. 

“You have to understand the margin structure because it’s going to be different,” Avila says. “If you don’t understand your multiples, your gross margin and whether that will still be a fit for all of the hands that are out in retail, then this could be a short honeymoon.”

Besides the cost considerations, moving into retail also carries a certain level of risk, especially if it’s a major national chain.

“There’s a big risk, big reward with these large contracts,” Brewster says. “A large chain may offer you a big paycheck and instant national distribution, but if it’s not where your target consumer is shopping, there’s a big risk that your SKUs will collect dust and you’ll need to buy back your inventory. To manage this risk, you need to know who your target is, where and how they shop, and how to effectively position and promote your brand to them.”

Stay tuned for part two of this series, exploring the right way for DTC brands to approach retailers and how to succeed on-shelf.