Why global brands are investing in the DTC strategy
DTC is back in fashion
Research the top retail trends for 2021; you will find that direct-to-consumer delivery (DTC) appears in almost all relevant results.
How can this be, you will ask yourself, given that people have been selling direct for centuries? What it means to sell direct has undergone many transformations over the years. The latest transformation is happening right now as retailers invest in the DTC strategy not only to supplement sales revenue, but to build a global brand. Understanding the motivations behind this change is crucial for retailers in order to fully capitalize on the potential offered by DTC.
20 years ago DTC looked very different
The term DTC is a misnomer because it does not encompass all types of direct selling. If you took your cart on wheels to sell potatoes at the Old Spitalfields Market in 18th century London, for example, you weren’t a DTC brand.
DTC specifically refers to a type of business in which the customer purchases directly from a retailer’s website or app. The term originated in the 1990s, when the internet was at its peak and retailers suddenly found themselves with the means to sell to customers around the world at a lower cost.
DTC has become popular as a democratic and modern form of commerce. Retailers could build a website with an integrated e-commerce platform and sell to customers without convincing a wholesaler, online marketplace, or specialty distributor that a product is worthy of their assortment. It was this ease of access, along with minimal time to market, that made DTC a popular channel for startups in its early days. Besides cheap social media ads and an abundance of venture capital, small businesses could be launching and growing at an unprecedented rate with DTC trading.
For a while, the model was consistent: Companies would go out with a minimal product offering (sometimes even a single product), nurture a small community of loyal followers, then scale the business with social media ads. . Today, many startups that had thrived are facing soaring prices for social media ads and the steadily decelerating Instagram follower count that accompanies market saturation. Even when a business is ahead of the competition, there is a limit to its ability to scale when it relies solely on web-only retail. For now, these companies are at an impasse.
The current DTC landscape is changing
Rather than remaining the hallmark of web-only startups, DTC has now entered the mainstream, and there are two main motivations behind this change.
The first is the COVID-19 pandemic, which has seen established retailers – especially those that once relied heavily or exclusively on physical sales – invest in the DTC strategy. With the closure of physical stores pushing unprecedented numbers of consumers to shop online, mainstream retailers have quickly found e-commerce a high priority. Online shopping and pick-up services (BOPIS), for example, saw year-over-year growth in 2020 of 28% in February compared to 18% in January, according to an Adobe study. Analytics. While many retailers viewed these initiatives as a temporary fix, the growing popularity of digital retail experiences has encouraged many retailers to continue these investments in e-commerce platforms.
The second, and most promising, is the growing interest of global retailers in the potential of a DTC strategy to strengthen their brand image and protect it from dilution. The more a business grows, the more difficult it can be to maintain consistency in the brand’s message, as each additional third-party distributor means additional brand fragmentation and more room for inequality in the customer experience. Retailers have limited oversight or control over product descriptions, delivery times, or customer service provided by third parties. Since channel partners will never put as much effort into defending a retailer’s brand as the retailer itself, investing in a DTC strategy is the best step retailers can take to ensure that ‘they present the brand on their own terms.
An online presence is increasingly important
More than ever, consumers are doing their homework before they buy. 63% of shoppers now research a brand online before making a purchase, according to Think With Google. If they can’t find the information they’re looking for, 72% would buy elsewhere, according to an Akeneo study. Consumers can’t risk buying from retailers they don’t know much about, especially during the COVID-19 pandemic.
Having a branded website that provides consumers with the information they need to make an informed decision is the best way to allay these concerns. Even the most basic DTC strategy that primarily focuses on the e-commerce solution can provide consumers with a level of information that is not available anywhere else. Product guides, FAQs, and size guides are just a few examples of services that help consumers make sure a product is right for them. In the fashion retail trade, some companies go further by offering consumers the possibility of seeing the same product on models of different body types.
One of the most common reasons consumers deter from shopping online during the pandemic is the inability to touch items as they would in-store. By providing consumers with as much information as possible about each product, retailers can gain the trust of consumers. For confined consumers, being able to trust a retailer to deliver on their promises is essential. Half of those polled in an Edelman study agree with the statement: “In this time of crisis, I am turning more and more to brands that I am absolutely sure I can trust” (52% in the UK United, 51% in France and 48% in Germany). It is no longer enough to suspect that a retailer is trustworthy; consumers want absolute certainty.
Besides product information, consumers also want to know the brands they buy from. A brand’s mission, purpose and attitude towards corporate social responsibility are now key criteria for changing consumer decision-making models. Consumers of all generations are willing to spend more money on products they believe protect the environment, defend workers’ rights and protect inclusiveness, according to a McKinsey report. If they feel that brands are neglecting their social and environmental responsibilities, it is now very likely that consumers will avoid buying from them. In fact, Edelman reported that 71% of consumers would lose trust in a brand forever if it put profits before people.
It’s all in the brand
The most successful DTC strategy doesn’t start with an ecommerce solution and in hindsight fashion a website around it. A successful DTC strategy sells its brand as rigorously as its products. While the e-commerce solution is often only one of many potential revenue streams, the company’s website is the home of the brand.
Here are some ways that retailers can strengthen their brand through DTC:
Clearly communicate your brand values and consider including sections on sustainability, social responsibility and inclusive practices, as well as information on the company’s response to COVID-19.
Explore your brand issues in a blog and feature guest editors whose values match yours.
Let consumers know your brand cares about their experience by ensuring consistent customer service, responding directly to customer reviews, and sending customer feedback surveys.
Excite consumers with special promotions, subscription sales, product bundles, flash sales, free shipping, and freebies.
Personalize the customer experience, for example by designing your own products and building your own offerings.
Reduce friction as much as possible by allowing customers to create an account that records their shipping and payment information.
Reward your most loyal customers with membership programs that provide members with special benefits, such as pre-sale access and exclusive discounts.
Offer online activities that complement your brand, such as expert makeup tutorials and yoga classes.
Boost customer affiliation with your brand with a community page that explores customer stories, brand ambassadors, and events.
Rather than a way to supplement sales revenue, big brands should invest in the DTC strategy to create a brand that customers find so exhilarating that it drives sales across all channels.
The DTC strategy of the future
For some retailers, the company’s website is just a digital asset in the DTC strategy.
Over the next few years, we will likely see an increase in the number of retailers offering retail apps for mobile and smart home / smart clothing. Rather than just providing mobile-friendly versions of the website, the best retail apps offer app-exclusive experiences. They increase digital channels while creating entirely new consumer experiences.
Retail apps operate knowing that customer loyalty increases with brand engagement. In food and beverage retail, apps can let you order your food at the table, open a digital supermarket card, or receive special offers via notifications when you walk past items in the store. . In household items, these could be apps with built-in VR functionality that let you see what objects in your home would look like. In sportswear, it could be a training application, like those offered by Nike and Adidas. Retail apps have the potential to boost brand engagement in all markets when used as part of a DTC strategy.
If you are considering investing in a DTC strategy, look for an upcoming article with tips on how to properly manage your DTC channels.