Direct to consumer: trends, tips and challenges in 2020
The direct to consumer (DTC) approach is taking over ecommerce. But what makes DTC so popular with shoppers? What trends are we seeing in direct to consumer marketing? What challenges lie ahead for retailers?
What is the direct to consumer (DTC) approach?
Direct to consumer (DTC) marketing is in the name itself: it’s a way for brands to sell straight to customers. No wholesalers or middlemen to get between the buying journey. The idea behind this approach is that it brings a company closer to its target market so they can better understand their needs, dislikes, and desires. That way, brands can adjust their marketing and offerings accordingly.
DTC has been particularly successful with lifestyle categories, including personal care, apparel, and home furnishings. Notable companies include Casper mattresses, meal kit delivery service Blue Apron, apparel retailer Bonobos, and eyewear provider Warby Parker.
DTC brands are also a part of the digitally native era, focusing on building a robust online presence over traditional retail sites. Their success goes hand in hand with retail shopping moving increasingly online. But are there other factors contributing to the rise of DTC? What direct to consumer trends are we seeing as this business model becomes more ubiquitous?
Why is DTC becoming so popular?
DTC shopping is becoming an increasingly common way to shop, especially for digitally native consumers. In fact, 4 in 10 US internet users expect DTC brands to account for at least 40% of their purchases within the next five years. That’s a big pivot even within ecommerce. But why?
DTC brands have reshaped the buying process to have closer access to shoppers. Not only does that mean higher control over company profits, but greater access to more targeted customer data. This in turn lets them have a higher degree of personalization in their product offerings.
Customers feel like they can build a closer relationship with DTC brands: there’s better customer service and goods tailored to their needs. Additionally, the DTC approach can offer consumers lower costs, faster delivery and response time, and a better product.
In turn, DTC also provides companies with better customer insights, greater focus on innovation, and the ability to outcompete more established brands on price.
That said, legacy retailers are taking note and trying out D2C models themselves. In the last few years, we’ve seen big-name conglomerate Procter and Gamble launch its Native personal care, and Welly partner up exclusively with Target. During lockdown, we’ve seen famous food brands like Heinz and PepsiCo try out their own DTC ventures, and apparel giants like Nike continue to boost their own DTC offerings. The space is becoming more crowded and competitive.
Recent circumstances have also been a boon for D2C brands. With physical stores closed, many customers have been encouraged to try D2C and alternative brands for the first time.
It doesn’t appear that the direct to consumer approach is a passing trend. Even as brick-and-mortar stores reopen, consumers are still hesitant to shop in person and are now more accustomed to online shopping. Both are good news for DTC companies looking to make their mark.
The very nature of DTC brands also means they are focused, nimble and agile, able to adjust to changing circumstances - a winning formula for any brand when no one quite knows what will come next.
What are the challenges associated with DTC?
Closer customer relationships, lower production prices, greater flexibility: sounds like DTC is the perfect panacea for online retail. However, there are unique challenges to this approach. What do retailers need to know?
Conversions can be tough to nail down
DTC is notorious for its high consumer turnover. Although brands often provide free trials or other enticing offers, many shoppers tend to cancel after the free trial period ends. The long-term customer can be an elusive relationship for many online businesses.
Tip: DTC need to continuously do the work to create value for shoppers. But even if they leave, it doesn’t have to be goodbye forever. DTC brands must remember to keep ex-customers in their email marketing lists, sending them periodic reminders or fresh offerings. After all, these consumers are already familiar with the brand, and businesses never know when novel offerings might spark something new.
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Even when you have them, customers are fickle
Customers have always been capricious and price-driven. But with lockdown there’s an even bigger spotlight on DTC brands and how they’ll meet the demands from new customers and keep them coming back.
Because DTC brands generally operate without middlemen or third parties, they can also be vulnerable. It’s up to them to get everything perfect: their marketing, their shipping, their customer experience, their website performance. Customers won’t hesitate to stop shopping from brands if they encounter any issues.
Tip: Because DTCs are responsible for all aspects of selling their products, they need to keep website speed at the top of their agendas, ensuring they provide a customer experience that’s up-to-par with customer expectations. Almost half of shoppers expect a website to load in 2 seconds or less. 40% will leave if it takes longer than 3 seconds to load. There’s little room for error.
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Product launches can be unpredictable
Many online retailers, including DTC brands choose to work with influencers for upcoming launches. But working alongside influencers or launching new product campaigns are full of unknowns. Will the influencer hit the company’s target market? What if the launch is a flop? What if the launch goes too successfully?
That’s right: product launches and campaigns can be too successful, drawing in a crowd of interested buyers. Online businesses might have a solution in place to scale up, but that may not kick in immediately if a sudden spike in traffic hits. What then?
Tip: Scaling up is good start, but online businesses need to have a safety net to ensure they can manage traffic surges at a moment’s notice. For many, that safety net comes in the form of a virtual waiting room which allows websites to manage online traffic without the risk of slowdowns or crashes. That way, DTC companies can run campaigns smoothly, catch all conversions, and maintain a stellar brand reputation.
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Building an online presence, whether as a DTC or a more traditional brand, is anything but easy. It demands constant trial, time, and dedication. We hope this guide on the direct to consumer trends gives you a deeper understanding of how this approach works and how you can manage expectations around it.