Last year, L’Oreal launched a D2C offering called Color and Co that offered personalized hair dye kits to its consumers. The consumers could receive live online consultations from professionals on the colors and packages and order a customized product that would be delivered at their footsteps.
Similarly, Nike built a D2C sales program to sell their products online to consumers directly. Nike witnessed record-high sales during Black Friday and saw its digital sales increase by 84%. PepsiCO has also started engaging with consumers directly.
Direct-to-consumer is an e-commerce strategy where you do not have to rely on middlemen to sell their products. You can directly sell your products to consumers through digital platforms such as social media and websites. Most importantly, you have complete control over the manufacturing, marketing, and distribution of the product.
2020 showed the true potential of D2C. With brick and mortar shops shut down and e-commerce websites slowing down due to heavy traffic, consumers started to turn to the brands’ websites directly to buy products. This increased the popularity of D2C.
The major advantage of D2C is that you develop a deeper connection with your consumers and build consumer loyalty. Consumers, on the other hand, are able to enjoy the superior brand experience and receive personalized offers.
This makes it a win-win strategy for both consumers and the brand, making it a popular way of shopping. Does it mean this approach would replace retailers and e-commerce brands? The answer is no. It is just an additional avenue through which brands can leverage to sell their product.
Retailers and e-commerce brands give consumers the power to compare products based on features, services, price, etc.
What works in favor of direct-to-consumer is the experience it offers to the consumers and its authenticity. Consumer brands understand that consumers look for a good experience – both offline and online. So, they have been ramping up on their efforts to provide omnichannel and personalized consumers.
And it seems to work. Check out some statistics that prove it.
If you want to accelerate your earnings and build a meaningful relationship with your consumer, D2C would be one of the best avenues to experiment with.
Now that you know what makes D2C the new retail strategy, let’s look at how you will benefit from it.
D2C enables brands to earn more profit by removing the dependency on middlemen. Hence, you don’t have to pay the middlemen additional markup on the products. Instead can earn the profits directly. A direct strategy allows you to improve your margins, i.e. you can save around 10-15% on wholesale distribution and 15-40% from retailers. D2C is also an opportunity for you to sell a wider range of products to the consumers, creating an exclusive shopping experience that may not be available on other platforms.
Although retailers have learned the art and science of personalization, D2C is not far away from adapting this strategy. Brands get access to better quality consumer data. This gives you an opportunity to serve your consumers better by personalizing their experience. In turn brands are able to maximize their profits, increase their customer’s LTV, and build a deeper connection with the consumer. As a D2C brand, you can use behavioral data to segment the consumers into different categories. Based on that, you can send them personalized content, offers, and discounts to engage with them instead of sending a standardized message. Personalization leads to customer loyalty and reduces the overall marketing costs by 10% to 20%. It also results in a 10% to 15% boost in sales conversion rates.
Customer loyalty is the foundation of a successful D2C retail strategy. D2C provides more opportunities to build a direct connect with the consumer, unlike retailers and e-commerce companies. From personalizing the offers to offering customer loyalty rewards, there are several strategies that brands can try to win consumers. Identify the consumers who buy frequently or who leave reviews on your products or who recommend your brand to everyone. They are your high-value consumers and deserve to be appreciated.
Build a deeper relationship with them that goes beyond being transactional. Small things like sending a handwritten thank you note can go a long way in building a long-term relationship with the consumer. Or using your social media to offer useful tips and tricks can go a long way too.
When you shift your retail strategy to D2C, you have to fix a few things to ensure smooth operations. Remember that there are no middlemen in this strategy. So, begin with re-engineering your existing processes, systems, and ensuring that your people are re-trained to adapt to the new way of working. For example, you can no longer rely on retailers to solve your consumer’s query, you have to train your employees to address the queries directly. From setting up logistics to reach your consumer directly to reworking your customer acquisition and loyalty program, ensure that your consumers can engage with you directly instead of relying on the middlemen. With the right tools and plan, you will be able to transition to this new strategy effectively.
Your consumer leaves their digital footprint across different touchpoints such as social media, website, etc. If you want to adopt D2C strategy, you need to collect all the data of your consumer across all touchpoints in a single platform. That’s how you would be able to understand their behavior and segment them to personalize their journey.
To begin with, invest in a CRM that helps you manage your interactions with the consumers. Ensure that you have all the details of them in the unified system so you can tie up all the information together to create a meaningful engagement with them throughout their journey. Consolidating all the information in one platform will help you to create a frictionless and consistent experience for your consumers across all channels. Probably leverage automation tools such as that of MoEngage to create a personalized journey for your consumers across all channels.
Retailers and e-commerce brands have their established channels to reach out to consumers. When you transition to the D2C strategy, you have to determine the channels that you would use to reach your consumers directly. There are various channels at your disposal - your website, app, social media platforms, email marketing, etc. Let's say you own a brick and mortar outlet, you can also consider opening franchises in different areas. The important part to remember here is that your consumer should be able to shop without any hassles. They should be able to enjoy the same experience across all touchpoints - whether it is finding the products to paying and receiving the ordered products on time.
Also, keep in mind that no two consumers shop the same way. Focus on building an omnichannel experience for your consumers. Make your channels consumer-first, i.e., choose the channels your consumers prefer and not the ones you find convenient to use. Integrate all the channels and use automation tools to segment and send personalized communication to your consumers through SMS, emails, push notifications, remarketing, etc. Just remember that this is your only way to reach out to consumers directly. Therefore, make it as convenient for your consumer as possible.
D2C has ushered in a new way to reach out to customers. It’s going to be the new normal in the retail and e-commerce industry. Even e-commerce giants like Amazon have woken up to the popularity of D2C and have started their D2C arm called AmazonBasics to attract D2C brands to its platform. Now, this speaks volumes of how D2C strategy is gaining traction in the ever-evolving e-commerce space. Even spending is expected to grow by 12.7%. Thus, if you have been considering using new strategies to engage with customers, D2C could be a good start. You can start planning your retail strategy to prepare for 2021.
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