New Digital Age is running a series of articles looking at the future of DTC brands, talking to experts in the market on how the sector will evolve and the lessons to be learnt from its success.
By Richard Mathias, Senior Technology Architect at LiveArea
The number of direct-to-consumer (D2C) brands has skyrocketed throughout North America and Western Europe. This has transformed the way that products are sold, how companies approach markets and how consumers interact with brands.
The impact of D2C has been felt across the retail industry in its entirety, but no more so than in consumer goods For all consumer brands, the message is clear: Ignore D2C at your peril. This is no passing trend, rather an evolution of the commerce space; how consumers discover, buy and receive everyday products.
However, direct sales in this sector is not a new concept – Nespresso, for example, has been running its capsule subscriptions since 1986. Could the time soon come where consumers get bored with the repetitive sound, look and feel of these hyper-consumer-centric D2C companies?
After all, if the brand isn’t leading the way in terms of quality versus price or convenience, then consumers will eventually lose interest. There’s only so much of an emotional connection a brand can make, only so much investment a customer can give if the same tactics are used.
While the landscape is certain to change in the coming years, it’s difficult to say exactly how. The market does provide us with clues as to how brands can react, what will drive change, and that new technologies will play underpin them.
In overseas markets such as China, D2C is exploding. Backed by the likes of Baidu and Alibaba and catering for a willing, tech-savvy population of over one-billion, it is here that we should look for a glimpse into what will come next.
Established brands are finally figuring out what they can learn, exploit, and foster when it comes to D2C. With large corporations acquiring D2C start-ups en-masse, what’s certain is that this is going to be a fertile breeding ground for experimentation, innovation and change.
With this in mind, the savvy business will take the rule book from agile D2C digital natives and use it to change mind-set and rethink its portfolio. It will realise that it can breathe life into smaller, niche brands using a D2C digital-first mentality.
It can approach the market from a new perspective and learn from the shifts of 21st century markets and millennial trends which conform with their need for low cost, convenience and a seamless shopping experience.
Trends in the D2C space
But what trends should CPG giants expect? For a start, a wider awareness and recognition of potential is key to nurturing growth. Let’s take digitally native vertical brands (DNVBs) into account such as Graze. Where subscription snack boxes were delivered straight to consumers’ doorsteps in the past, they have now gone offline and expanded their reach to include the likes of Sainsbury’s, Boots and WHSmith.
Secondly, many D2C firms start out with focus on individual products addressing very specific consumer needs. This is often central to the brand story and engaging with a target market. But by doing this, they pigeonhole themselves and would do much better through expansion, offering a stable of products.
DNVBs will realise this – while making their name in one category, D2C brands will expand their offering and target others.
To widen their reach to tech-savvy millennials and beyond, brands must focus on the complete shopper experience. This will undoubtedly mean adopting an omnichannel approach, throughout the customer journey.
We should fully expect to see D2C companies begin advertising on broadcast and print media channels, as opposed to merely social media or SEM, as well as experimenting with physical retail locations or experiences.
New technology that will assist D2C
As a digitally-driven model, developing technologies stand to play a large role in the future landscape. From voice recognition to virtual reality, programmatic commerce to artificial intelligence, technology will help DNVBs surprise and delight customers.
For instance, as smart appliances become more widespread, the Internet of Things (IoT) will enable food and beverage companies to offer something new. For example, cooking and storage information could be leveraged to talk to smart ovens and refrigerators direct from your subscription recipe-box.
Elsewhere, as blockchain becomes more widespread, market traceability, transparency and accountability along the supply chain will become more commonplace.
This means that millennials looking for storytelling and experiences will not be disappointed. For example, by simply scanning a QR code, customers have the added ability to learn where the produce was grown or at which temperature it was transported.
A digital future
D2C start-ups are piranhas taking bites from the giants. That being said, these giants have enough of a presence in mainstream supermarkets and retailers to withstand the attack. For now, scaling-up remains a challenge in D2C.
What these smaller DNVBs have done, however, is force large corporations to reconsider how they refine storytelling, experience, customer service and the product itself. Many believe that DNVBs are in fact technology enterprises in a different guise. Whether or not this is true, their success cannot be ignored.
Larger businesses must learn to focus on customer-centric data, technology platforms, and digitally-driven business models. After all, this is a conversation about digital transformation and logistical business changes will come after.