By Ciaran Bollard, CEO at Kooomo
In today’s competitive global marketplace, brands are increasingly searching for new ways of engaging with customers and managing their supply chains more effectively. This explains why the Direct-to-Consumer (D2C) business model has been increasing in popularity and steadily driving innovation and growth across the retail sector for many years. However, it is only during the last twelve months that its true potential has been fully realised.
D2C is a low barrier-to-entry eCommerce strategy that allows manufacturers and CPG brands to streamline their operations by removing the middlemen from the sales process and selling directly to the consumer. It is also a cost-effective strategy for startups and SMBs looking to launch a new product, due to the low investment required to reach a global customer base. By helping businesses increase their resilience to external forces beyond their control, D2C is quickly becoming a guiding light for brands navigating the new normal.
The evolution of the traditional retail landscape
At the start of the pandemic, while high street retailers were struggling to manage Covid-related store closures, digitally native D2C brands already had the infrastructure in place to continue operating with minimal disruption. Research reveals that 80% of larger, traditional retailers suffered sales dips since the onset of the pandemic, compared with just 22% of D2C brands reporting sales declines . This shows the increasing pressure on bricks and mortar retailers to adapt to the digital expectations of today’s consumers.
The increased proliferation of D2C is driving further demand for a fast and highly personalised omnichannel customer experience, with many consumers (55% according to research ), now preferring to research and purchase directly from the manufacturer’s website. This shift in shopping habits doesn’t spell the end for bricks and mortar, as established high-street names aren’t expected to cut all ties with their partner networks. Instead, they can easily add a D2C channel to their existing arrangement and tap into a wider market.
Third-party distributors are likely to always play a part in the consumer sales mix but there are many advantages for brands that have ownership over each stage of this process, from logistics to supply chain and everything in between.
From D2C to omnichannel success
D2C brands get a direct insight into their customers’ data from every touchpoint and interaction across marketing, sales and customer services. Analysing this data helps them to understand what works, what doesn’t and what needs adjusting, and provides visibility over the entire process – from first contact to product delivery.
As a result, D2C brands are able to effortlessly refine their customer engagement and communicate highly personalised content at the right time to maximise conversions. By being responsive, answering questions in a timely fashion and building trust, this creates a satisfying shopping experience that reduces cart abandonment and customer churn.
A D2C strategy doesn’t mean you can’t eventually expand to selling across multiple channels. In fact, brands who embark on this approach can easily scale-up by opening physical locations as the business grows. The ability to unify the offline and online environments is the next logical step in building a seamless omnichannel shopping process that offers a variety of browsing, purchasing and delivery options to suit customers’ needs.
A new strategy means new challenges
It is clear that D2C will continue to play a major role for increasing the longevity of a brand, but it does present new challenges around precision analytics and optimising product information. Brands considering a D2C model will need to adapt to different supply chain and warehouse stock management processes, while ensuring accurate and consistent Product Information Management (PIM). If every items’ size, colour and product specification is not listed exactly, it could mean unnecessary returns, lost sales and reduced profits.
Another area to consider is liability risks around customer data management that would previously have been the responsibility of distributors and wholesalers. The sales process needs to be secure and compliant with the latest GDPR regulations, so safeguarding your customer information is critical to protect your brand reputation and avoid costly legal battles.
A bright future for D2C
Despite the challenges, D2C is fast becoming the secret to retail success in the post-Covid economy and D2C startups are already securing huge rewards, with some across the pond now valued at over a billion dollars . As eCommerce technologies continue to help brands meet their customers’ digital expectations and respond to their rapidly-changing demands, you can be sure that D2C will remain an essential retail strategy for the foreseeable future.