- Despite the climate of economic uncertainty and declining consumer confidence in advertising campaigns, consumer e-commerce spending has increased dramatically
- The direct-to-consumer (D2C) sector is exploding worldwide, offering smaller, niche and nimble brands significant opportunities to gain market share
- The key to success lies in focusing on agility, building meaningful customer relationships, making data-driven decisions and thinking long-term
With our third lockdown beginning in 2021, many retailers and direct-to-consumer (D2C) brands face an uncertain future. Media reports have systematically rung the death knell for a number of longtime British stalwarts, with shopping malls particularly hard hit.
The Arcadia Group, Peacocks, Jaegar, Laura Ashley, Oasis, and the Warehouse Group are among those that fell into management in 2020.
Technological revolution in e-commerce
But the commercial landscape is far from all ruin and gloom. Many brands are reacting quickly and quickly to the pandemic by investing more heavily in their digital offering and the online customer journey.
A Barclays report in December reported that one in four industry leaders (26%) believe the pandemic has accelerated a “technological revolution” in retail.
Many multicommerce and pure play ecommerce brands saw sales spike during the lockdown, with sectors such as food and beverage, home and garden, and gifts seeing significant increases in online order volume.
D2C brands are navigating the new retail landscape
One retail sector thriving in the pandemic is D2C. While traditional consumer product retailers struggle with disrupted supply chains and rapidly changing consumer needs, brands in this sector are cleverly turning their strategies to provide much-needed support to consumers.
Their inexpensive, personalized and innovative approaches to reaching the target groups as well as reducing costs for third parties have made them one of the few winners of the pandemic.
These companies, which include Dollar Shave Club, Made.com, Abel & Cole, Glossier, and Pasta Evangelists, are no longer a niche segment in the e-commerce landscape. According to an IAB report, 97% of consumers have heard of at least one leading D2C brand in the UK. 39% bought from one.
But there is still great uncertainty ahead of us. Falling consumer spending, higher unemployment and a highly competitive digital landscape are just some of the challenges brands in all industries continue to face.
In order to drive business growth in the coming year and beyond, D2C companies must now set the right strategies and structures.
Here we suggest four ways D2C brands can plan for success in 2021:
Steps for D2C Brands to Drive Growth
1) Be agile
If there is one thing that retailers were taught in 2020, it is important to be able to adapt quickly.
86% of consumers have changed their behavior because of COVID. During the initial lockdown in March last year, orders increased in sectors that support living at home, such as tech, food and drink, home and garden, and gifts.
While D2C brands’ digital-first approach positions them well to benefit from this accelerated shift to e-commerce, that alone is not enough. In order to continue to grow, these brands need to continually develop their online experiences and offerings.
For ODDBOX, a sustainable fruit and vegetable delivery service, this meant the opening of a new marketing channel. After seeing an increase in online orders earlier this year, a referral program was launched.
By attracting its rapidly growing customer base to referring friends and family, the fruit and vegetable company has cost-effectively gained thousands of high-quality customers and generated significant (and sustainable) revenues.
Adapting to changing circumstances doesn’t always have to be an instant win. Bloom & Wild, for example, donated 15% of the selected sales to the Coronavirus Appeal of the National Emergencies Trust and gave key employees a 40% discount on flowers. Actions like this do not create strong branding, but rather a strong brand affinity that translates into long-term sales.
Retailers are adapting, however, one thing is clear: time is of the essence.
2) Build meaningful customer relationships
Even before the pandemic, consumers were increasingly looking for brands to connect with and believe in. A large advertising budget is no longer synonymous with effective marketing. Now consumers want brands with a purpose. This creates space for younger brands with smaller marketing budgets to gain market share.
Much of the popularity of D2C brands comes from the perception that they are on the customer side. This attitude became particularly important in the past year, as consumers are demanding more transparency and security from brands due to the widespread uncertainty.
Companies that have taken real action in the COVID-19 area, from making hand sanitizer to exclusive benefits for NHS employees, have found public favor. The human connection is particularly important in times of crisis.
According to this Sprout Social report, 57% spend more on brands they feel connected to. This is even clearer in our current situation. Edelman’s special report on the Trust Scoreboard found that 33% of consumers have actively discouraged others from using brands they believed to have acted inappropriately in the pandemic.
Given the business climate that demands careful consumer spending, meaningful exposure can make the difference between brands that thrive and collapse.
Instead of expensive TV ad campaigns or blanket email explosions, D2C brands should prioritize meaningful customer relationships. If done right, they can build strong branding communities that actively promote their purpose and services, such as Huel’s die-hard Hueligans.
A quick look at the social media accounts of successful D2C companies shows the power of good customer loyalty.
Brands like Snug Sofa have thousands of highly engaged followers who regularly interact with posts. This is another touch point for building brand affinity as brands have two-way conversations and maintain customer relationships.
While initiatives like charity donations, online contests, or social media interactions may not be generating any revenue right now, they build lasting connections for long-term income.
3) Make data-driven decisions
Rather than relying on third parties, D2C brands are uniquely positioned to capture customer data in real time. With many of these brands scaling rapidly, this data is key to gaining valuable insights into rapidly growing customer bases.
In the current situation, consumer needs are changing rapidly. By continuously monitoring buying behavior and attitudes, D2C brands can experiment and optimize their offerings to adapt as needed. With so much data, however, it can be difficult to know where to start.
Making sure the end goal and business objectives are in the foreground and clearly focused on specific metrics can help marketers effectively measure the performance and impact of various initiatives.
For example, if making repeat purchases is a priority, experiment with segmenting customers by order number and providing targeted engagement content that drives the next best action. Because D2C’s success relies on meaningful relationships, creating effective interactions at every stage of the customer journey will support sustainable business growth.
4) Think long term
Many young D2C companies exploded over the course of 2020. To continue scaling in a sustainable way, these brands should think long-term rather than just focus on meeting monthly goals.
Companies that have gained significantly more customers in the lockdown space should now adopt initiatives that focus on customer loyalty.
By prioritizing activities to maintain customer relationships, a strong feel for the brand community is created. The involvement of the original customers is also important. The early adopters who chose the brand’s purpose when there were endless online and offline options to choose from.
A direct-to-consumer approach is now mainstream. Just being a D2C brand is no longer innovative. To stay one step ahead of the curve, these companies should continue to nurture customer loyalty and adapt to the evolving marketing landscape.
Widespread economic and consumer insecurity will continue to affect retail and e-commerce for the foreseeable future. To overcome this, D2C brands should continue to benefit from their flexible business models and low marketing costs, and provide consumers with the excitement, purpose and experience we all crave.