Why DTC: The Case for Direct-to-Consumer eCommerce
Consumers are demanding a better customer experience, and companies — big and small, old and new — are scrambling to deliver experiences in a way that meet customer expectations.
To do this, companies are bypassing traditional practices, such as selling through resellers, and taking control of the consumer experience from the very beginning of the sales cycle by selling directly to their customers.
This is a dramatic shift from traditional B2C strategies that have dominated retail for generations. Until the advent of digital channels, most brands focused their efforts on getting products placed in other companies’ retail outlets.
Today’s brands are building their own stores and creating direct channels to get closer to the consumer.
Illuminating the Shift to Direct-to-Consumer
This direct-to-consumer shift has been led by new startups that are bypassing major resellers for distribution, creating what Randall Rothenberg, chief executive officer at the Interactive Advertising Bureau, has coined “the direct brand economy.” Rothenberg dates the origin of this revolution in 2010, the year Warby Parker was started.
Warby Parker found success by controlling the customer experience from end to end by developing stronger one-to-one relationships with consumers through digital marketing channels. That strategy has propelled them into the $1 billion-value club in eight years.
Bonobos and Glossier are seeing similar results as they focus on the one-to-one experience of their customers. These natively-born DTC brands have successfully tapped into the reality of empowered consumers: People understand their individual importance as customers, and they feel brands should be speaking to them directly.
There are countless other startups taking a DTC approach, and they are “systematically stifling growth for some of the world’s largest brands,” says Katherine Hays, CEO of Vivoom, Inc. That is why some of the largest legacy brands in the world, like Nike, are following in the footsteps of startups and going DTC — or doubling down on it, in Nike’s case.
According to Market Realist, in 2016 Nike was already planning to capitalize on the growth potential of DTC. At that time, the company planned to grow its DTC business by 250 percent by 2020.
To that end, in June 2017, the company announced the Consumer Direct Offense, a faster pipeline to directly serve customers at scale. The company said it would focus on driving sales and distribution through its websites and brick-and-mortar stores in 12 key cities across 10 key countries. The company has projected the effort will represent more than 80 percent of Nike’s projected growth through 2020.
And Nike isn’t the only legacy brand to start making the shift. L’Oreal, Coach and Procter & Gamble, to name a few, have all been experimenting with DTC. The current climate of the retail industry is perfect for the shift to DTC sales.
Consumers Want to Buy Directly
The timing of this shift is no coincidence. Consumer shopping preferences have been slowly changing.
As consumers have gained more access to designers and manufacturers through online resources, they now prefer to buy directly from those brands. According to iXtenso, 55 percent of shoppers prefer to shop directly with brand manufacturers over retailers.
Jon MacDonald, president of conversion consulting company The Good, lists the reasons why:
- Shoppers enjoy personally interacting with companies and establishing a connection.
- Buying directly eliminates the risk of buying counterfeit goods.
- Customers have access to full product lines, not just what retailers choose to carry.
- Information is up to date and accurate.
- The brand is more likely to “do the right thing” if there is an issue that needs to be resolved.
Armed with this knowledge, brands are pivoting to better serve their customers. How are those companies able to make that shift? The primary answer is via digital sales and marketing channels, including eCommerce sites and social media.
How Digital Channels are Facilitating the DTC Shift
The access to digital marketing channels is driving the shift to direct-to-consumer.
Companies have unprecedented access that lets them talk directly to customers and build one-on-one relationships, which is why now is the perfect time for companies to start the evolution to DTC sales.
Two of the most powerful digital tools available to companies are eCommerce and social media platforms. Read on to find out why.
The Role of an eCommerce Website or App
While big brands have the resources to open their own brick-and-mortar stores, they may be better served to create their own eCommerce storefronts. A well-designed website or app can be the key to successful DTC sales because it allows brands to create a VIP experience for customers.
According to Statista, online sales of physical goods is projected to surpass $603.4 billion in 2021, which is a 40-percent increase from 2016. Companies have the opportunity to capitalize on this trend by creating their own eCommerce sites.
Emily-Hickey Mason, communications account manager at Big Cat Agency, lists a number of advantages of having an eCommerce website:
- Companies have complete control over design, marketing and SEO, which means they control the brand narrative.
- Customers don’t see products side-by-side with competitor products, as on a retailer’s website.
- Companies can reach consumers on a worldwide scale and customize the after-sale experience.
- Websites facilitate relationship-building because even if a visitor doesn’t buy from a company site immediately they may return later or share the site with friends.
By building their own eCommerce platforms, companies create the opportunity to interact directly with a customer, collect valuable data and build a mutual relationship of trust and loyalty. Companies miss out on this opportunity when relying on distributor or reseller websites for exposure.
The proliferation of brand-owned eCommerce sites and online shopping is facilitating the shift to DTC sales.
The Power of Social Media
Social media is a key force behind the DTC sales movement, as well. The power of social media lies in the opportunity it creates for companies to connect directly with consumers, whenever and wherever those consumers are shopping.
Social media enables brands to build meaningful relationships with customers and represents an opportunity for regular interactions with consumers, explains Ro Bhatia, CMO at LimeLight. Companies can create cross-channel experiences that reach customers with unique content and establish brand awareness, engagement and loyalty with those consumers.
But where they really drive the DTC movement is through their commerce options. More of the top social media sites are offering commerce tools for businesses, which turns them into powerful engagement and customer service tools. According to a study from digital services firm Avionos, 55 percent of people purchased directly from a social media channel in the past year.
Facebook and Instagram are pioneers in social shopping, and consumers are taking advantage of these shopping channels. Forty percent of respondents to the Avionos survey said they made a purchase through Facebook in the last year; 13 percent said they made a purchase through Instagram.
With access to so many direct marketing channels, companies that aren’t at least attempting some DTC sales are missing out on key opportunities to connect directly with their customers and build their own sales channel. By owning the sales channel, companies can reap the benefits of direct consumer relationships.
Creating Personalized Experiences to Directly Engage Consumers
Personalization has become the linchpin to successful consumer engagement, and companies are taking notice. According to a 2016 Forbes Insights & PwC Content Survey, 94 percent of senior-level executives believe delivering personalization is critical to reaching customers.
Companies that don’t own their sales channels are missing out on the opportunity to create personalized experiences and form relationships with consumers because those companies are not involved in the consumer interaction or transaction. Before digital marketing, these companies had few resources available to them to break through into the sales and marketing side of their products.
Websites and social media have allowed companies to interact directly with consumers, however. And the data these platforms generate allow companies to create content that is personalized to consumers.
The payoff for companies that make the shift to DTC and use direct marketing channels to create personalized consumer content is a significant improvement in awareness, acquisition, engagement, satisfaction, mindshare and profitability, notes Stephen Diorio, director of the Forbes CMO Practice.
The Benefits of Adopting a Direct-to-Consumer Approach
Direct-to-consumer sales is not a passing trend for manufacturers to contend with. It is an evolution in the retail industry, driven by digital marketing channels, that puts the customer at the center of business decisions. Companies are cutting out intermediaries to get closer to their customers, notes Lior Sion, CTO of delivery logistics platform Bringg.
In doing so, they are gaining more control over their customer relationships. Here are three key reasons why companies are moving to DTC sales:
1. Better Understanding of the Customer
In traditional retail, consumer data is often collected and protected by the retailers and distributors. Traditional brands haven’t had the need for consumer behavior data in the past. But with the shift to DTC, that data has become a necessity for learning the customer and creating the right experience.
In order for businesses to strategically connect with consumers, they must have a strong understanding of the customer’s journey to purchase, says James Lovejoy, marketing manager at Turbine Labs. Direct selling in digital channels creates opportunities to measure every aspect of the user journey, Schwartz from SimilarWeb notes.
Digital channels especially provide invaluable data about consumer attitudes and shopping habits, and that data is easy for companies to access directly. Once companies build their own audiences, they can create engaging experiences that encourage consumers to maintain a relationship with the company, says Hays from Vivoom, Inc .
Hopwood warns that collecting the data is only half of the battle. Companies must integrate all of their data from all of their channels to understand the data and improve the customer experience.
2. Create a Better Customer Experience
“In the age of D2C, brands need to make the customer experience as seamless as possible because consumers are in charge and, if they encounter friction, they will shop elsewhere.” This summation by Gideon Spanier, global head of media at Campaign and Media Week, perfectly captures the necessity of DTC.
Consumer behavior, attitudes and expectations are driving business decisions more than ever before because of the rise of mobile, social and cloud technologies. Customers are demanding a seamless experience across all channels and devices. The companies that deliver those experiences are the ones making the sales.
Companies that sell directly to consumers are better positioned to meet these demands because they can control the customer experience. In traditional retails sales, the manufacturer is responsible for the product end of the experience, but loses control over the front-end experience once products hit retail shelves. By selling directly to consumers, companies can create the customer journey as they envision it should be, Claire Hopwood at Vision Critical says.
When companies themselves craft the customer journey, they create a personal experience and aesthetic that is unique to the company, explains designer Alexa Adams. That company-directed journey helps the customer feel connected to the brand, which results in greater brand loyalty, Adams says.
To create these experiences, companies have to know and understand their customers, which is why data collection and analysis has become so important to businesses that didn’t traditionally have access to detailed consumer data. And digital media monitoring is providing a lot of that data.
3. Build Brand Relationships with Consumers
Selling is as much about the relationship as it is about the product. Direct-to-consumer sales allow companies to control their brand story to build better relationships with their customers. When companies sell through resellers, they lose the opportunity to tell their stories and bond with customers. By owning the these customer relationships, companies can deliver a more targeted value proposition, notes authors of a recent Deloitte study, Jake Gregory, Adrian Xu, Andrew Chung and Liza Turner.
When a company controls its narrative and messaging, Schwartz notes, its can personalize the relationship with the consumer. The direct connection that is established between the customer and the company helps create trust and familiarity that isn’t possible when customers buy products from retailers.
Give Consumers What They Want
Consumers want more — more access, more personalized content, more products, more customer service. A company’s job is to deliver on these consumer expectations.
The only way to do that is to maintain control of the consumer experience from beginning to end of the sales cycle. That is why so many startups, and some legacy brands, have made the decision to own their sales channels.
By selling directly to consumers, these companies are able to meet customer demands and build personal relationships with customers that help ensure future stability and longevity in a crowded industry.