Thought Leadership

How can brands better capitalise on the growth of DTC routes in the long-term?

The growth of direct-to-consumer routes have created new opportunities for brands but long-term shifts in buying behaviours will be built on more than just necessity.

Nicola Kemp

Editorial Director

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The rise of direct to consumer and ecommerce channels has been one of the most fundamental consumer buying shifts amidst the pandemic. Analysts at Retail Edge shifted initial predictions of 11% growth for UK online sales to 19% in 2020, reaching £78.9bn, up from £66.3bn in 2019.

Long prior to the pandemic, this shift towards direct-to-consumer was already clear to thinking marketers. Many of the world’s leading brands from Nike to Levi’s have long-established hybrid direct to consumer models, which work hand in hand with their physical stores. As physical shops closed their doors, a direct-to-consumer model became a lifeline enabling brands to reach customers, sell products and build up valuable first party data. 

Shopping as a leisure activity has been re-wired by the pandemic. The rise of direct to consumer has helped to create a level playing field for brands. Notably niche and local brands can cut through to compete with established players. Shop local has successfully gone global via direct-to-consumer channels. 

Then there are changes born out of necessity. Nestle in Europe has seen fresh roast coffee sales climb by a third in 2020, as commutes and coffee-shops ground to a halt. While booming alcohol sales has continued to fuel the rise of ‘drunk ecommerce’ a phenomenon that even prior to the pandemic was worth £4.4bn in the UK alone, according to price comparison site Finder.

The fusion of the digital and physical worlds has long been a core trend in marketing and in many ways the accelerated shift to direct to consumer in the midst of the crisis simply builds upon existing trends in the market. Trends which brands which were on the front foot with digital transformation were well positioned to capitalise on with frictionless and rapid delivery. 

Yet there is no question that some of the shifts in the market are born of necessity. Arguably consumers may not have a long-term stomach for bad-home hair dye kits or bad coffee. While meal delivery service Hello Fresh’s recent apology to a customer who received a bottle of what appeared to be human urine in his order underlines the fact that the human cost of ‘free delivery’ is one that is set to rise up the marketing and business agenda. Delivery is not ‘frictionless’ if the business model demands that drivers can’t even break for a pee. As the sustainability and environmental credentials of online retailers will continue to face greater scrutiny it’s clear that the rise of direct to consumer is not without its challenges.

Yet what is apparent is that the freedom for consumers to switch and save both time and money through subscription services and online shopping is clearly here to stay. With this in mind we asked a selection of industry experts to share how brands can better capitalise on the growth of direct-to-consumer channels in the long-term.

DTC means the brand and the business can get a deeper and more real time view of their customer base.

Claire Lawson

Claire Lawson

Clare Lawson, Ogilvy.jpg

Chief Customer Officer

Ogilvy UK

There are so many benefits to brands in DTC, but for me there are two that stand head and shoulders above the rest. Firstly, going DTC gives a brand the ability to provide the consumer with a unique end-to-end brand experience. Not just at initial purchase, but how the brand behaves, the consumer needs it meets, how it can add value over and above the transaction, how the consumer receives and interacts with the brand. All of these points are levers that drive closeness to your brand, and with it bring incremental lifetime value. Retailers, re-sellers, channels can disrupt it. DTC enables greater purity.

And secondly, DTC means the brand and the business can get a deeper and more real time view of their customer base. A brand can get to know the demographics of the customers. They can gain feedback, get more qualitative and quantitative data points, and use this for prospecting, and fulfilling their unmet needs. And importantly, as they own the data, they can act at speed on any changes in who their customers are, and what they need. As markets continue to transform, this becomes a superpower.

Brands need to think ahead to the evolution of commerce.

Christian Taylor

Christian Taylor

Christian, The Kite Factory.jpg

Strategy Director

The Kite Factory

Selling direct to consumers has always been seen as a great opportunity, particularly when it comes to cutting costs and increasing margins, especially for nimble start-ups and those leveraging borrowed supply-chains. However, the advantages of low-cost acquisition through social and digital media are slowly eroding and many of the brands that led the charge on D2C are hitting diminishing returns. The simple way to counter this, benefit from a D2C approach and scale a brand to its greatest potential is through an omnichannel approach to distribution, media planning and buying.

Brands can take advantage of D2C journeys in several ways. First, by capturing data to profile their consumers and communicate with them. ‘Direct with consumeris a new trend whereby brands collaborate with customers to create new products and services and tweaking existing products.

Secondly, brands can introduce flexible subscription models with tailored services that can be paused at the convenience of the consumer, enabling repeat purchase. The infamous duo Binet and Field outline the importance of high-reach emotional advertising in growing subscription brands. Taking this long-term approach to customer acquisition will pay dividends.

Brands can increase consideration through brand partnerships where both parties use their respective assets and audiences to cross-promote one another. A mutually beneficial approach that boosts brand perception and builds brand strength. An example of this being Adidas selling the shoes made in collaboration with Kanye West’s brand Yeezy exclusively through their website.

Brands need to think ahead to the evolution of commerce. First movers with voice search journeys and distribution may make early wins but it will soon become table stakes. Others will leverage new technologies such as AR and VR to improve customer experience throughout the funnel.

Management culture should reward risk taking and invention and accept that mistakes will happen.

Neil Collard

Neil Collard

Neil Collard_Managing Director.jpg

Managing Director

Great State

Direct to consumer has clear benefits including cost efficiencies, control of brand, more direct relationships with customer, cutting out the middleman. Yet it also comes with risks. When an Amazon order goes wrong, you don't blame the brand you're buying from, you blame Amazon. Consumers also have high expectations of brands on digital channels. They expect the seamless in-store experience, with great customer service, advice on items to buy, and even with new services like Klarna, delayed payment. So, D2C takes work, and legacy brands are already behind the curve.

To make the most of the opportunities that are present, brands need to take inspiration from businesses who are successful in this space, businesses who may sit outside their normal competitive set, in order to understand the cultural shifts that are going to be required to drive success: 

- Prioritise customers over everything else by gaining an intimate understanding of their lives and how your product can provide a benefit 

- Technology as an enabler. Technology should inform what you ‘can’ do, not what you ‘cannot’. Personnel and platforms need to focus on agility and flexibility. 

 - Management culture should reward risk taking and invention and accept that mistakes will happen. Products and experiences should evolve so that errors are spotted early, and corrections can be made. 

In 2021, everything needs to be done twice as fast. You’ll always be lagging behind the consumer and the competition if not.

Winning brands will increasingly combine product and service creating an enhanced value proposition that cannot be replicated elsewhere.

Tom Moore

Tom Moore

Tom Moore, VMLY&R Commerce.jpg

Head of Retail

VMLY&R COMMERCE UK

Fuelled by a seismic shift in ecommerce growth, ONS data shows a 46% uplift from Dec 2019 to Dec 2020, long term DTC opportunities are ripe for the picking.

Disruptive business models 

Store closures in 2020 meant simply having products for sale online was enough, but, as some sense of normality returns, consumer expectations of DTC will increase massively. Winning brands will increasingly combine product and service creating an enhanced value proposition that cannot be replicated elsewhere. Peleton whose revenues doubled year-on-year pre-COVID, is a great example, providing premium hardware facilitating home exercise with world-class content from fitness instructors and creating a community, during and beyond usage.

Hyper personalised content 

Consider from a commercial perspective how to curate products to drive growth. Infinite shelves of online stores offer opportunity to bundle up around hyper-segmented shopper needs. Translating these bundles into bespoke PDP pages and combining off-platform search strategies with activation campaigns create boundless gateways to the shopping cart. A joined-up perspective to marketing and sales will help DTC brands fuel growth and drive-up basket spend.

Live digital experience 

DTC models have always outpaced physical stores in convenience but lagged behind in experience. A recent survey by Digital Happiness Pulse reveals only 15% of consumers are happy with online shopping interactions. So, focus on immersive and engaging experiences that high-street retail specialises in. China is leading this trend with an explosion of live shopping events in health & beauty and fashion providing education, inspiration, entertainment, and seamless check-out simultaneously. Fenty Skin’s gamified virtual house party event merging celebrity content, entertainment, interactivity and shopping has become a must-visit destination trending on Twitter.

One reliable way brands can differentiate is to build money-can’t buy exclusivity into the product offering via an unexpected partnership.

Andrew Dunbar

Andrew Dunbar

Andrew Dunbar, Appnovation.jpg

General Manager EMEA

Appnovation

With traditional brands becoming wise to D2C’s potential, it takes something special to stand out from the crowd. Digital is a great leveller. Emerging D2C brands have switched ambitions away from being acquired towards competing with established players, even opening bricks and mortar outlets of their own.

One reliable way brands can differentiate is to build money-can’t buy exclusivity into the product offering via an unexpected partnership. Supreme's 3-Pack of bright red Oreos sold out almost instantly last year, based on a limited-edition partnership between two cult brands. This cookies-meets-skatewear collaboration delivered unique consumer appeal, as well as a cross-pollination of two distinct brand audiences. The same goes for the Kit Kat and Etude House eyeshadow collaboration.

Brands seeking new D2C routes need to be aware of shifting power dynamics between a focus on product and pure commerce, and engaging content-based experiences. From constantly refreshed collaborations, augmented reality makeovers to subscription coffee boxes that are personalised to taste, these value-driven experiences provide a perfect opportunity to capture data and build long term profitable relationships with consumers.

Finally, with Amazon an important channel in its own right, scalability is key. D2C brands are aware that their businesses are dwarfed by retail, and that traditional behemoths are rapidly moving to crush their competition. Through agile and scalable omnichannel platforms, personalised eCommerce, and data driven decision making, D2C is becoming a key component in every modern retailers’ playbook.

Once your consumer decides to buy, it should be a seamless experience, with as few clicks as possible.

Alistair Vines

Alistair Vines

Alistair Vines, MediaMonks.png

Vice President, Growth

MediaMonks

Going DTC may feel like a long, hefty initiative, but speed over perfection should be the focus for brands as they shift to meet audience needs online. It’s better to fail fast than be left behind!

When building a DTC platform, we focus on the principle of time spent vs time saved. What this means is creating engaging experiences for consumers, so that they browse and spend time. We combine creativity and data to build rich, interactive experiences and create memorable purchase moments. We then remove friction from the purchasing process to save time. Once your consumer decides to buy, it should be a seamless experience, with as few clicks as possible.

Ultimately DTC gives brands that are used to selling via channel partners an upside such as more effective cross-selling over the third-party e-commerce platforms. With greater control of the customer experience, and ownership of first party data, it can even be used to refine product roadmaps, if you are collecting the right data.

If your business will support the logistics then building a prototype is an easy, low risk way to experiment with products, propositions and pricing and deliver continuous incremental value. Or regain share lost to COVID!

Brands can’t afford to treat D2C as a solely transactional channel.

Ed Mitchell

Ed Mitchell

DesignBridge_EdMitchell.jpg

Group Brand Experience Director

Design Bridge

Brands can’t afford to treat D2C as a solely transactional channel.  

To build long-term value and drive growth, brands need to create a holistic consumer experience across all channels, from online to in hand, and everything in between, to truly become known, loved, remembered and, most importantly, re-purchased.  

Creative and strategic brand thinking is crucial, and design is the golden thread that ties it all together.

A brand’s personality, its equities and expressions, including visual identity, tone of voice, 3D, motion and sonic, need to be unique and meaningful, with the ability to flex across the entire consumer experience. Brands like Huel, HP Instant Ink and Callaly are all great examples.

From meaningful eCommerce content to a personal dispatch message or a ‘wow’ sensorial unboxing experience when it arrives on the doormat, for a brand to fully capitalise on the growth potential of D2C it needs to harness the power of creative thinking and design to build strong emotional connections with consumers, taking them on a consistent and authentic journey that they will buy into again and again.

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