The pandemic has immensely accelerated the retail industry's pace of digital transformation in a period of just a few months, forcing customers to change their consumer habits and brands to make significant changes in their business model in order to survive. Among other things, this massive shift to e-commerce caused a one-in-a-lifetime shock to brand loyalty. A substantial number of consumers globally have tried new brands and retailers during the lockdown, with the vast majority of them intending on sticking with these new brands in the long term. The shift to digital and the desire of customers to try new brands became a winning combination for many digital-native, direct-to-consumer (D2C) companies.
The D2C model
Most of you should be familiar with at least some of the following names: Harry’s, Glossier, Warby Parkers, and Bonobos. All of these incredibly successful brands are outstanding examples of D2C companies. Direct-to-consumer is a retail model where companies are selling their products directly to customers, bypassing any third-party retailer, wholesaler, etc.
The benefits of a direct-to-consumer approach are plenty. With less reliance on third parties, D2C gives a company better control over its branding, marketing strategies, and sales tactics and maximises shoppers’ convenience by distributing its products directly to them. Most importantly, D2C helps brands engage directly with their customers and gain access to first-party consumer data through direct sales, subscriptions, reviews, and social media channels. That way, a D2C model gives companies the chance to cultivate meaningful conversations with their customers and thus better influence their decision-making journeys by offering exceptionally personalised shopping experiences, tailor-made to their individual preferences, needs, and values.
Every D2C approach appears slightly different depending on the brand, product, and target market. However, in general, D2C brands are usually digital-native, and they specialise in a specific product or product category, which they sell online through their e-commerce website. Nevertheless, many D2C brands incorporate marketplaces like Amazon or eBay into their sales channel, and some establish brick-and-mortar shops and pop-ups. However, these are typically more like experiential showrooms and less like stores in a traditional way.
Big brands go D2C
The D2C model is an excellent avenue for new brands that are seeking for an easy entry into the market. However, it has also become very appealing to big legacy brands like Nike that wish to gain more control over the customer journey and overcome the impact the pandemic had on supply lines. For a long time, the supply chain strength of the multinational companies guaranteed that their products were on the shelves of every shop at any given time. The pandemic proved how vulnerable these supply lines can be, the wholesale model was seriously challenged, and big legacy brands were forced to find new ways to reconnect with their customers more directly. Going D2C was the obvious choice.
When lockdown hit, Kraft Heinz introduced Heinz to Home, with bundles of canned foods and sauces delivered directly to customers through their first-ever online shop. They offer the option of personalised sauce bottles and cans, and they teamed up with Blue Light Card, the discount service for the NHS in the UK, offering frontline workers free deliveries. With the Heinz to Home initiative, the company not only managed to regain lost ground when retailers temporarily shut down their shops during the lockdown, but it also had a direct engagement with their clients that allowed them to gather valuable first-party customer data and helped them re-establish brand loyalty. PepsiCo and Nestlé have also launched direct-to-consumer services during the lockdown.
How D2C brands can stay relevant today
Logistics, e-commerce platforms, payment solutions, the high cost of customer acquisition, and the need to keep your products always in line with customers’ ever-changing preferences and expectations, make direct-to-consumer a challenging task. Ultimately, D2C brands have to offer an immersive customer experience able to bridge the gap of not be able to touch, feel, or try a product like during a traditional in-store shopping experience. And as the D2C world continues to grow and become increasingly competitive, D2C brands need to keep innovating to remain relevant.
Offering merely a high-quality, personalised product is not enough nowadays. Great D2C brands excel because of their distinct personalities. During the Covid-19 crisis, consumers re-evaluated their idea of well-being as well as their consumption habits, and they became more and more aware of how these habits affect others and the environment. As a result, consumers care more these days about brand authenticity and a company’s social responsibility.
Taking a public stand on important social and environmental issues plays an enormous role when customers choose a brand and it is way more probable they recommend a particular company to friends and family if its social values align with theirs. A recent study showed that being vocal as a brand is perceived by customers as having responded better to the crisis. On top of that, D2C brands have to constantly demonstrate that they are listening to and applying the feedback they receive from their customers.
Amid the crisis, a favourable brand reputation that communicates care and responsibility will make people trust your D2C company and even spend some of their limited budget on your products. Also, most certain people won’t forget this pandemic in a hurry. Habits, values, and behaviours have changed drastically during the pandemic; some of them will stick for the long term, others will not. Nevertheless, when the world goes back to some sort of ‘normal’, consumers will remember the brands that helped them get through the crisis.
Conclusion
Over the last few years, consumers’ attention has shifted from legacy retailers to smaller, more nuanced direct-to-consumer businesses. The increase of online shopping, the decrease of retail football, the vast shock in brand loyalty, and the rest of the pandemic’s effects on the retail industry have only strengthened that trend. Now it is the best time to change your brand’s relationship with your customers into a more direct one.
The D2C landscape will continue to evolve and become more and more competitive as not only new players enter the game, but an increasing number of large legacy retailers are moving into D2C either through acquisitions or by copying its methods and approaches. What the Covid-19 crisis has shown us is that the D2C e-commerce model is not only for small, speciality companies, but for every size and type of brand that wishes to reinforce its brand loyalty, boost sales, and benefit from a direct relationship with their customers. Therefore, in order to remain relevant in an increasingly competitive landscape, D2C brands must find ways to differentiate through innovation, personalised customer experiences, product diversification, and more.
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