Retail, CPG and Logistics

How direct-to-consumer brands can continue to grow

Direct-to-consumer (DTC or D2C) is a retail distribution strategy under which product manufacturers sell their products directly to customers completely bypassing the traditional distribution network that includes distributors, wholesalers and retailers. DTC brands have disrupted traditional business models by connecting directly with customers, offering unique products and enhancing the shopping experience. These brands use data picked up from daily interactions with their customers and use that data to better serve their customer communities. To ensure continued growth in an ever-evolving market, DTC brands must adapt and innovate.

DTC brands have succeeded so far because of the growth of e-commerce and the ease with which online stores can be set up. As per industry reports, global retail e-commerce sales is expected to reach over USD 8 trillion by 2026. And not to be left behind, traditional retailers have joined the DTC brands in the race to reach customers quickly, especially in a post-pandemic world. The lines between the two have blurred quite a bit as DTC brands have started opening physical stores. One reason for this is the rising costs of digital advertising. Opening stores has become a popular move among DTC brands since it operates as a marketing channel as well as a transactional touchpoint for customers. Research indicates that like the work world, DTC brands will also adopt a hybrid model to remain relevant and profitable.

Certain trends that are expected to guide DTC brands as they continue to grow and flourish include:

  1. Bypassing the restrictions set by inflation: Inflation is a global reality and most  consumers worldwide are spending their money thoughtfully. Steps that DTC brands can take to manage this are:
    • Strengthen the brand and let customers  decide why the brand is better and unique
    • Build marketing campaigns on platforms that have proven to generate the best returns
    • Focus on the customer journey so that they become brand advocates.
  2. Creating personalised stories to stand out: Acquiring new customers and retaining old ones is perhaps the greatest challenge for any brand. DTC brands must implement creative strategies to tell stories that customers can relate to. Brand stories must blend in with customer lives to make an impact and attract new customers.
  3. Creating sustainable subscription strategies: DTC brands must strive to create subscription pricing that appeals to customers. Trying too hard to compete with every competitor can harm product margins so brands must be creative and prudent. Customers like to stick to a brand too if they are happy with the products and the pricing.
  4. Offering flexible payment options: A major pain point in e-commerce is shopping cart abandonment, which is reported to have reached almost 70 per cent.This must be brought down consciously to improve profitability. Many DTC sites offer flexible and attractive payment options to help customers. The ‘buy now, pay later’ (BNPL) scheme offered by expensive brands is attracting customers since the payment options are frequently more attractive than those offered by banks and credit cards.
  5. Focusing on product innovation: DTC brands must keep their product lines fresh and aligned with customer demands. Regularly introducing new products, improvements, or limited editions to maintain excitement will help attract a wider audience. It is also important to keep the checkout process simple and smooth. Seamless shopping experiences are what all customers look for.
  6. Implementing data-driven marketing: DTC brands must leverage data analytics to refine their marketing strategies. Data analytics can help brands understand customer needs and behaviour, segment audiences, anticipate trends, and tailor marketing campaigns for higher engagement and conversion rates. In fact customers enjoy personalised experiences and over 50 per cent of shoppers expect to receive personalised experiences. Understanding regional preferences can help brands be ready for localised markets too. 
  7. Continuing with SMS and email marketing: SMS marketing and plain text email marketing continue to be effective ways to reach the customers. SMS notifications have a 98 per cent open rate and they generate quite a positive reaction. Similarly plain text emails still generate interest especially in the midst of all the flashy marketing mails that flood people’s email inboxes.
  8. Using social media judiciously: DTC marketing strategy relies quite a bit on social media. An engaged audience translates to better sales and brand loyalty. However, it is also important to remember that any change in policy in social media platforms can affect a brand’s growth. Change in leadership, change in algorithms, new moderation and advertising rules can all affect a brand’s performance. Building a community through a website of email lists can help brands in controlling customer data.          
    Of course brands cannot ignore the business that comes through social media platforms. Especially popular among Gen Z and millennials, social shopping is making quite an impact. Social media platforms are aware of this and are trying to retain users in various creative ways. Who wouldn’t want a bite of the projected USD 2.9 trillion worth of social commerce  expected to be reached by 2026?
  9. Using technology to enhance customer experience: Brands must embrace technologies like augmented reality (AR) for virtual try-ons, chatbots for customer support, and AI for personalised recommendations. Chatbots are already being used successfully by most e-commerce sites and the use of AI chatbots has reduced customer service tickets by almost 92 per cent in recent times. As technology evolves, more and more customer queries about products, orders, product returns and giving out general information will be handled by AI chatbots.
  10. Collaborating with relevant influencers: This is not a new concept and many popular influencers are swaying opinions like never before. DTC brands must partner with relevant influencers who align with their brand values. Authentic endorsements can introduce many products to new audiences and build credibility.

DTC as a marketing strategy is here to stay. Even as customers are frequenting brick-and-mortar stores, the convenience of online shopping cannot be ignored. True, there are many bottlenecks to contend with, such as supply chain problems, advertising restrictions and rising costs, labour shortage, especially skilled labour, new regulations and many other little hurdles, both businesses and customers are willing to use new technology to elevate e-commerce to greater heights.

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