Vice President, LS Direct Marketing, provides customer retention, reactivation and acquisition solutions for national brands & retailers
Over the past decade, a growing number of innovative brands such as Harry’s, Bonobos and Warby Parker have shaped a new, direct-to-consumer (DTC) business model. By selling directly to loyal customers, these startups bypass the traditional wholesale and retail middlemen.
Given the circumstances posed by Covid-19, it’s not surprising that a number of legacy brands, which traditionally depend on wholesalers and brick-and-mortar retailers for distribution, are taking lessons from the successes of these DTC pioneers.
According to data compiled by McKinsey, 75% of U.S. consumers have changed their shopping habits due to the pandemic. In fact, e-commerce penetration in the U.S. increased at a rate equivalent to that of the past 10 years.
Brand websites are the store’s new front door.
Brands that relied on retail foot traffic for sales suddenly had to shift to an e-commerce mindset, upgrading websites beyond pure brand awareness to support customer engagement and seamless transactions.
For many, it was a steep learning curve. Brand marketers who hadn’t been in a DTC selling environment had to quickly get up to speed on strategies and tactics for driving website traffic, gathering accurate data, mitigating shopping cart abandonment, increasing conversions and more.
But it was worth the investment for many, as the DTC mindset isn’t likely to change anytime soon. In fact, research shows 83% of consumers intend to shop online the same amount or more.
The trend toward DTC is undeniable.
Diffusion’s 2021 DTC Purchase Intent Index supports the fact that DTC is penetrating consumer awareness. The study reveals that 43% of American consumers are aware of DTC brands and that 69% purchased at least one DTC brand in 2020.
More importantly, intent to purchase DTC brands is on the rise:
• 79% of those familiar with DTC brands say they plan to increase their DTC purchases in 2021.
• 52% say that 20% or more of their 2021 purchases will be DTC brands.
Legacy brands respond to the new retail environment.
Numerous legacy brands are feeling the urgency to provide their customers with a direct sales channel — some quite unexpected.
For example, PepsiCo recently launched PantryShop.com and Snacks.com, where visitors can order a variety of Pepsi’s food and beverage brands. According to Progressive Grocer, PepsiCo did so in response to pandemic buying habits and as a way to strengthen the company’s e-commerce channel overall.
But food and beverage brands aren’t the only ones that recognize the importance of incorporating DTC into their marketing and sales plans:
• Dubbing it “Consumer Direct Offense,” Nike confronted the pandemic with an aggressive DTC plan that drove its share price to an all-time high, even amid the global health crisis.
• Evenflo, manufacturer of infant and juvenile products, has launched its new smart car seat brand, Evenflo Gold, exclusively as a DTC product.
These aren’t the only legacy brands starting to think about a move to DTC. L’Oreal, Coach and Procter & Gamble are just a few of the others that have all been experimenting with direct-to-consumer strategies.
What are the advantages of going DTC?
Aside from the obvious goal of maintaining sales and market share while customers are avoiding in-person shopping during the health crisis, traditional brands are learning that there are additional, long-term advantages to incorporating a DTC strategy into their marketing plans:
• DTC brands gain total control of their data. That gives the brand complete ownership of the customer relationship. It allows for all of the data to be utilized to create a truly customized experience for the consumer. Data control also provides the ability to track and observe customer behavior and preferences firsthand.
• Selling DTC promotes direct customer engagement. By knowing who their customers are, DTC sellers can engage directly through social media, email, direct mail and more.
• By shifting toward DTC, sellers need less reliance on third parties. This translates into fewer contract negotiations, fewer fulfillment restrictions and, of course, the ability to pass along savings to customers.
• DTC gives brands control over all marketing possibilities. Examples include extra benefits for the customer, such as free shipping and gifts, subscription-based sales, flash sale promotions, personalized customer service, premium services and more.
Rise to the challenges.
There’s no denying the impact of Covid-19 on brands that have historically relied on brick-and-mortar stores to get their products into consumers’ hands. But the pandemic has also encouraged us to discover new ways not only to keep legacy brands alive, but also to keep them thriving.
Those venturing into DTC are meeting new challenges head-on to retain customers and acquire more, and in the long run, they are creating a new, long-term business model.
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Vice President, LS Direct Marketing, provides customer retention, reactivation and acquisition solutions for national brands & retailers. Read Brian DeLaite’s full