Why direct-to-consumer brands are winning retail in 2020
The rise of direct to consumer (D2C) brands over the past decade is hard to ignore, and like many things in the world of marketing, has undergone a shift during the COVID-19 pandemic. Major retail brands including PepsiCo, Nestle and Heinz all launched D2C offerings in lockdown to better connect with their customers at home. While the D2C business faces stiff competition from the popular marketplace models such as Amazon, the model is setting brands up for growth and success throughout 2020 and beyond.
So why does the D2C model work so well?
The success of a D2C model is two-fold: brands have more control over customer experience, and in return they receive more customer data. Customer data is invaluable to brands, allowing you to more accurately pinpoint who their customer is, identify the key problems they are facing, and understand what they are buying and when. In turn, brands can use this data to create customer experiences that surprise and delight – meeting the needs of customers they didn’t even know they had and creating memorable experiences that drive loyalty and repeat purchase, increasing customer lifetime value.
How do we harness that data?
D2C brands, and particularly those operating in the ecommerce space, have access to a wealth of data that will help hone their marketing. Learning how to interpret the data they have available to them is key for brands to leverage the power of their D2C model. As a starting point, brands should be asking the following questions from their data:
- Where are my customers coming from? (Referral information)
- How long are they staying? (Indicates website functionality and engagement/relevancy)
- How much, and how often, are they buying? (Frequency and basket size)
- Are they coming back? (Loyalty and lifetime value)
Businesses with more mature digital processes can dive even deeper into their customer data to segment audiences and target certain groups with the products most valuable to them. Brands who wholly and accurately understand their average customer lifetime value, looking at how much it costs to acquire a customer, how much they spend and how frequently they come back, will be well-placed to operate profitable business models in tomorrow’s world.
Are there any drawbacks of a D2C model?
Retail marketplaces leverage their size and scale to offer consumers exceptional product range variety and superior delivery options, and consumers are coming to expect this as the norm. Individual brands are now competing with the likes of Amazon, expecting fast and free delivery, wide product ranges and flexible return policies. While these processes can be costly, the benefit in terms of building customer loyalty and encouraging repeat purchase can far outweigh costs. For many successful D2C businesses, supply chain logistics have been just as integral to their success as branding and marketing.
How do I make my way into the D2C space?
If you are a retail business that wants to transition to a D2C model, start by following these three steps:
- Consider your retail channels. In today’s increasingly digital world, the majority of D2C brands are seeing success in online retail. Is your ecommerce offering sophisticated enough to compete with major online marketplaces?
- Audit your supply chain. Will you be able to offer customers the free, fast delivery that they have come to expect? What will it cost you in terms of customer lifetime value if not?
- Set yourself up for data success. Do you have the expertise in your team to fully analyze and interpret your customer data or is this something you’ll need to hire/outsource?
At Tag, we create faster, cost-effective and consumer-centric marketing campaigns. Backed by the knowledge of our team of retail experts, we are uniquely positioned to help support brands in their offline-to-online retail acceleration. We provide end-to-end marketing solutions that enable our brand partners to ensure they are well-positioned during times of change and uncertainty in the market.
Schedule a call today to discuss how Tag can support your changing marketing needs.