D2C: The Digital Disrupter

Posted on January 27th, 2021
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D2C: The Digital Disrupter

Today, D2C brands are experiencing a meteoric boom in the eCommerce sector. In the past two years, these digitally-native brands have amped up their web traffic, employed more customer-driven strategies, and expanded their reach globally.

D2C brands are agile and data-driven. By eliminating the middlemen, D2C brands handle every business operation by themselves, from retail to shipping. Since D2C brands offer highly specialized and personalized products than bigger retailers, it becomes easier for customers to find what they are looking for and get the products easily delivered at their door. The success of the direct-to-consumer model has also captured the attention of brands like Nike. In 2017, Nike announced its plans about launching a direct-to-consumer wing. One year later, Nike’s D2C division has recorded a global revenue that stands at USD 10.4 billion.

When a brand hands over the last mile to a third-party retailer, it misses out on the most important data insights to be gained from customer relationships: preferences and buying patterns. Therefore, many CPG companies are breaking away from the traditional marketing practices and are choosing to establish direct relationships with their customers by using digital platforms.

With legacy brands and new brands competing in the highly saturated D2C landscape, a brand needs to have an omnichannel presence that will let them be discovered by audiences in various sectors, eventually increasing their reach from national to global. Having an omnichannel approach will allow brands to engage with the audience through digital D2C channels including websites, mobile applications, SMS, social channels, email, IoT devices, and more. These multiple channels will help brands earn an abundance of customer data to understand customer behavior, buying patterns, preferences, and intent in a better way.

As consumers become comfortable with buying and replenishing products in new ways, new D2C entrants are getting more attention as they offer speed and convenience. Looking at the trend, we have deduced that technology is the driving force behind this shift. According to survey reports by the World Economic Forum, the impact of digital transformation on consumer industries is expected to record USD 2.95 trillion in terms of revenue over the next 10 years. To keep up with this shift and meet the ever-changing customer demands, CPG brands are moving towards direct channels of communication with their customers, cutting down the middlemen and dealing with the customers themselves.

This is where D2C brands are already ahead and some cracks begin to appear in CPG brands' retail models. While companies were perfecting their mass marketing and branding through third-party retailers, direct-to-consumer brands are already leveraging various digital means to sell their products and form a relationship with the end consumer. Customer engagement is the crux of better brand identity and sales. Hence, CPG brands are taking inspiration from D2C brands to gain direct visibility of their customer's online transactions, and are able to harness the benefits of real-time insights and data from their valuable customers.

The importance of digital channels

Most customer relationships are now digital-centric. According to reports by Forrester, eCommerce will account for 17% of total retail sales by 2022. This makes digital channels the key source of more retail growth, influencing a large number of retail purchases. By focusing on these digital channels, D2C brands have gained effective control over their products and marketing aspects, resulting in reduced costs and fewer challenges in getting their brand’s message across the customers.

The digital platforms have also helped CPG brands to develop stronger relationships with their customers. In fact, 82% of CPG brands claim that employing a D2C model has helped them improve their customer relationships significantly.

Customer experience has also become a new battleground for D2C brands. Now that there are several brands in the picture, customers have become more attentive and aware of how the brands are trying to communicate with them. As the number of steps to reach the customers has reduced, it is important for the brands to demonstrate that the data collected is being put to good use. Email spam and straightforward convincing strategies should be left in the past as it creates a filling of unrest within the customers. Today's modern customer will judge the brand on the basis of receiving a personalized and compelling experience, regardless of the channel they are using.

In-store and D2C: the best of both worlds

When we talk about a more holistic omnichannel experience, it is important to mention retail stores as well. Retailers that have a strong omnichannel strategy experience a 91% increase in annual customer retention rates, as stated by V12.

Providing the customers with more flexibility will significantly increase the customer revenue due to the added convenience and a robust omnichannel presence. This means that customers can visit a retail location before purchasing the products online. Some brands also offer the option to buy online and pick up the products from the physical stores, highlighting the beauty of digital and physical alignment of an omnichannel retail strategy. Today, we are witnessing several D2C brands that are trying to embrace the in-store concept by opening up pop-up shops and full-fledged stores at various locations.

Shifting to a physical location does not mean that brands can overlook their relationships with the customers. Having a strong relationship and interaction with the customers and providing a quality experience and products is paramount, whether it is digital or in-store. Effective communication is only achieved when all marketing programs and systems are communicating and working in harmony with each other to ensure that each interaction is valuable and informative for the customer as well as the brand in real-time.

Focusing on Every Part of the Customer Journey

As mentioned earlier, customer interaction and a strong relationship is the best way to improve and enhance business operations and goals. Honest customer feedback allows brands to craft their marketing strategies in a better way and also lets them dive into exciting new approaches, like the personalization of products and subscription models. Whether it's a digital or a physical approach, brands must focus on the full customer journey. It is essential to achieve a single view of each customer that has the data from all platforms and touchpoints in the customer journey.

The important points in each customer's journey that should be taken into account include needs, preferences, interests, purchases, and intentions gathered from various customer engagement channels and data sources. By using this information, brands can achieve a holistic view of the customer journey that persists over time.

The customer journey is fluid and dynamic in nature, as customers change their preferences and buying habits frequently. By focusing on all the touchpoints carefully, brands will be able to make real-time data-driven decisions and provide the customers with better, personalized products.

Conclusion

D2C brands are taking the eCommerce industry by a storm. These nimble, customer-friendly brands are turning many heads as they provide a more convenient, personalized experience. In the coming years, it is possible to see legacy brands adopting the D2C model, making it a win-win situation for the brands as well as the customers. To master the direct-to-consumer model and yield the most benefits out of it, it is essential to have an omni-channel strategy, a proper customer engagement strategy, and most importantly, providing an unmatched, personalized experience.


Category:
Best Practices

Posted on:
January 27th, 2021