D2C brands: How to sustain explosive growth beyond the pandemic - ClickZ

30-second summary:

  • Despite a climate of economic uncertainty and falling consumer confidence in advertising campaigns, there has been a huge spike in consumer ecommerce spend
  • The direct-to-consumer (D2C) sector is exploding across the globe, presenting significant opportunities for smaller, more niche and nimble brands to take market share
  • Key to success is focusing on agility, building meaningful customer relationships, making data-driven decisions and thinking long-term

As we enter 2021 in our third lockdown, many retailers and direct-to-consumer (D2C) brands are facing an uncertain future. Media reports have been systematically sounding the death bell for a number of long-standing British stalwarts, with shopping centers hit especially hard.

The Arcadia Group, Peacocks, Jaegar, Laura Ashley, Oasis, and the Warehouse Group are all among those that fell into administration in 2020.

Technological revolution in ecommerce

Yet the retail landscape is far from all doom and gloom. Many brands are responding quickly and nimbly to the pandemic by investing more heavily in their digital offering and the online customer journey.

A Barclays Report from December reported that one in four industry leaders (26%) believe the pandemic has accelerated a ‘technological revolution’ in retail.

Many multicommerce and pure play ecommerce brands experienced a peak in sales during lockdown, with sectors such as food and drink, house and garden, and gifts, seeing a significant uplift in online order volumes.

D2C brands navigate the new retail landscape

One retail sector flourishing in the pandemic is D2C. While traditional consumer packaged goods retailers struggle with broken supply chains and rapidly changing consumer needs, brands in this sector are nimbly pivoting their strategies to provide much-needed support to consumers.

Their cost-effective, personalized and innovative approaches to (Read more...) target audiences, alongside cutting out the expense of third parties, has seen them emerge as one of the few winners of the pandemic.

These businesses, which include the likes of Dollar Shave Club, Made.com, Abel & Cole, Glossier and Pasta Evangelists, are no longer a niche segment of the ecommerce landscape. According to an IAB Report 97% of consumers have heard of at least one leading D2C brand in the UK; 39% have bought from one.

But great uncertainty still lies ahead. Decreasing consumer spending, higher unemployment and a fiercely competitive digital landscape are just some of the challenges brands across every sector continue to face.

To drive business growth over the coming year and beyond, D2C businesses must put the right strategies and structure in place now.

Here we suggest four ways D2C brands can plan for success in 2021:

Steps for D2C brands to drive growth

1) Take an agile approach

If there’s one thing 2020 taught retailers, it’s the importance of being able to adapt, fast.

86% of consumers changed their behavior as a result of COVID. During the first lockdown in March last year, order volumes rocketed in sectors supporting life at home, including tech, food and drink, home and garden, and gifts.

While the digital-first approach of D2C brands positions them well to capitalize on this accelerated shift to ecommerce, this alone isn’t enough. To continue growing, these brands must continuously evolve their online experiences and offerings.

In the case of ODDBOX, a sustainable fruit and veg delivery service, this meant opening a new marketing channel. After experiencing a surge in online orders earlier this year, it implemented a referral program.

By incentivizing its rapidly growing customer base to refer friends and family, the fruit and veg provider has cost-effectively acquired thousands of high-value customers and driven significant (and sustainable) revenue.

Adapting to changing circumstances doesn’t always have to mean driving immediate profit. Bloom & Wild, for example, donated 15% of select sales to the National Emergencies Trust Coronavirus Appeal and gave key support workers 40% off flowers. Rather than fluffy brand-building, actions like these build powerful brand affinity that converts into long-term revenue.

However retailers adapt, though, one thing is clear: time is of the essence.

2) Build meaningful customer relationships

Even before the pandemic, consumers were increasingly seeking brands they could connect with and believe in. A big advertising budget no longer equates to effective marketing; now, consumers want brands with purpose. This makes room for younger brands with smaller marketing budgets to gain market share.

Much of D2C brands’ popularity rests on the perception that they’re on the customer’s side. This attitude gained particular prominence last year, as widespread uncertainty prompted consumers to seek more transparency and reassurance from brands.

Businesses that took real action around COVID-19, from producing hand sanitizer to giving NHS workers exclusive benefits, garnered public favor. Human connection is a powerful thing, particularly during times of crisis.

According to this report from Sprout Social, 57% spend more on brands they feel connected to. This is even more prominent in our current situation. Edelman’s Trust Barometer Special Report found that 33% of consumers have actively deterred others from using brands they felt acted inappropriately in the pandemic.

With the economic climate forcing careful consumer spending, meaningful engagement can be the difference between brands thriving or collapsing.

Rather than expensive TV advertising campaigns or blanket email blasts, D2C brands should prioritize meaningful customer relationships. Get this right, and they can build strong brand communities that actively promote their purpose and services, such as Huel’s die-hard Hueligans.

A quick glance at successful D2C businesses’ social media accounts highlights the power of good customer engagement.

Brands like Snug Sofa boast thousands of highly engaged followers who regularly interact with posts. This provides another touchpoint for building brand affinity, as brands engage in two-way conversations and nurture customer relationships.

While initiatives like charity donations, online competitions or social media interactions may not deliver revenue right now, they build lasting connections primed to deliver long-term revenue.

3) Make data-driven decisions

Rather than rely on third parties, D2C brands are uniquely positioned to gather customer data in real-time. With many of these brands scaling rapidly, this data holds the key to unlocking valuable insights into fast-growing customer bases.

In the current situation, consumer needs are rapidly changing. By continuously monitoring buying behavior and attitudes, D2C brands can experiment and optimize their offering to adapt as needed. But with so much data out there, it can feel tricky knowing where to start.

Ensuring that the end goal and business objectives are front of mind, and keeping a clear focus on specific metrics will equip marketers to effectively measure performance and the impact of different initiatives.

If driving repeat purchases is a priority, for example, experiment with segmenting customers by order number and serving highly targeted engagement content that drives the next best action. With D2C success rooted in meaningful relationships, creating effective interactions at every stage of the customer journey will underpin sustainable business growth.

4) Think long-term

Many fledgling D2C businesses exploded over the course of 2020. To continue scaling in a sustainable way, these brands should think long-term and avoid simply focussing on hitting monthly targets.

Businesses that acquired significantly more customers in lockdown should now roll out initiatives focused on retention.

Prioritizing activities that nurture customer relationships will help instill a strong sense of brand community. Also important is engaging original customers; the early adopters who bought into the brand’s purpose when there were endless on and offline options still to choose from.

A direct-to-consumer approach is now mainstream. Simply being a D2C brand is no longer innovative. To stay ahead of the curve, these businesses should continue nurturing customer loyalty and adapting to the evolving marketing landscape.

Widespread consumer economic uncertainty and insecurity will continue to impact retail and ecommerce for the foreseeable.  To overcome this, D2C brands should continue to take advantage of their flexible business models and low marketing costs, while offering consumers the excitement, purpose and experiences that we are all yearning for.

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