How to build a multi-million pound kick-ass DTC eCommerce brand: Part 3
Part 3: How to brilliantly execute a Direct-To-Consumer model
In this latest instalment of the 5-part series, we’ll be exploring why NOW is the right time to be making ground in the DTC space and some of the key steps you can take, to brilliantly execute a kick-ass DTC model.
If you didn’t catch our last instalment, which explored some of driving forces behind why DTC brands are thriving right now, you can find it here. In the last instalment, we also delved into some of the standout advantages that adopting a DTC model can bring to your business.
What are you waiting for?
So, you’ve seen or heard about how adopting a DTC model can bring a range of benefits to your consumer goods business. Whether that be, generating deeper insights around consumer needs, maintaining greater control over the brand experience, delivering an exceptional customer experience (CX) or simply, driving sales. But you’re still unsure. You have doubts and your lack of experience selling direct (rather than through retailer/reseller channels) is preventing you from taking the leap.
As we explored in part 1 of this series, COVID-19 acted as a real catalyst for change within eCommerce. It forced businesses to adapt and innovate like never before. Those that took the leap and adapted effectively, reaped the rewards. With the sharp acceleration in eCommerce, those with direct-to-consumer (DTC) business models are making waves. And while, for some, the idea of selling DTC and the benefits this can yield, may have been alien, you’ll struggle to ignore the shining DTC examples within the eCommerce space in the present day. These brands are thriving and it’s because they have adapted fast and executed an effective DTC model. By not exploring the opportunity of selling direct, consumer brands risk not capturing unique growth opportunities that await within eCommerce.
For those businesses that have flirted with the idea of establishing a DTC channel in the past or for those who haven’t given it much consideration, now really is the time to reconsider. McKinsey reports how COVID-19 has really accelerated profound business trends, including the massive consumer shift to digital channels. In the US, the eCommerce penetration we saw in just the first half of 2020 was equivalent to that of the last decade. Closer to home, here in Europe, overall digital adoption jumped from 81% to 95% during the COVID-19 crisis. “The accelerated consumer shift toward digital is here to stay,” says John Donahoe, a veteran of Silicon Valley and Nike President and CEO. Nike’s digital sales grew by a staggering 36% in the first quarter of 2020, and Nike is aiming to grow the share of its DTC sales from 30% today to 50% in the coming years.
CEO of Pepsi Co, Ramon Laguarta, who joined household brand names such as Nike and Kraft-Heinz in speaking about their firm commitment to DTC eCommerce, stated “as you’re hearing from everybody else, eCommerce has become a high-growth channel at this point,” at company’s Q1 earnings call.
Similar to Nike and Kraft-Heinz (and a whole host of other shining success stories), there are some consumer brands that have attempted to establish a DTC channel over the past 18 months, but unlike those brands, they naively view the move as more of a temporary adjustment, meant to help them weather the storm of the pandemic. A huge mistake. Those consumer brands without an established DTC channel, but who have implemented a kick-ass DTC strategy will be the ones who thrive. This is a strategic, long-term commitment which will allow consumer brands to open up new channels and capitalise on increasing enthusiasm for DTC brands across verticals. Whilst COVID-19 was a catalyst, it merely accelerated an existing movement and shift in consumer buying behaviour. Anheuser-Busch InBev CEO, Carlos Brito confirms as much stating: “things that we’ve invested in already… for the past five years, like direct-to-consumer, like eCommerce, have proven to be good decisions”.
DTC hesitancy amongst traditional consumer brands
Whilst the shift to incorporating a DTC model offers major opportunities – which we covered in our last blog – it also presents significant challenges and hesitancy, as you’d expect with any new channel. The majority of consumer brands are familiar with selling their products through intermediaries, such as retailers, resellers, online marketplaces and distributors. This element of familiarity and sense of ‘this is how we’ve always done it’, paired with the limited experience of selling direct and establishing effective direct consumer relationships, can often lead to reluctancy and caution.
Concerns vary between consumer brands, but often revolve around the below:
- Fulfilment and logistics – selling direct requires an effective logistics and post-sales strategy. Concerns often centre around whether consumer brands will be able to offer the same level of fulfilment service as the long-standing, established retailers. Such retailers have robust distribution channels and the prospect of establishing this, and at the same level, may seem like a huge (and expensive) task.
- Customer service – selling and communicating with consumers directly requires processes, procedures, and expertise. Consumers who buy direct expect a more personalised, engaging approach and if this has previously been for the most-part, managed by an intermediary, then this can pose a challenge for those looking to establish a strong DTC model. Learning how to best manage the customer service relationship is critical in order to best serve customers and keep them happy. The DTC approach means that consumer brands need to improve their customer service literacy. Effective cross-channel, multi-platform customer communication is fundamental, whether that be over the phone, email, live chat or through social media platforms, brands need to have a laser focus on this area. Serial tech entrepreneur, former VP of Engineering at Salesforce and current CEO of Kustomer, Brad Birnbaum concluded that “the real CPG winners will be those that invest not only in DTC, but in the customer service infrastructure required to satisfy even the finickiest of customers”.
- Lack of end-to-end eCommerce experience – whether this is around needing a pricing engine, processing payments, loyalty and engagement, order tracking or processing returns. For those that have little experience in selling through a dedicated direct channel, and a lack of knowledge of the end-to-end eCommerce lifecycle, the entire process can seem daunting.
- Capturing high quality search traffic through content creation – while consumer goods businesses may be used to brand building on their owned channels, a DTC model requires a different kind of messaging. It’s critical to forge the right balance between broader brand evangelism and crafting targeted content that is specifically designed to capture share in organic search and really resonate with your specific audience. Brands that are solely DTC by their DNA are kick-ass at this. Especially when it comes to crafting engaging and relevant content across their digital channels that is aimed at capturing organic search traffic. Traditional consumer brands venturing into the DTC space have less expertise in this area and this can act as a barrier.
- Developing a powerful eCommerce channel and customer-centric website – traditional consumer brands may concede that building an eCommerce channel and powerful website would absorb a lot of resources. They’d be right. This part is critical if you are to execute a kick-ass DTC model, but it can be well worth the initial investment and concentration of resources. Consumer brands that are looking to really establish an effective and profitable DTC channel, must ensure that their eCommerce website is seamlessly navigable with a brilliant user-friendly UX/UI. You’ll need a site that is easy to use and creates a quicker, convenient path to purchase. Part of this involves creating an exceptional site search experience (so that customers can find products and questions about your brand easily) as well as multiple payment options (such as Stripe, Klarna, Clearpay, ApplePay and for some even cryptocurrency). Your brand’s website is your digital ‘shop window’. Forrester reports that as high as 68% of people would not return to a site that provides a poor site search experience. If you’re not delivering a seamless search experience on your website, you’re not showcasing your brand and its products in the best light.
By having a well thought out, deliberate DTC strategy, that clearly examines the opportunity and an execution capability to effectively convert customers at a reasonable cost, consumer brands can overcome many of these concerns and set up a profitable DTC channel and exciting, new source of growth.
How to WIN at executing a Direct-To-Consumer model
There’s a whole host of compelling reasons for selling direct and increasing sales is just one of them (a very important one of course). Before venturing into the adoption and execution of a DTC model, it’s important to define the goal of your DTC strategy (something we’ll cover later in the series). This goal should be clear, measured and fully integrated into your brand’s overall business strategy. By doing so, you’ll help anticipate and resolve potential channel issues and ensure that your retail sales can work in tandem with your direct, eCommerce sales. You’ll need to explore whether adopting DTC will provide clear value to the consumer and not introduce them to new friction in the customer journey. For example, if it’s not clear whether buying direct is the cheapest option for consumers and they wonder whether they can find your direct offering cheaper at a well-established and familiar retailer, they might not purchase with you until they’ve finished shopping around. Here, you risk the consumer going elsewhere or falling out of the sales funnel.
1. Master the art of brand authenticity
The most successful DTC brands are born out of mission-driven initiatives. It’s about more than just providing high quality products and a great service. It has meaning and depth. Brands that are perceived as authentic with consumers are more likely to resonate with their target audience and reap the rewards in the form of sales and loyalty. In order to achieve authenticity, brands need to be purpose-led, it also helps when visible figures associated with the brand are immersed in the business and its products. Whether it be for writing better product descriptions and marketing copy or designing superior features, being fully embedded in the product and its space is something that rings true with dozens of DTC founders. It helps tell the brand’s story and project a layer of authenticity that selling solely through intermediaries (such as retailers or online marketplaces) may never achieve. Ghassan Halazon, the CEO of Emerge Commerce, a £250m (sales) collection of DTC eCommerce brands, agrees stating: “an authentic voice helps brands stand out from the pack, it will convert into higher customer loyalty and retention”.
Businesses that are succeeding at DTC and that master the perception of authenticity with their consumers, do so because they have distinct personalities and it’s clear what they stand for, or what they aim to achieve. Take Smol, for example, a British DTC brand that posts laundry detergent and cleaning products direct to your door. Their slogans? ‘Smol things make a big difference’ and ‘big is dead, long live Smol’. Smol have truly disrupted this sector (dominated by big players like Procter & Gamble and Uniliever) by providing an affordable and convenient solution. Their products are not tested on animals and their packs are refillable, returnable and recyclable, reducing plastic usage, chemicals and carbon. This is a brand that is succeeding at guiding consumers to make the green switch, and keeping them there. Their messaging is clear and their communication with consumers is informative with few gimmicks, magic tricks, or cheesy advertising. Check out their story here. Other notable success stories from over the pond, include Glossier, a billion-dollar beauty brand, focused on disrupting the beauty and skincare sector. They also have clear sustainable initiatives such as, 40cean, which aims to end the ocean plastic crisis (an important factor in the buying decision, especially amongst younger consumers).
So, why does brand authenticity matter if your business is to thrive with a DTC model? Because consumers really do care about the interactions they have with brands. They want brands to ‘walk the walk’ when it comes to authenticity. The modern consumer is smart, tech-savvy and research-oriented. A brand’s authenticity perception with consumers has never been more relevant. Research from Stackla found that almost 90% of consumers mentioned ‘authenticity’ as an important factor in deciding which brands they like, support and purchase from. The ‘Millennial’ and ‘Gen Z’ category of consumers, the shoppers of today and tomorrow, are giving preference to brands that feel “real and organic”. Consumer research (via MarketingDive) found that 65% of Gen Z respondents had an “increase in positive feelings about a brand because of an association with a social cause”. The consumers of today want brands to support the core issues they care about. Fail to address this and you risk losing out on customers. With digitalisation, consumers are observing you round the clock, and they crave a credible, trustworthy and authentic experience in this hyper-connected, digital world. As a consumer brand establishing a DTC model, it is your job to deliver on this.
2. Build a community of brand advocates and evangelists
Once you have developed trust amongst your audience and mastered the art of authenticity, you’ll want to build a community army of brand advocates. As humans, we’re naturally social beings, we long to be part of something. To be included within a social group. The very best DTC brands have employed a laser focus on building and nurturing their social communities and online fan bases. The likes of Sephora, a multi-billion dollar French beauty brand have really excelled at this. As beauty is personal, there is a remarkable opportunity to cultivate a strong and active community. Sephora have their Beauty Insider Community, an online social platform that allows fans to connect, share tips and advice with one another all formed around their interest in beauty, skincare, and cosmetics. This provides a unified brand experience for their biggest fans and creates a sense of community, which inevitably leads to brand engagement and loyalty. Within the community, members post reviews, photos, and recommendations on products they love. In here, there’s an opportunity to chat with other ‘Beauty Insiders’ to gain inspiration. It acts as a central hub of knowledge and content that keeps the brand’s community engaged. Sephora rewards engaged users with exclusive discounts, live streams, special events and access to top tips from prominent influencers within the beauty space. This unique combination of consumer-led engagement, sense of community, and rewards, keeps consumers closer to the brand.
By creating brand advocates, through an effective strategy of engagement and reward, your very best customers will likely be some of your best salespeople. They’ll act as an ambassador for your brand. As a consumer brand looking to adopt a powerful DTC model, you should consider introducing an ambassador/influencer initiative with incentives that include commission or special rewards. This will encourage and incentivise your biggest customers to positively promote your brand. Of course, you’ll need to look at the data and ensure that those referrals are resulting in sales before offering too many rewards. Like an effective loyalty program, a tiered approach, which offers additional value for the brand ambassador, the more they help sell your products, is going to be the most effective strategy for your DTC brand.
Nurturing a community of brand advocates is likely to be one the fastest ways to truly scale your brand online. If you persuade customers to talk about your products, whether that be through social media posts, product reviews or unboxing videos, you are creating UGC (user generated content), and this is really powerful for building a strong community and persuading new customers to enter the fold. As high as 93% of customers read online reviews before making a purchase. As a brand looking to win at DTC online, you therefore need to make it as easy as possible for your customers to write and submit reviews. Whether that be on desktop, tablet or mobile. You want to remove any friction with mobile-first requests and reviews should look good on any device. You don’t want to be making your customers click through various pages or sign into their account. Make it seamless. To increase your user generated content submissions, offer incentives that relate to your loyalty and rewards scheme. You may wish to award points or a discount from a future purchase in return for leaving a review. This will lead to brand loyalty, and hopefully repeat purchases. Research suggests returning customers are likely to spend on average three times more than a one-time buyer.
3. Make payments easy and flexible
As a brand looking to establish a kick-ass DTC model online, you need to create as little friction as possible, and this is true for payments. You should present your customers with a range of payment options, including BNPL (buy now pay later). BNPL is a short-term financing service offered by merchants in which customers have the options to defer or spread the cost of purchased goods, without incurring interest or fees. BNPL providers claim that having such options can increase sales by as much as 35%. As a merchant selling online, you should consider offering card payments alongside the likes of ApplePay and several BNPL options. The BNPL sector has experienced exponential growth recently. The ease and availability of this form of credit has proved particular attractive to Millennial and Gen Z consumers. The BNPL sector quadrupled in size in 2020 and alone and is expected to be worth a staggering $166bn (£120bn) by 2023. Here in the UK, Klarna has more than 10 million customers and is seeing 95,000 new accounts being opened on a weekly basis.
Buy now, pay later delivers in satisfying two competing consumer demands: the desire for immediate gratification and the inability to pay up front, in full. Dominant players, Klarna, suggest that offering a financing option increases your customer’s purchasing power and will deliver more sales for your eCommerce store.
When devising your DTC eCommerce strategy, design your payments process with today’s consumer in mind. Offer a range of payment options with minimal fuss. British sports fashion retailer, JD Sports are a shining example of how this can be done. Below you’ll find the options that their customers are presented with at checkout.
4. Digital by design
To really thrive with a DTC model online, your store will need to be digital by design. DTC brands not only depend on the powerful digital ecosystem, but they were also born digital natives with eCommerce and digital channels (such as social media) embedded within, and central to, their brand.
As the growth of eCommerce continues to surge, the digital experience, from your eCommerce platform, site speed and UX/UI of your site is crucial. We’re in the midst of a sea change when it comes to consumer behaviour. The majority of the buying population are now millennial or younger, and they’re born digital natives. As brands move forward in their digital transformation journey, design, flexibility, and ease is going to be more important than ever before. Your brand needs to be online, all of the time. Consumers are savvier and more demanding in their digital expectations, as an eCommerce brand, you need to place a greater focus the way things look and feel as well as the tone of voice. Your digital presence needs to look, feel and respond in a tip-top, seamless fashion.
Winning DTC eCommerce brands have slick websites with minimal friction. Their mobile experience is exceptional and a great number of them have ways in which you can shop directly from social media posts. Take Essential Label’s website for example, they have a dedicated section where you ‘shop the look’ from posts fed through from their social channels.
It’s now no longer an afterthought, or a ‘nice to have’, having a site that is optimised for mobile is essential. If you’re to establish an effective model for selling direct, you must have a fully responsive and optimised site on all devices. Whilst the specific industry you’re positioned in dictates the exact percentages, research shows more than half of all digital traffic online now comes through mobile. Your customers want to view your store online in whichever way they please. Even if consumers research a product on mobile and follow with a purchase on desktop, it’s critical that your mobile site is slick. Most mobile users won’t even put in the effort to browse a website that isn’t formatted for mobile. Failure to implement this and you’ll find your customers will be hopping right back into the search results to purchase from a competitor.
Combine this, with the fact that having a site that’s not mobile friendly, will negatively impact your search rankings with Google’s recent announcement of mobile-first indexing, now really is time to get serious about your web design.
5. Offer convenient, flexible delivery options
Whilst logistics and fulfilment can be a genuine concern for those brands looking to establish an effective DTC model, there are measures you can implement to ensure that you’re offering consumers a convenient, flexible and efficient option when it comes to the delivery of products purchased online.
Retailers and resellers have well established distribution networks and the likes of Amazon have heightened the expectation of speedy delivery from consumers but as a brand selling direct you can ensure you’re meeting the demands and expectations of your customers by offering a range of flexible delivery options.
As we’ve seen in the pandemic, effectively merging both the digital and physical worlds, can save your business and earn you customers for life. Brands that were heavily brick and mortar, such as Lindt had to adapt overnight when they were forced to close their retail outlets during the pandemic. Without a robust eCommerce store, the company had a large inventory of products and no channel to sell them.
Lindt adapted fast to selling direct, within less than a week they had launched their first online DTC store ready to capitalise on Easter sales. By adopting a direct eCommerce channel, Lindt were able to slash their fulfilment costs and offer pickup options for customers that had made a purchase on their online store. To accompany this, Lindt offered speedy tracked delivery options on their site and worked with reliable logistics partners to fulfil their chocolate orders. By accelerating their DTC initiative and executing their strategy they were able to save the Easter sales season. They now plan to further expand their DTC offering to consumers. Kairen Wu, VP of Marketing at Lindt stated: “we had fantastic feedback from our customers, many of them telling us that we helped save Easter… in this crisis, every day can seem to run into the next. But our customers told us that we gave them a way to come together and celebrate and feel a bit special and closer to normal.”
Analysis from Whistl suggests that 45% of shoppers have changed their mind about making a purchase online due to dissatisfaction with the delivery options available. It is critical consumers are given a range of options as they’ll likely abandon a cart if the merchant does not provide flexible delivery options. Melanie Darvall, Director of Marketing and Communications, Whistl, said: “our analysis shows that parcel tracking has considerable benefits for online retailers in converting sales. It provides transparency and reassurance for customers leading to reduced customer enquiries”. Detailed analysis suggests over 85% of consumers want the ability to track their delivery, receive proof of postage and dispatch and have an option to reschedule if they’re unable to accept the delivery.
Have your say
Please feel free to share your thoughts in the comments section below on part 3 of this 5-part series on building a multi-million pound kick-ass DTC eCommerce brand. The next edition will be released later this week and will explore key insights and considerations you’ll need to make when adopting a DTC model, be sure to look out for it.
Hope y’all enjoyed and see you on the next one.