Why direct-to-consumers brands are winning at retail
A host of new brands and business models have carved out market share from long-standing players – those focussing on a more direct to consumer (D2C) model are at the forefront of this. By creating a more direct relationship with their audiences they are challenging established businesses – why should this be and what is there to learn from this approach?
1. Owning the relationship
Today, consumers are discovering through social media, drawn to strong brand personalities and experiences, value purpose and expect nothing less than great customer service and a seamless brand experience.
Why is this important?
Meeting these priorities comes easily to digitally native D2C brands. By eschewing the wholesale model, they’ve absolute control over everything from design to discovery and transaction, and as they ‘own’ this relationship they can continue to nurture after a sale and create a more personal dialogue.
They’re also able to offer an undiluted personality and hero their mission statements without having to temper or compromise for a third party. This creates a more honest and authentic personality – and in an age where authenticity is key (a study by Stackla found that 86% of consumers think authenticity is important when deciding what brands they like) gives the direct model an advantage.
It’s no wonder others are now mimicking it. For instance, when razor brand Harry’s entered the market with its subscription service model, Gillette upped its game and launched a ‘club’ that encourages customers to subscribe, offers deals and even personalised razors. This year Gillette attempted to get one step ahead of the subscription market by launching Gillette on Demand, a service that enables customers to text for products.
2. The power of physical experiences
These new, mostly ‘pure-play’, brands by their nature didn’t start with a physical presence, but they now understand the importance of physical experiences. They see the critical impact that human-centric, experiential and immersive spaces can have in the on-going relationships with their customers.
Why is this important?
From Casper’s nap room to Loaf’s ‘slowrooms’ and Birchbox’s whimsical pop-ups, these brands are enhancing their digital channels with experience-led, customer-centric spaces. Sometimes these are less about the ‘sale’ and revolve around getting to know the brand better and connecting with their audiences. These businesses treat the physical as another part of the experience, rather than as the main place to shop. For instance Korean brand Gentle Monster is famous for the spectacular and ever-changing installations staged in its stores, which, to be honest, have very little to do with the product on sale. As Philippe Chainieux, chief executive of Made.com says: “It’s about the brand experience. The number one objective is to engage with the audience. The showrooms are not a retail channel to drive revenues, they are an extension of our online business. The physical footprint is part of the overall brand proposition. When we open in a new market it takes a couple of years to build up the business and get traction. This reinforces the brand proposition.”
3. Data is king
Owning the relationship means really knowing your customers, and the key to this is data. D2C brands have built their models on the collection and interpretation of this information.
Why is this important?
Many predict that consumer data will be a more valuable commodity than oil in the very near future. This puts those that have a direct relationship in a more powerful position. Data is the bedrock for better connections with customers, it allows brands to create customer-centric experiences – ultimately it allows brands to sell smarter. Digitally native winery Winc uses a range of data-capturing methods, starting with a palate profile quiz when customers sign up and then as co-founder Brian Smith explains, “we track data on both the wine and consumer preference to constantly optimise for better wines and targeted recommendations.”
As AI develops, those with the best data libraries will ‘seamlessly embed themselves into their customers’ lives and sell to them in a way like never before’ (stylus). Facebook has now patented technology that reads people’s emotions and predicts what products they might be interested in. In the near future, those that really know their customers will employ technology that understands people’s mood and motivations to their advantage.
4. Community building
On the whole people today have less brand loyalty. Having a loyal following takes more than just great product; it requires a targeted community building strategy. D2C brands are masters at giving power to the consumer, use social media as a way to galvanise their fans and treat their physical spaces more like clubhouses than stores.
The hit American beauty brand, Glossier is a great community-building case study to consider:
Born of the blog ‘Into the Gloss’, Glossier has an almost cult-like following that founder Emily Weiss has used to catapult the business to success. Weiss believes in the power of the individual – not the influencer – and by harnessing user-generated content, she’s placing people above product by merchandising their stories and creating a community. The brand has also set up a Slack channel where its top 1000 customers can discuss what products they like and dislike. By being highly engaged in the conversations their customers are having Glossier creates better products and sells more.
Brands like Glossier have realised that growing a community is not about influencers, ads and product placement, but rather thinking strategically about how they can unite their fans.
5. Next-level service
The thing that activates the above pillars and brings them to life at every touchpoint is exceptional service.
Why is this important?
Through owning the relationship and customer data, D2C brands are able to offer heightened and more personal services that make better in-store and online experiences and build ties with the consumer. Stitch Fix for example delivers a cherry-picked box of clothing to customers (based on their size, taste and needs) and offers easy free returns for any items they don’t want to keep. This business model hinges on providing a convenient service from start to finish. More immersive experiences, such as Casper’s sleep rooms only work because they are executed with an exceptional level of thoughtful service.
So how to bring all these pillars together?
When it comes to living these pillars as a non-D2C brand, Nike is really leading the charge. It has been increasingly adopting a more direct attitude by narrowing its wholesale contracts, investing heavily in data and CRM tools, and investing in more personalised services through apps and community initiatives, alongside trialling more connected and immersive physical experiences. We’ve talked about the ‘locally tailored’ Melrose store here. If all brands can find their own way of embracing these pillars they may just find a way of navigating the changing retail landscape.
David Wright is the marketing director at Dalziel & Pow.
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