DTC (direct-to-consumer) commerce accounted for 40 percent of overall sales growth in 2020 and eMarketer projects that 103.4 million people will buy online through DTC channels by 2022. While these numbers are encouraging for brands looking to make their mark in the DTC space, they also point out current obstacles.
With more pure-play direct-to-consumer brands entering the market, as well as retail marketplaces, such as Shipt or DoorDash, the competition is fierce. If brands want to continue to see success in this area, they will have to re-evaluate their approach.
Repositioning from transactions to relationships
The simplest way to evaluate your DTC commerce approach is by examining where your efforts are going. For most brands, the urgent necessity to switch to DTC in 2020 naturally led to an emphasis on the transaction. Brands were figuring out how to get their products to consumers who needed them without going through traditional channels.
But now that the dust has settled a bit, consumers expect more from the brands they love. Enhancing and branching out into DTC strategies is becoming less about offering your products in more venues online and more about taking back ownership of the customer relationship. When repositioning from transaction-focused efforts to building customer relationships, ask yourself these two questions:
1. Do you know your consumer and the value of their records?
2. Which channels are the most positive for your brand and where do you belong?
Only brands with strong answers to these questions are best suited for a move to DTC. Otherwise, you may want to go back to the drawing board and ask your team why you’re branching out into DTC and if it’s worth it for the brand.
Defining the DTC Proposition
When we ask brands to go back to the beginning and tell us why they are embarking on a DTC journey, we often hear “My boss told me to sell our products online” or “Everyone else is.” And to that we would also say, let’s go back to the drawing board and figure out if this is the right fit for your brand.
If the answer to the first question of “Why are you going DTC?” is “To collect data,” then you likely have a good understanding of what will make it successful and the metric that matter. The answers to these next questions are going to be what makes or breaks your approach.
1. Why should a consumer ever buy from you and why should they ever come back?
We now live in a privacy-first era. Consumers understand the value of data they provide, and they aren’t willing to give personal information away if it doesn’t benefit them in some way. You have to provide a compelling reason for consumers to interact with you over a retailer or competitor.
2. What do you need to see a positive ROI?
Think about what the data you collect can do for you. And because the focus is on the relationship instead of the individual transaction, customer lifetime value becomes a powerful metric to focus on as your company’s DTC program evolves and matures.
Thinking about DTC long-term
Once you’re able to answer the questions we’ve posed above, you’re well on your way to building solid DTC strategy that will grow over time. To dive deeper into this DTC discussion and learn about the DTC four-phase maturity methodology our experts have developed, download our ebook, Identify Your DTC Value here.