D2C Offers Both Challenges And Opportunities, But Retail Has Changed Forever

I’ve written about direct-to-consumer (D2C) companies a few times recently and the articles have sparked a lot of debate. It’s clearly an area that is taking off seriously in 2021 and the pandemic only partially explains why this has happened.

D2C is also known as the subscription economy. Everyone is used to paying a regular subscription every month for magazines, a phone service, or access to a streaming video platform, but the huge interest in this area is because if has expanded to offer many more services - almost anything can now be bought as a subscription, even your car.

Most of the Covid restrictions have now eased in countries such as the US and UK, but there are some lingering changes in consumer behaviour. Forbes magazine recently published research from July 2021 indicating that 45% of American consumers are shopping less in-store and almost 38% confirm that they are ordering more products online. The same research also indicated that 45% of shoppers intend to maintain their pandemic shopping patterns.

These observations are being echoed elsewhere. Not everyone feels comfortable heading back into the shops yet and some are just changing their shopping habits because they prefer the new way - getting items delivered directly to the home saves all that time spent driving, parking, and walking around the shops.

D2C will drive a lot of this change. Consumers have found that many of their purchases are repetitive. You know how much dog food you are going to need each month, how many cleaning products you usually buy, and how many toiletries you usually need. The vast majority of grocery shopping can be ordered on D2C platforms leaving the customer to just buy anything unusual or unexpected.

Most of the conversation around e-commerce and online shopping is focused on convenience. The Forbes article talks about how consumers are happier ordering from their sofa, compared to visiting a shopping mall. I think this commentary is missing two key points that executives need to be aware of when building a D2C strategy - one is a challenge and one is a huge opportunity:

1. The challenge of managing direct relationships: producers are now building relationships directly with customers, rather than retailers. Think about the pet food example to illustrate this. Usually I’d pick up some cans of dog food at the supermarket or pet store, but if I ask Pedigree or Royal Canin to send me 30 cans at the start of each month then that’s a direct relationship. The brand needs to consider the implications of managing thousands or millions of direct customer interactions, rather than just managing a few relationships with big retailers - a customer service strategy is essential.

2. The opportunity to understand customers in more detail: the pet food manufacturer doesn’t usually have a direct relationship with the end customer, so although there is effort involved in building that customer service function, there is also a huge opportunity to get to know the customers in more detail. Data analytics can be used to find what they like, dislike, when they like to order, whether variables such as weather trigger different behaviour. The brand now has direct access to all this information on consumer behaviour, rather than leaving it all up to a retailer to manage - smart brands will use this insight to retain customers that may be thinking of cancelling and for smart offers designed to move a customer from thinking about a purchase to completing it.

D2C isn’t just regular e-commerce. It’s not just the store transferred to an online environment. Customers are acknowledging that they have regular requirements that they will pay for on a repeated basis. Building insight and a great experience is essential for managing this type of ongoing customer relationship.

Leave a comment here with your own thoughts on D2C or get in touch with me directly here. I’d be happy to share some examples of D2C projects I have worked on and can advise on the next steps for your business.