Shaping the future of DTC: Trends to look out for in 2022 and beyond
Author: Nigel Parson, Research Director, Consumer Sector
DTC companies need to continue to innovate rapidly to stay relevant to their customers, adapting to and integrating the latest trends. Amidst an ever-changing e-commerce environment, the DTC segment is buzzing with initiatives in development.
At our recent DTC Conference, Jay Wright, CEO of Virgin Wines, explained that they are at the accelerating point for DTC businesses, and that subscription models must continue to innovate, finding new ways to engage with customers and to solve their problems.
Steve Oliver, CEO of musicMagpie, described how subscription models enable businesses to talk to their customers more frequently through open dialogue, enabling businesses to find out exactly what they want, which ultimately aids innovation.
For Andy Mackinnon, CFO of Moonpig Group, a culture of innovation is embedded across the business and innovative ideas don’t necessarily come from the boardroom but ‘bottom up’ from the organisation. Each member of Moonpig’s development team has 10% of their time dedicated specifically to idea generation, aiding the company’s ‘gifting transaction’ strategy.
Here is a flavour of some of the initiatives that we would expect to see in 2022 and beyond:
Embedded finance
·????????Recent research by management consultancy Accenture, in partnership with open banking platform Plaid, found 87.5% of the non-financial companies that have begun to offer financial solutions had increased engagement levels and 85% said they had attracted new customers. Initiatives such as buy now, pay later is on a steep rise in every market. Similarly, digital wallets like Apple Pay and Google Pay, which offer pure convenience, are gaining increasing acceptance. Survey research by Checkout.com found that 50% of European consumers used a digital wallet such as Apple Pay or Google Pay at least once in 2020 and 80% say they plan to use one in the next 12 months
·????????By 2023, e-wallets are expected to become the most popular online payment method in the UK, accounting for 33% of the market, according to Fidelity National Information Services. Soon, it’s likely to become standard for customers who are buying a fridge online to be offered a loan to cover the cost, insurance for the product, and maybe even some form of blockchain integration to secure the entire process.
·????????Embedded finance companies like Afterpay and Klarna have attracted huge valuations in the double-digit billions, on both sides of the Atlantic. In the US, Plaid, a tech platform that enables apps to connect with users’ bank accounts, was acquired by Visa last year for $5.3bn. In the UK, fintech-as-a-service start-up Rapyd, which offers financial service bricks to integrate into third parties’ websites, raised a $300m round in January on a $8.75bn valuation.
?Voice recognition
·????????Shopping via virtual home assistant such as Alexa, Siri, Cortana, Google Home is still in its infancy, with just 18% of consumers surveyed having used a voice home assistant, such as a Google Home or Amazon Alexa, to purchase a product in the past year.
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TV shopping
·????????ITV has launched Shoppable TV on Love Island with Boots the first brand to have its ‘must-have’ beauty products featured. ITV has plans to roll out the service on other programmes across different genres later this year. It is a service that will allow viewers to discover and shop items from its programmes directly on screen.
Crypto-currencies
·????????There are signs that DTC and other retailers are willing to try crypto-currencies and it could be an important marketing tool in the future.
Metaverse shopping and non-fungible tokens (NFTs):
·????????Metaverse is one of the biggest buzzwords in the industry at present. It is a vision where all digital experiences and objects – social media, markets, and games – are connected in one huge digital universe. It could include real-life elements like products and events and could exist with its own laws, currency, and communities. NFTs could change the market for artists for whom NFTs are opening new revenue streams. Instead of only being able to sell a piece once, creators will be able to set the terms of secondary sales using smart contracts.
Social media shopping
·????????TikTok, which recently allowed its users to shop directly in the app for the first time, has become a key source of beauty information for Gen Z.
Quick commerce
·????????This trend has already arrived with groceries in 2021 due, in part, to the nature of the products and the frequency of consumption. Companies vying for business include Jiffy, Getir, Zapp, Weezy, Gorillas and Deliveroo Hop and they all promise a delivery within 15-20 minutes from their dark stores. Consumer goods manufacturers are increasingly expected to deliver in one day, or even same day, thereby necessitating profound changes in distributor networks globally.
Parcel lockers
·????????Customers feeling increasingly guilty about the road congestion and street pollution caused by endless delivery vans are starting to decline the home delivery option. However, they are not always happy to join a queue at a local post office or other ‘pudo’ points where people do their pick-up-drop off. The growing alternative is the parcel locker: millions of little boxes across thousands of locations delivering greener, cheaper and less guilt-inducing parcel delivery. InPost, which floated on the Amsterdam stock exchange earlier this year for €6.5bn, will have 3,000 locations in the UK by year end with the plans to double the number by the end of 2022, helped by deals with Tesco, Lidl, Morrisons and Transport for London. InPost already has relationships with Boohoo, Misguided, Zara, Vinted and eBay.?