D2C: Building bridges to the consumer
Short for direct-to-consumer, D2C models remove the middlemen from retail transactions, enabling brands to sell their products (as the name suggests) directly to their consumers. The companies control not only the production, but also the distribution of their goods, bypassing third-party wholesalers and distributors.
Innovative startups such as Casper, a mattress seller, and Warby Parker, a brand of eyewear, proved the model could be profitable. And yet some industries, such as food-and-beverage, have been slow to catch on. Many larger brands seem reluctant to take the plunge as well.
Then COVID happened. (In most places it’s still happening, of course.) The first lockdown saw the economy all but screech to a halt. As that first wave receded, societies slowly loosened restrictions. But a second wave came. And for some, a third.
The social and economic changes brought on by 2020 turned out to be a trial-by-fire of D2C’s efficacy and resilience. So far it seems to have passed the test — with honours.
Too Good to Turn Down?
D2C’s web-enabled retail experience is ideal for people living through a pandemic, when lockdown restrictions and fear of contagion keep so many at home.
But there’s a second test for D2C on the (hopefully not-too-distant) horizon. What happens when COVID finally relents? Will consumers ditch D2C for the shopping centers and high streets of old?
It’s important to note that D2C isn’t exactly new. The first wave of brands to use the web to sell their products directly to customers — Warby Parker (eyewear) and Everlane (clothing) and The Honest Company (baby and beauty products) — came on the scene around 2010.
But the game of D2C isn’t for everyone. The technology and logistics needed to acquire and serve customers directly are intimidating, to say the least — especially when there’s Amazon, spoiling the lot of us with its endless variety of goods and its cheap next-day deliveries.
Yet the upside to D2C models might be too good to turn down, no matter how treacherous the entry might be.
With D2C, brands have the chance to form unbelievably close relationships with their customers. They don’t have to share control of their retail experience with a third-party. They have quick and easy access to a trove of consumer insights. They are present at every touchpoint, collecting and analysing data, personalising their messaging.
In brick-and-mortar spaces, brands have to compete for shelf space. In the realm of D2C, it’s all about the data.
Let’s take a look at a couple of larger brands which finally decided that, with the cloud of COVID hanging over us, 2020 was the year to try their hand at this new way of doing business.
Colgate and Coty Take the Cue
The personal care front has been especially busy over the past few years with brands making the leap to D2C. Perhaps this isn’t so surprising, given that the industry gave rise to one of D2C’s pioneers, Glossier, which began as a simple beauty blog back in 2010, until founder Emily Weiss started racking up over a million views a month and converted her devoted readership into a customer base.
In recent years Unilever has acquired online male-grooming firm Dollar Shave Club while Procter & Gamble acquired women’s personal care company This is L. The purpose of these acquisitions was primarily to learn how these DNVBs (digitally native vertical brands) operate from the inside.
Then, in the heat of the pandemic, Colgate-Palmolive waded in, releasing its new direct-to-consumer line of products called Shopsmiles by Colgate. Don’t expect to buy all of Colgate’s products here, though. Their D2C offerings are limited to their teeth-whitening products and smart toothbrushes.
Meanwhile Coty UK decided to dive head-first into the D2C deeps with its Home Beauty Edit service, which delivers product bundles to customers’ homes within two days of the order.
Pepsi and Heinz Make Their Move
For many people, one of the most frightening aspects of the early months of the pandemic had little to do with the virus — namely, empty grocery-store shelves.
But where consumers saw massive inconvenience caused by irrational reactions, giants of FMCG (fast-moving consumer goods) such as PepsiCo and Heinz saw a chance to break into D2C and strengthen their bonds with customers in need.
With Heinz to Home, soup-lovers can rest assured they won’t go hungry during lockdowns. And with PantryShop.com and Snacks.com, Pepsi is bringing brands from Tropicana to Tostitos straight to consumers’ homes, just in time for that classic COVID coping mechanism — boredom snacking.
Not to be outdone, Nestle announced its acquisition of Mindful Chef, which delivers recipe boxes and frozen meals. Nestle’s D2C portfolio now stretches from food (Mindful Chef and Freshly) to coffee (Nespresso and Nescafé Dolce Gusto) to pet care (Tails.comand Lily’s Kitchen).
Nestle’s not the only business to notice an opportunity to branch into D2C for pets, though.
Even as the virus cratered economies, pet brands thrived. Many people decided lockdown was the perfect time to invest in some furry companionship. And pet care brands, from startups to established names, were paying attention.
Mars, Inc. launched its platform to deliver Royal Canin goods to homes throughout Germany, France, and the Netherlands. The company also created its “Companion Fund” to invest in startups, including D2C companies. Mars can benefit from these investments in numerous ways. It can use them to keep tabs on the rapidly morphing D2C marketplace. At the same time, if any of the startups catch on, Mars can make profit on its investment. Perhaps most importantly, when and if Mars decides its time to branch further into D2C, it has a stable of familiar startups it can easily acquire.
No Longer a Younger Person’s Game
Before the pandemic, direct-to-consumer retail was largely a game for the younger crowd. But the older you are, the scarier COVID seems — and suddenly groups of people who might’ve avoided ecommerce just months before flooded the web in search of digital alternatives to queuing at the shop.
Some big brands were readier than others for this mass disruption to the status quo.
Being quick to adapt, however, is no guarantee of long-term survival in the ever-evolving jungle of D2C. Many people have decided they need D2C — for now. But brands have to show that the D2C experience can be rewarding whether there are lockdown restrictions in place or not. This is the only way to earn customers’ long-lasting loyalty.
For more information about how to build a deeper connection with consumers and gain a better understanding of what drives them, book a demo for Streetbees’ Always ON platform.