By Naomi Botting, Communications Project Manager – UK/Nordics, Lengow
The movement towards Direct-to-Consumer (DTC) gained momentum during the Covid-19 pandemic. Direct online sales have seen strong growth in 2020, with DTC sales increasing by 24.3% in the US alone. The same trend is seen throughout Europe. Let’s take a look at how exactly this affects the online strategy of brands and retailers.
What exactly is DTC again?
Brands seek a direct connection with their customers with the DTC approach. This means they sell their products directly to the end consumer, without involving partners or middlemen, implying that the brand must take care of marketing, logistics, customer service, etc. High investments must therefore be made in advance in each of these areas. Direct-to-consumer distribution provides some significant advantages in the highly competitive world of online retail. The direct production, marketing and distribution of products enables efficient cost reduction and direct interaction with customers. The entire consumer journey is owned by the brand. The brand can then trade in such a way that products, processes, and communication are optimised precisely for the customer. Personal relationships can be better established, therefore improving the overall customer experience.
The DTC model has been on the rise for several years now
Even before the pandemic, the trend towards direct-to-consumer was already apparent. 81% of B2C brands said that DTC brands have changed consumer expectations, seeking higher and more personal levels of service. Consumer goods companies saw 70% growth coming from DTC sales online. According to eMarketer, web traffic on DTC shops has doubled in the last two years.
Over the past few years, more and more brands have moved towards a (hybrid) DTC model. Brands such as Nike, Adidas or Levi’s have redesigned their online shops, activated new sales channels and increasingly enabled personalisation for their customers. Birkenstock also demonstrated a serious DTC initiative and hired 45 people from the digital sector to this effect.
Covid-19 bolsters the DTC model
During Covid-19, physical sales channels failed, and some online channels also had their problems. Brands either had to rely on their own online shop or serve the strategically most important online channels themselves. As a result, a DTC strategy became a must during the initial lockdown. Purchases no longer took place at wholesalers or on the high street, the focus shifted online. According to the electronic banking company ACI Worldwide, the average value of online transactions increased by 74% compared to the previous year. A look at the USA helps: there was a considerable DTC rise online. It is expected that DTC sales will account for $17.75 billion of total US e-commerce sales in 2020, up 24.3% from last year.
At the end of October, Puma announced that direct e-commerce sales to consumers grew by more than 60%, significantly contributing to the increase in sales in the third quarter of 2020. And a German study of 120 decision-makers from consumer goods companies in Germany, France, the US and the UK found that in the wake of the Covid-19 pandemic, these companies are increasingly adopting DTC approaches and adapting their business strategies to meet changing customer requirements while gathering valuable first-party data.
What does a DTC strategy look like?
First off, a well-maintained online shop is of course a basic requirement for a successful direct-to-consumer strategy. It is important to direct customers to the shop; a good start here is to be listed directly as a merchant in Google Shopping. The customer is redirected to the brand’s shop, which then takes care of shipping, etc.
The next big step is direct sales on online marketplaces. Retailers should not leave their brand image up to third-party retailers. You don’t necessarily have put your entire product range online to get started on marketplaces. A hybrid model is suitable when making your first steps. This means retailers continue to sell directly via their online shop and distribute a few selected products simultaneously via marketplaces such as Amazon, eBay, Zalando, etc. We advise pushing products that aren’t already widely available on each respective marketplace, so they quickly stand out. If this model bears fruit, then it can be very easily expanded by the brand.
Not to be forgotten in an efficient DTC strategy are of course social media platforms. The first step with Pinterest, Instagram or Facebook is Product Ads, i.e. ads that redirect customers to the retailer’s website. The next step is the use of the extended shopping functions of the platforms, which are constantly evolving. Instagram Checkout, for example, enables customers to make purchases directly within the app, helping retailers avoid frictional losses.
For more tips and tricks for a successful DTC strategy, there is a dedicated white paper on the subject.
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Naomi Botting manages public relations for the UK and Nordic markets Lengow, an e-commerce automation solution that helps brands and online retailers improve their performance, automate their business processes, and increase their global sales.
By Naomi Botting, Communications Project Manager – UK/Nordics, Lengow
Published 01/12/2020
