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May 13, 2021
While in-store purchases are still the most popular way consumers choose to make their purchases, e-commerce is quickly catching up. A recent study shows that D2C E-Commerce is growing fast. Accounting for 18% of total global sales in 2020, this is up from 7% in 2015 and is projected to hit an impressive 22% by 2024.
The rise of the internet means that this distribution business model is rapidly evolving as small businesses can now put their products directly in front of customers instead of having to place them on a shelf in a store. As a result, manufacturers are increasingly skipping traditional brick-and-mortar retailers and selling direct to consumers.
In this article, we look at some vital pointers that will guide you in successfully convincing your customers to purchase directly from you instead of through traditional retailer channels.
According to Statista, over 2.14 billion people worldwide are expected to buy goods and services online in 2021. That represents close to thirty percent of the planet making at least some of their purchases online!
While some retailers may fear the rise of online DTC sales may damage or even cannibalize their existing retail sales channels, this is not entirely true. A manufacturer looking to set up a D2C channel can use their intimate knowledge of their own products to test out new lines. At the same time, with more comprehensive information at their disposal, brands making use of D2C sales can take personalization and improve customer experience.
So what can businesses do to shift closer towards D2C selling without sacrificing their existing retail channels? Let's take a look.
Before deciding to switch to a D2C-only model or to diversify your sales channel network, you must first let customers know what you're doing.
A pre-launch marketing campaign offers brands and D2C store owners a couple of practical head-start advantages:
If done right, an effective pre-launch campaign will drive new traffic to your online store and give you a platform from which to educate people about the benefits of your D2C offering over traditional retail outlets.
Online stores benefit from requiring customers to share more information with them than they usually would with a retailer. This gives D2C sellers the advantage of using this information to tailor a more personalized experience for customers, building all-important loyalty towards the brand.
In the battle for online supremacy, loyalty is like digital gold. In fact, D2C brands enjoy a retention rate of 25.9% and a 63% increase in revenue from their loyal customers alone. Knowing your customer means that you can give them more of what they want, forging a lasting relationship with them.
By putting the information that they already have to good use, D2C sellers are able to build loyalty programs that are customized to their patrons' needs. However, this can get tricky. Thankfully, there are many online tools that make setting up a D2C loyalty program a walk in the park.
Demand is king, and the more in-demand something is, the more keen people will be on getting their hands on it. People are much more inclined to buy something if it is perceived as 'scarce' or 'hard to get’. By controlling their products' perceived or actual availability, D2C channels allow brands more flexibility in marketing their products and services as exclusive. That being said, good timing and the correct messaging are key here. Claim that you’re low on stock too soon, and people won’t believe you, while retail outlets filled with your product will detract from its perceived scarcity value.
There are many examples of brands that have found success in scaling down on retail product offerings to offer them exclusively through their stores. A great example of direct buying from the manufacturer is natural cosmetics company Hairytale. The brand offers only a few of their best-selling items through retailers, making sure that their full assortment is available through their D2C channel only.
In the wake of the ongoing COVID pandemic, people are more reluctant than ever before to head outside. While stuck at home, people have also changed how they shop. Goods that we would typically purchase over the counter, like groceries and clothing, are now being acquired more and more through D2C online stores. However, many brands found that their delivery logistics and costs were insufficient to keep up with demand.
While many traditional retailers do offer delivery options, they are often forced to charge for having goods sent to their customers. D2C stores can take advantage of operational cost, rental, and wage savings by including free delivery in their value offering.
'Click and Collect' trends are also providing a convenient, low-contact option for customers. Brands can partner with other retailers or facilities that operate as pickup points for their products, allowing customers to quickly and easily collect their goods. With Click and Collect sales in the US alone having more than tripled since 2018, this added convenience and additional cost-saving is a sure-fire way to lure customers away from retailers.
One of the biggest factors that influence customers' purchasing decisions is the experience that they have with a retail or online store. As much as 73% of people value their customer experience as a more important factor than the price of the product or even its quality.
Nothing hurts conversion rates or loyalty more than unanswered questions or negative interactions. To combat this and create a more personalized customer experience, D2C storeowners must ensure that they know their product, inside and out, as well as adhere to some essential CX-boosting principles:
A major benefit of operating a D2C online store over traditional brick-and-mortar retailers is the much higher volume of information available to them. Subscriptions are a known growth strategy that allows businesses to leverage this information into a vital value offering for customers.
A study conducted by McKinsey in 2018 showed that the biggest subscription-based companies increased their cash flow from $57 million in 2011 to a whopping $2.6 billion by 2016! This is driven by the fact that close to half of all consumers are now signed on to a subscription service.
Three of the most common forms of D2C subscription services include:
The very nature of D2C selling means that consumers are already primed to happily subscribe to a service or product offering. Consumers are also far more likely to take up a subscription service offered by D2C sellers than they are to trust paper forms or enter their information into a strange iPad in a retail store.
As online buying sentiment shifts towards selling direct to consumer and away from traditional retailers, sellers and brands must adopt an innovative approach in order to keep up. Evolving customer needs are reflected in their changing expectations, especially when it comes to online stores.
Keeping customers informed of your move to a D2C channel is a critical first step in luring people to your online store offering. Be sure to make them aware of the benefits of buying online – from safer COVID-free interactions to free-delivery cost savings and more access to their favorite products. Know your product, talk to your client sand ensure that your customer's experience is at a personalized premium by offering unique subscription opportunities.
With global growth trends all pointing toward D2C E-Commerce as our ‘new normal’, make sure that your D2C online store is ready and open for business!
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