After reaching new heights during the Covid-19 pandemic, with many crashing down soon after, direct-to-consumer (DTC) specialists are entering a new era, according to leading data and analytics company Globaldata. After being forced to shop online during lockdowns, consumers are still eager to browse and interact with products before purchasing, especially in sectors such as apparel and beauty. As a result, the online retail market is reaching maturity in key digital markets like the US and UK, with many brands reevaluating whether sticking to a pure DTC business model remains the best strategy.

GlobalData Retail’s new study ‘Futureproofing DTC strategies’, explores the challenges ahead for DTC players as it becomes increasingly difficult for some of them to build success solely online, and reveals that many DTC brands are now partnering with established retailers to move into wholesale distribution.

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Physical presence
Now that pandemic disruption has subsided, consumers are back using a mix of online and offline shopping. Some DTC brands are adapting their business model to offer a hybrid retailing experience, giving consumers the option to visit in-store and interact with products before purchasing.

  • Brands that are predominantly online, risk losing business to competitors
  • Pop-up stores are a good opportunity to trial experiential store formats, to help build brand loyalty and meet consumers’ desires.
  • DTC mattress specialist Casper experimented with pop-ups before opening its first store in 2018 and has successfully expanded to over 60 permanent stores across the US.

Personalisation
Creating a personalised experience will enable brands to stand out in the crowded DTC space.

  • Much like the concept itself, the level of personalisation a brand undertakes depends on its proposition.
  • By providing full personalisation at every stage of the buying process DTC brands have the opportunity to create unique products.
  • Beauty brand Prose creates customised formulations for its customers, which are based on a detailed questionnaire that covers their lifestyle, demographic and health.

Loyalty programmes
Loyalty programmes allow brands to build stronger relationships with their customers, which in turn will encourage more sales through their DTC channels.

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  • Brands must incentivise consumers to use these schemes through exclusive offers such as free delivery and returns.
  • These programmes offer brands the opportunity to boost margins by selling directly, and access data on specific consumer shopping habits.
  • Sportswear giant adidas has created a loyalty scheme that incentivises shoppers to buy directly from the brand through free shipping, free personalisation, and exclusive products. Adidas anticipates the number of members to reach 500 million by 2025.

Neil Saunders, Managing Director of Retail at GlobalData, comments: “Overall, the diverse performance and innovations of DTC brands prove that the model is no longer one size fits all. While wholesale may be the path to success for some brands, others are reaping the benefits of stronger margins through DTC channels, proving that the business model can still be a strong avenue for growth. The most successful brands in the near future will be those willing to adapt and react quickly to changes in consumer buying habits, and as we have seen in the last few years, brands stuck in their ways will be left behind.”

To read GlobalData Retail’s ‘Futureproofing DTC Strategies’ study in full please download your FREE copy here.

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