Direct-to-consumer retail brands are taking a larger bite out of overall retail sales across the globe. Competition between DTC and Traditional retail brands is heating up, and many retailers are feeling the pinch. If retail brands could do both!
While the percentage of global consumer dollars spent online is still a small piece of the pie, there has been a steady growth in the eCommerce space for years. At our current stage in the evolution of eCommerce, an important distinction has emerged between pure players (brands devoted solely to online sales, most notably Amazon) and traditional brands and retailers. Globally, the pure players account for 71.8% of eCommerce dollars spent, a trend driven by the Chinese market, where over 99% of online spending goes to sites like Alibaba. In America, Amazon and others focusing exclusively online account for 60% of revenue. Meanwhile, the UK lags behind international trends, with only 16.2% of pounds going to pureplay websites and apps, and traditional retailers maintaining the lion’s share of the market.
But with the explosive growth of eCommerce giants like Amazon and AliBaba, and in particular their aggressive moves into FMCG, traditional retailers and brands would be foolish to rest on their laurels. Kantar analysts predict that Asia will spend the majority of its grocery dollars online by 2025, while European and North American shoppers will slowly and steadily migrate online. Brands in the UK would be wise to look for lessons from the success of pure-play platforms worldwide and implement them into forward-looking strategies for growth.
The DTC model has allowed some opportunistic entrepreneurs to achieve meteoric success. Dollar Shave Club, Graze, Casper Mattresses, and Warby Parker are just a few of the success stories that the internet has thrown our way. And DTC pure players have several innate advantages that they’ve used to incredible effect. They have total control over their supply chains and customer data, they’re free to increase their margins, and they build loyalty among subscribers through convenient subscriptions and customized offers and rewards.
DTC success stories have been sprouting up like mushrooms. An influential fan or influencer can fling an upstart brand or platform into the mainstream in a matter of months. But one trend we’re sure you’ve noticed is that once these brands climb into the popular consciousness they quickly try to emulate traditional brands and retailers. We’re sure you’ve noticed Harry’s and Graze products on the shelves of brick and mortar stores, right next to the Doritos and Gillette products they once aimed to replace. Away and Warby Parker are now just another glitzy shopfront in the airport, and Ugly is selling its produce at Wal-Mart and on Ocado.
Does the fact that the most successful DTC retailers are seeking to emulate their traditional retail competitors indicate a fatal flaw in the model? DTC enables stratospheric growth, but it’s impossible to sustain that momentum without actually responding to consumer behaviour, and the majority of consumers can still be found offline. The brands and retailers that will thrive tomorrow are those who recognize where their customers are today, and also where they are going.
While DTC has a host of attractive qualities, it also has substantial barriers to entry. People love the convenience of home delivery, but research shows that they remain wary of committing to subscriptions with automatic fees and debits. They also are very fickle creatures and are quick to cancel in the event of a less than amazing experience. Consumers crave freedom and convenience, and while DTC may offer greater ease in purchasing, it hasn’t created an optimal shopping experience in the FMCG field yet. When people are buying groceries, they like surveying all of their options. They want to see what they’re getting, compare prices, freshness, and tastes, and the supermarket still delivers a better experience in these areas, giving brick and mortar an innate advantage at this stage in the game.
A synthesis of the two models offers brands and retailers the blueprint for future success. But for established retailers and brands, adopting the DTC model requires substantial investments in building an online sales platform, and putting logistics in place for the quick and convenient deliveries which customers have come to expect. The amount of capital that’s required to acquire online customers is prohibitive in many cases, a fact which pushes many companies to rely on Amazon’s marketplace for online sales. Doing so has a lot of short-term benefits, but it also results in the handover of all sales data to a rapacious, acquisitive potential competitor. A company that relies on Amazon for digital sales is a lot like the Gingerbread Man riding across the river on the back of the wolf. Sure, you’re moving forward right now…
If the cost of creating a sales platform based on the DTC model is enormous, and relying on Amazon is a deeply flawed strategy, what should you do? This is the point where we tell you how Adimo can help. Our research into consumer behaviour has taught us that customers are likely to research the quality, attributes, and prices of goods online, even if they intend to make an offline purchase. Our technology is a response to the way we shop today, enabling quick, frictionless purchasing at any point in the sales funnel. This unlocks the convenience of the DTC model, while also accommodating shoppers who prefer the traditional ways of doing business.
DTC customers show much more loyalty to the brands and products they buy, and our platform incentivizes consumers to favourite a product by allowing effortless purchase and delivery of frequently used goods. Our technology also allows consumers to access pricing information and purchase through their choice of leading retailers, giving them the best of both worlds: the convenience of DTC and the array of options to choose from that traditional retail can offer. We also will let you under the hood, giving you all of the sales data you need to tweak and tinker with your eCommerce sales strategy until you’ve perfected it. If the considerable benefits that DTC can offer sound good to you, let’s get to work on an optimizing your online sales today!