Is direct to consumer (D2C) the future of post-lockdown consumer goods?

Earlier this year, lockdowns changed the face of retail overnight. No longer could people access most shops or retail outlets and supermarkets had to adapt to support vulnerable customers and key workers. Consumers, meanwhile, started looking for alternative solutions to meet their needs and desires.

In response, D2C models were catapulted into the spotlight. Consumers, stuck indoors, moved online – spending more time engaging with digital channels, where D2C models are typically well-placed to acquire customers – and receiving the packages to prove it. Direct consumer relationships and experiences, especially those linked to owned e-commerce platforms, were essentially lockdown-proof.

But as lockdowns begin to lift – or shift to localised efforts – we’re seeing the retail experience start to open up again. With new requirements for physical shops, D2C – or elements of this model – could still have a significant role to play in the retail industry. Now is undeniably the right time for brands to understand their full range of options for engaging directly with customers, and ensuring they are ready and able to create and maintain a good customer experience.

Starting with the product proposition

Getting direct to consumer right is all about having a point of differentiation. What can you deliver, in terms of product and customer experience, that others can’t? What technology or partnerships can you leverage to make this unique and differentiated? Birchbox, for example, innovated how beauty products were curated, packaged, and delivered to customers for a D2C environment, rethinking the entire experience from the traditional beauty retail experience. There are undoubtedly untapped opportunities to innovate in other categories.

But D2C in and of itself doesn’t build brand affinity. The experience has to be good, the brand has to be relevant, the communications have to strike a chord and the economics have to make sense to drive scale. There’s a lot that has to be executed well, and for many established D2C models, success came when they built live experiences – think Harry’s or Warby Parker who built retail experiences that brought the brand to life. While many retail outlets were closed during lockdowns, longer-term they will become options once again. In fact, amidst the headlines of store closures, there are some that are ploughing forward with their store opening plans. For example Easy Bathrooms, the retail arm of the bathroom brand Cubico, has opened a new store each month for the past three years and plans to keep opening stores despite COVID-19, even opening a new store on the day non-essential shops were allowed to reopen.1

Alternatives to D2C

The primary challenge with a D2C model is that it’s not necessarily the solution to every brand’s woes. It can be expensive, logistically challenging, and distracting. The ultimate reason why D2C has garnered so much attention and hype comes down to the fact that it presents an opportunity for brands to get closer to their consumers. However, many brands can achieve that same outcome by cherry picking from the D2C model. For example, they can build great customer experiences, backed by good relevant content, that can equally build brand engagement and loyalty and create differentiation and competitive advantage.

These alternatives can also deliver great customer insights and build direct relationships with consumers without the full scale transformation and investment required to achieve the fully-fledged D2C model. For example, King Arthur Flour, operating in an otherwise dull category dominated by store brands, has created brand differentiation by investing in online recipes and by building content that engages loyal customers. In fact, this approach runs in their DNA, operating the company with a vision to “inspire and share the joy of baking, bringing people together and building stronger communities”. The product or distribution hasn’t necessarily changed, but the way the brand engages with customers is wholly different – it requires a content-first approach, backed by editorial, production, and digital channel management capabilities.

The future of retail?

Brands are accelerating their transformation efforts in response to COVID-19. This is likely the right response, given change has accelerated, yet brands should not lose sight of the long-term, including how best to support their underlying business models. Retail will return, albeit perhaps slowly in some areas and categories, and not all of the COVID-19-induced behaviours will stick.

As consumers begin to venture into the world again, brands that find the right applications of the D2C model – and use their limited investment budgets wisely – will engage their audience most effectively. Brands also need to continually assess their D2C efforts to improve the customer experience over time, adapt to the changing environment, and remain relevant.

With an initial focus on the day-to-day of getting customers in and out of shops safely, it will take some time before we see a complete return to the retail experience we once knew. And while consumers have flocked to digital channels during lockdowns, until we’re forever stuck in a chair with virtual goggles on, there’s a long life left in live experiences too. Brands shouldn’t lose sight of this as they innovate and move forward.

 

Featured in WARC.