Direct-to-consumer (D2C or DTC) brands across all retail categories are turning a lot of heads right now. A recent report by Barclays Corporate Banking found that D2C sales in the UK amounted to £96bn in 2020, and that this number is set to grow to £120bn by 2023. The same research found that 57% of UK consumers say they frequently buy from D2C brands.
So, what’s so special about the D2C model, and what can traditional brands learn from it?
It’s no secret that the Covid-19 pandemic has spurred massive shifts in consumerism. More and more people are shopping online for products they used to buy in-store. And they’ve put a higher priority on convenience, ease-of-use and customization in those online shopping experiences.
Cue D2C brands, which are rising triumphantly to the occasion. And cue traditional brands that are taking a page from the book of their D2C competitors, such as Diageo with the launch of its D2C Haig Club brand.
There are three traits in particular that create a ‘perfect storm’ for D2C brands in today’s consumer environment: a data-driven approach, agility in adapting to changing conditions and customer needs, and a focus on e-commerce to fuel that agility.
Let’s look a bit closer at each lesson and how traditional brands can keep up.
1. Know your data to know your customer
The D2C model is heavily data-centric because these brands deal directly with their customers with no middlemen or third parties, giving them direct access to more customer data. That data is a powerful tool, and it’s used to develop a deeper understanding of who those customers are, and why they’re shopping (or not shopping) with them.
From demographics to needs, wants and shopping behaviors, D2C brands have a stronger grasp on what’s happening in the lives of their customers and the changing expectations they have for the brands they choose to do business with.
While the term ‘data-centric’ gets thrown around a lot these days, few brands are true role models for the possibilities that can come from a robust database, thoughtful analysis and a strategic plan.
Traditional brands may not have access to the same types of data as their D2C competitors, but they can still leverage the data they do have available, whether it comes from partners, industry benchmarks or elsewhere, to keep up to date with their customer and respond accordingly.
2. Be agile or be left behind
The most successful brands are the ones that have been able to stay on the pulse of their customers’ experiences, adapt to their changing needs and respond effectively.
Taboola customer Naked Wines is a great example of a brand that kept a finger on the pulse of what was happening in the customer landscape and quickly adapted its messaging to follow suit.
Data from Statista shows that during the pandemic, food and drink has been one of the top categories where consumers have switched from in-person to online shopping. Naked Wines jumped on this trend, using the Taboola platform to show native ads that encourage shoppers to try at-home wine delivery instead of buying from the supermarket.
The campaign earned the company 8,000 new sign-ups in eight months and a 33% higher lifetime value (LTV) than Naked Wines’ company average.
3. Prioritize e-commerce
E-commerce was given a boost by Covid-19, but its growth is likely to continue post-pandemic: eMarketer reports that e-commerce sales in the UK amounted to £153.71bn in 2020, and predicts that this will grow to £216.99bn by 2025.
Wherever possible, traditional brands should be considering how they can develop robust, faster and more reliable e-commerce capabilities in response to D2C players whose businesses were born online.
They’ll benefit from asking questions like:
How can our company reduce dependency on physical retailers?
What systems, processes and infrastructure can we set up to be able to respond more quickly to changes in the market?
How can we keep up and compete with pandemic-induced growth in the e-commerce space?
Of course, e-commerce isn’t just about setting up a Shopify account, and in many ways setting up an online store is almost like starting a business from scratch. Brands should consider where they can meet their customers in online space, and how to capture their attention there.
For many, the first online space to spring to mind may be social media, but there’s another online space that shouldn’t be underestimated: the open web, where consumers spend as much as 25% of their time online, according to Globalwebindex.
Here at Taboola, we believe that the open web will be increasingly key for businesses’ e-commerce success. We believe in empowering merchants in online environments beyond just their own sites and the ‘walled gardens’ of social media, helping them to use open web commerce and news sites to reach new customers.
That’s why we’ve recently acquired Connexity, one of the open web’s largest e-commerce media platforms. By combining our massive reach and data, as well as our direct access to millions of advertisers, merchants and publishers, we’re making big strides for the future of digital consumerism. Is your brand ready?