The new DTC: delivering goods fast, with purpose

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AnalogFolk question whether smart FMCG brands will take the opportunity to upgrade to a new approach.

In the last few months, all around the world, people are wishing they hadn’t unsubscribed from that delivery razor/make-up/food box service, as they find themselves queuing (virtually or actually) for supermarkets and missing out on life’s essentials during Covid-19 isolation.

Will this lead to a renaissance of DTC for FMCG brands? Yes, and no. Despite the buzz, previous incarnations of DTC didn’t provide an innovative leap forward. They were one-way delivery systems based on lowering costs, but the new DTC will be different. DTC 3.0 will be a brand-building collaboration between business and customer.

A brief history of DTC

In the mid-20th century, DTC 1.0 was old-school mail order where niche businesses thrived through their ability to reach customers via print media and selling direct. More recently, DTC 2.0 focused on single, novel products sold via online subscriptions. This was driven by easy access to Asian manufacturing, a growth in consumer confidence in e-commerce, the rise of influence marketing and, let’s not forget, novelty.

Massive exits by brands like Dollar Shave Club and Graze to FMCG multinationals like Unilever added more heat to the fire in the mid-2010s. Then, novelty began doing what it tends to do. Early-adopters struggled for routes for growth, often turning to traditional retail channels or diversifying. Harry's Razors swerved lane entirely and took its product range into Boots. Casper mattresses expanded its product set into dog beds, among other curious adjacents. Competition came on two fronts – from traditional suppliers using their scale to launch DTC initiatives and online multi-category retailers such as Amazon and supermarkets offering new subscription functionality.

The key reasons a consumer might have opted for DTC in the first place – cost and convenience – have been largely negated, which brings it back to brand. Brands that consumers have known and trusted for years invariably win out over the new. And DTC 2.0 failed because it was never truly digital. It simply mirrored its predecessor’s offline mail-order approach online. Beyond this is DTC 3.0. This new model will turn traditional one-way distribution channels into two-way conversation streams, enabling agility and innovation like never before.

Deliver brand purpose, collect customer loyalty

There’s a new ‘C’ in DTC 3.0 – collaborators. Customers won’t just sign up and receive products as passive end-users, they’ll become nodes in the distribution network, connecting other consumers, co-creating service ideas with the business or using the distribution facilities for their own projects. Content-based influencers will ebb as customers look to those who are levelling with brands to deliver better products and services.

As collaborators, a brand’s consumers can’t help but get closer to seeing and, hopefully, advocating what it stands for, that much-hyped marketing paradigm of the 2010s – purpose. Because, if the advantages of DTC 2.0 have been largely eradicated by the competition and waning novelty, this is where DTC 3.0 can earn brands long-lasting loyalty. How they behave in this seemingly functional space can be an opportunity for them to ‘walk the walk’.

If a brand’s key purpose is sustainability, for example, its DTC proposition shouldn’t simply be sustainable itself but also help a consumer live a more sustainable life overall. It might go from minimising its own packaging, for example, to using recipients as drop-off points for recycling other manufacturers’ waste.

If it’s about living a more fulfilled life, a brand shouldn’t just deliver a product with an energy kick to get more done. It could create opportunities for hobby or career networking meets via shared delivery. Even better, if brands were to piggy-back each other's distribution services and customer bases they could provide curated deliveries specific to an individual’s needs.

A brand with inclusivity at its heart won’t just talk about it, it will open up its distribution network for customers who are also small business owners to sell their products. Community-championing big brands could work with local businesses to support their delivery initiatives and diversify. The ‘last mile’ of delivery could become the ‘local mile’.

Make the business case for DTC 3.0

The simple notion of higher margins from selling direct to consumers was readily understood by both consumers and c-suite. DTC 3.0 is more complex but ultimately more rewarding. The basis for any business case for DTC 3.0 will need to take into account incremental opportunities for rapid insight generation (data flywheel), increased agility in bringing new products and experiences to market, and decreased price elasticity through improved brand perception.

The era of Big Data has taught us it’s not how big your data set is but what you do with it. By listening through distribution channels, DTC 3.0 will deliver customer insights that can be applied across the marketing mix. Customer collaborators can be rapidly involved in new product development and testing, and consumers can be segmented in a more granular way.

The Covid-19 crisis has reminded us that adaptability and agility are some of the most important skills an organisation can possess. DTC 3.0 develops agility by creating tighter feedback loops between production and consumer. This will no doubt put fresh burdens on traditional organisations at first, but once embedded it will benefit everyone.

Most importantly for this new era, DTC 3.0 offers new value creation. DTC 1.0’s proposition based on ‘we sell direct to you, and pass on the savings’ only has a long-term negative effect on price elasticity and ensures that, ultimately, your product’s value perception will drop. DTC 3.0 will be about creating value-added services and experiences around your product and its delivery experience.

Why now?

If the demise of DTC 2.0 was inevitable, the post-Covid world will only hasten the need for a new model. Consumers are showing a heightened sense of need for trust, security, quality control and other aspects of emotional support. We’ve started thinking more locally, and consumers have less to spend so are looking for ways to be savvy. While all these issues won’t only be solved by brands, brands can play a profitable role in helping consumers in a changed landscape. Ultimately, DTC 3.0 will prove itself by finally uniting a business’s product and its purpose in a way that’s both profitable and sustainable.

Read an in-depth analysis of the dynamics of DTC 3.0 in AnalogFolk's latest whitepaper.

Case studies:

This emerging blurring between consumers, advocates and activists was brought to life in a recent promotion from Forest Brew. Understanding that cans and bottles just weren’t the same as a pulled pint, Forest Brew fitted a van with a draft beer dispenser and delivered fresh pints to people’s doorsteps. Using WhatsApp, local residents could book a beer delivery slot and then invite their neighbours to join in, too, letting them create their own micro pubs. It not only helped people have a new experience, it brought local communities together, reduced waste and built brand awareness for long-term growth. It was also a great opportunity to get instant product feedback.

Another great example is the lockdown partnership between Magnum and Deliveroo to deliver ‘Make my Magnum’ kits. Promoting its new Ruby collection, the kits gave consumers the chance to customise their ice creams. By taking advantage of a time where people are getting more deliveries at home, it resulted in some stunning UGC, drove awareness of the new product and the Unilever Ice Cream Stores, and added to the luxury promise at the heart of the Magnum brand.

Bill Brock, founder and chief client officer at AnalogFolk.

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