Why pursuing a pure DTC strategy could be a red herring for big brands
DTC might be hot right now, but it’s not the right strategy for every brand to pursue, argues Dave Lowe, strategy partner at Digitas Experience Consulting.
Direct-to-consumer (DTC) brands have been a huge e-commerce success story of the past few years. Names like Glossier, Away and Eve have gone from start-up to millions of pounds in annual sales in under a decade, giving established players in their respective markets of beauty, suitcases and mattresses plenty to worry about.
It’s no wonder that, even before the pandemic drove millions more shoppers online, owners of some of the world’s most recognisable brands – Unilever and P&G among them – were looking at how they can ‘go DTC’ too. More recently, both Heinz and PepsiCo have launched DTC channels to appeal to pandemic shoppers.
Who could blame them? Historically there’s been a split in the role that institutions played in the value chains that resulted in manufactured goods getting into the hands of consumers. At its simplest, ‘manufacturers’ made and marketed products and relied upon ‘shops’ to be the place where people see, touch and buy their wares. Customers shopped with retailers without having a real sense they were buying from a brand.
For years, this specialisation worked. Manufacturers optimised production and distribution; shops strove to deliver an experience that fostered loyal customer relationships.
Things started to shift when supermarkets began to introduce own-brand ranges. But, with the advent of online shopping, the shift has been with brands bypassing retailers (and wholesalers) to market, sell and deliver their products themselves. This is the sales strategy that has become known as direct-to-consumer (DTC) business. And what a strategy it is; a host of problems traditionally faced by manufacturers – like a deep understanding of how customers behave, control of how your product is marketed against the competition, ownership of the sales and product experience – just disappear.
Ipso facto, all manufacturers should set up their own DTC operations, right?
Well, no. At least not in the sense of DTC which dominated the 2010s. In fact, the pursuit of a DTC strategy in the traditional sense of the term might be a red herring.
The reality is that it’s hard work developing a DTC website and the orbiting operational infrastructure, requiring significant investment, a wealth of knowledge and skills and often developing an entirely new business capability.
This puts many brands off the pursuit of DTC, but what if there was another way?
We’re now working on a new definition of DTC, one that focuses on giving customers the experience that they’re buying directly from you, the brand they love. After all, do consumers care if a brand is running a whole operation without middlemen?
A far better strategy for most businesses, in our view, is what we call ‘connected commerce’ – the idea that you revisit the modern value chain to define and implement new solutions using a blend of capabilities that meet the needs of customers and of the brand’s commercial and operational position, sense of purpose, creative platform, and tone of voice.
Working with this new, consumer-focused definition of DTC means we can tackle two of the biggest barriers to developing a DTC ‘shop’.
The first is the idea that you need to build the whole shop yourself. It’s not true – in fact, partnering with niche e-commerce players can mean you bring a better experience to market, and in less time.
The second is that you must be ready to welcome customers into the finished shop on day one. That’s not true either. A better solution is to define an incremental DTC roadmap and pilot a minimal viable product. This gives you the huge benefit of being able to evolve as lessons are learned along the journey.
For instance, a recent campaign by Unilever, for its Vaseline brand, is a really terrific example of connected commerce. This wasn’t one of ours but introduced customisable versions of its iconic Vaseline Lip Therapy tins, meaning that fans in the UK could order personalised versions for themselves and as gifts for friends. To make the concept a reality, Unilever worked with a product specialisation partner called Intervino. The result was a really successful campaign, putting Unilever in direct contact with some of the most loyal Vaseline customers for the first time, without the cost of setting up a fully operational Vaseline store and fulfilment system and then marketing it. Longer term I suspect it was also a big revenue driver.
Yes, it’s a long way from customers subscribing to a monthly delivery of Vaseline skincare products but the learnings will be incredibly valuable and likely save the teams involved from making at least one or two expensive mistakes if they pursue that strategy.
The important thing is, and will always be, getting your products into customers’ hands. If you think I’m wrong, look at the trend for DTC brands to jettison their do-it-all-yourself philosophy as competition intensifies. US mattress brand Casper, for example, announced a retail partnership with Target – a long way from the crisp, modern lifestyle brand it launched via Instagram.
If your brand will be enhanced by selling through a website and fulfilment capability you’ve built and own entirely, then by all means go for it.
But if not, find advisers who know about business strategy, experience design, media, technology and logistics and team up with the best possible partners. It’s what gives you the greatest chance of creating an experience that your consumers will love. And that’s a sales strategy to survive the ages.