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How can beauty brands win the direct-to-consumer race?

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The pandemic has put growing pressure on brands to find new avenues to both engage with and sell to their consumers. Amidst increasing e-retail partnerships, brands have been required to think about DTC as a channel.

The latest Direct-to-Consumer Purchase Intent Index, published by Diffusion PR, tells us that 43% of American consumers know of a DTC brand, and 69% of those have made at least one purchase from them in the last year. Within this, wellness and beauty is one of the largest categories, at 29%. When we consider that pre-pandemic, around 85% of beauty purchases were made in a physical store, it forces us to think post-pandemic: is the hyper personalised in-store experience still as important in the beauty industry? With the beauty world currently valued at $532bn, it’s important that brands move with their consumers.

What are some of the benefits and challenges to consider when moving to DTC?

Over the last year, there have been unprecedented changes to the traditional in-store experience for beauty brands, and as we adapt to the ‘new normal’ the DTC model is more pertinent than ever. This model has revolutionised the traditional interaction with beauty brands empowering them to have stronger control across the end to end customer experience. Without the limitations of traditional retailer marketing strategies, brands can own the customer relationship and directly engage with them in meaningful ways. Most importantly, this allows beauty brands to capture rich first-party data which can help them to create sought-after product launches, content, events, and loyalty or subscription models which have proven to add longevity to brand/consumer relationships.

DTC luxury brand Beauty Pie is changing the game with its successful members only, subscription service providing access to a strong portfolio of luxury cosmetics. What’s the catch? Members are offered straight-from-the-supplier rates, which removes the price mark-ups we tend to see with luxury brands. Global head of marketing, Sophie Jenkins told Marketing Week: ”The distinct advantage of being a direct-to-consumer brand is owning first-party consumer data which is much harder to come by if you sell via a retailer.” With a strong online presences, founder Marcia Kilgore explained how they ”call out for feedback on new launches, as well as sounding out the demand for new innovations from her dedicated #PIEFAM”. With access to such rich insights, it’s no surprise Beauty Pie boasts a number of sell-out product launches.

However, selling directly to consumers is not easy. Arguably, the biggest challenge is having an agile and responsive infrastructure to fulfil the end-to-end journey – setting up and managing an integrated inventory, packaging, delivery, digital merchandising and consumer support network is not so simple. There are large cost implications to consider, which could be passed on to your consumer through; for example, high shipping fees, making it more attractive for them to purchase from a retailer instead. Brands will also need to address brand awareness and drive traffic to their owned site, without relying on their retailer’s technology, database or market position.

What do you need to assess when deciding if DTC channel is right for your beauty brand?

Brand Values

Cultivating a conscientious brand perception within the market is critical for beauty brands with a strong purpose and brand identity. In today’s experience economy, every interaction between brand and customer matters as an opportunity to demonstrate your brand values. With retailers, brand messaging and values are often diluted, therefore, it is sometimes beneficial to cut out the ‘middle-man’.

Prominent retailer partnerships

Established retail partners such as Boots or Sephora will often have mature e-commerce capabilities and the budget to integrate innovative technologies such as tools that virtually analyse your face and recommend personalised skin care products. In a highly competitive market, do you have what it takes to go up against not only other brands but also your retail partners? Urban Decay is a stellar example of a beauty brand who has the traditional retailer/e-retailer partnerships, but is successful with its own DTC site through innovative tools, such as virtual try-ons, live chat and virtual 1:1 consultations with experts.

Power of data

Data is king and in the beauty industry, it has proven its value by helping brands to make smarter decisions across the value chain from formulas, products and packaging; through to marketing and merchandising. If generating actionable insights to fuel your brand activity is a business priority, the DTC business model can help your brand to leverage data that can provide you with a 360 view of your customer. Cult favourite Glossier, started off as an online community of beauty fanatics but became a $1bn dollar beauty brand in just five years. Chief executive officer Emily Weiss attributed the company’s "endless inspiration for new products, experience and ways of building an enduring business" to its direct relationship with customers and the first hand feedback they receive.

How to ensure you have the right capabilities to drive leading beauty experiences

To deliver an inspiring front-end consumer experience, it’s important you have the back-end capabilities integrated to support it.

More complex content needs

Running a DTC site often requires more branded content in a range of formats, this could include tutorial videos or eye-catching gifs, especially in the beauty world where content is king. To manage such high volumes and variations of content seamlessly, it’s critical to consider content management tools such as a PIM (product information management) and a DAM (digital asset management).

Capturing data is key, but how do you ensure you can leverage it effectively?

It is important to have the right infrastructure that can store and process the data, such as DMPs (data management platforms) for your anonymous data, eg cookies, and CDPs (customer data platforms) for your ‘personally identifiable’ data, eg names and addresses. Actionable insights can then be generated from this data using self-learning capabilities. This process can help brands to personalise brand experiences, where the right content is served at the right time, to the right person through the right channels.

Glossier does a great job of turning consumer data into product innovation – it leverages its owned DTC site, as well as the blog ‘Into The Gloss’ to find out what their consumers really want to see and then develops products with these insights in mind.

Operating model

Supporting all of this, you need to ensure your operating model is fit for purpose as it sits as the backbone to your DTC site. It is essential that you orchestrate a connected expertise across a range of competencies: from UX designers to community managers, to demand forecasters who can deliver against a 360 view of the customer.

With so much to consider, is a DTC model right for your beauty brand? It really depends on your brand positioning and goals. If you want to generate first-hand data, have greater autonomy of your pricing, and own the end-to-end consumer experience, then it could be a great option. If your main objective is to keep costs low and generate mass awareness, you’re probably better leaning on the beauty retailers out there.

At Capgemini Invent we’re passionate about working with consumer products organisations to create exciting new ways to engage with consumers. If you want to discover more about DTC and what it means for your brand, please get in touch.

Chloe Buckland is a manager at Capgemini Invent. Karishma Joshi is a digital marketing consultant at Capgemini Invent.