Imagine the world where you can purchase shoes, fashion, health and beauty care products, electronics, shaving sets and even a car directly from your favorite brand, with the single touch of a button. Well, that might just not be as far away as you think.
If you go down some of the really posh high streets in Europe, they’re sizzling with the top-end brand shops. To be crude, they need a bigger footprint, and that is most likely not a traditional bricks-and-mortar. With the growth in mobile, Direct-to-Consumer (DTC) is set to grow really fast. Selling DTC is the next big thing in retail. Consumers are on their phones everywhere all the time, and have come to expect simplicity, speed, and a great buying experience. Historically, the brands had a limited resources to sell directly to consumers. The idea of going DTC in the past was prohibitively expensive and time-consuming. It would have required the brands to take on a big risk and invest the millions in building a network of retail locations. Not anymore, a mobile commerce dramatically reduces the barrier to entry by allowing an easy access to a new channel that is revolutionising the way the brands sell products and the consumers interact with the brands.
It’s going to be a big, disruptive storm
Traditionally, the brands didn’t have a direct link to the consumer and had the limited data points on their preferences and behaviours. A mobile commerce allows the retailers to expand their existing sales channels with one that is easier, faster, and more affordable, giving them more control. This way, they know exactly who their customers are and how to interact with them. The successful retailers of tomorrow are the ones that harness DTC and backward integrate into stores. From the consumer side, more people want to shop from their mobile devices, and more people want a personalised, lightning-fast mobile experience. Harnessing the power of mobile devices to sell DTC is no longer an option for brands – it’s a necessity. And what about the stores?
The stores will continue to play a vital role. In the established markets, e-commerce peaks out at 20% of total sales. The consumers love the spontaneity, ‘touch and feel’ and instant ‘feel good factor’ provided during the in-store shopping experience. Brands will have to reshape their store footprint and rethink a floor space. It won’t be possible to carry the entire product inventory in the smaller footprint stores. Therefore, a mobile plays a critical role in providing an all-embracing multichannel experience to the customers. Virtual aisle will also become a fundamental part of a retailer’s strategy, as consumers place orders in a store directly from a mobile device using a payment option of their choice, instead of standing in a long queue. Dream or reality?
DTC and Private Label – a way of getting a bit more private. Sorry – personal
Netflix, Dollarshave, Uber, AirBnB, Hollister are some of the innovative new brands – they are direct and pretty personal. But what is stopping Private Label getting personal and going DTC? Just imagine how many more SKUs you can get in your shop if you’re not constrained by physical. What? Again, yes, a Private Label brand, some traditional retailers have over 50% in their total mix, goes DTC. That’s powerful. Growth that’s not limited by your floor space. Even better, you can dedicate your shop floor to creating a better experience.
A great experience creates a great Loyalty
Alongside the existing channels, DTC is a critical and complementary sales approach which offers two distinct benefits. First, it allows the brands to maintain a greater control over the products made available to consumers and the entire purchase experience. Second, brands can collect more data on the consumer purchase behaviors and preferences to communicate with them more effectively. Brands that sell DTC can create a great experience by determining which products are available for sale as well as the pricing and discounts. A second important benefit of going DTC is that it gives the brands the ability to make a personal connection with customers. Consumer purchases are often emotional, not practical. By delivering a more personalised message, a brand is more rapidly adopted and embraced, which fosters a deeper connection with the consumer, and ultimately leads to the increased sales and loyalty.
Get Smart on the phone – even if it’s not a Smartphone
Harnessing the power of smartphone allows the brands to easily build the lifetime fans with a loyalty card integration. Unlike the trailblazers of the travel and airline industry, the retail brands were initially slow to adopt loyalty programs, but are quickly seeing the benefits. Purchasing directly from the brand also results in cost savings as shoppers receive the relevant and timely push notifications with product coupons and promotions directly on their phones.
DTC offers the brands a process to inexpensively and accurately collect the data and insights that give them a better understanding of the interests and habits of their customers. Customer feedback travels directly to the company rather than getting lost in the multiple layers of the supply chain as it makes its way back to corporate. This data provides intelligence critical to customising marketing and promotions, influences the sales strategy and supports the product development.
Follow the DTC leaders
We are at an early stage with DTC. but there is already the evidence of industry leaders who have recognised the importance of going DTC. And they’re doing well. Nike has acknowledged the potential of DTC and plans to grow this business by 250% in the next 5 years. Apple is the real star of DTC. It has captivated a global market by offering its electronics directly to the consumers, resulting in a business worth more than $200 billion. On a final note, perhaps the most compelling case study in DTC is a car producer, Tesla. They introduced a DTC sales channel to a market that hasn’t changed its sales model in more than a century. Although the consumers can kick the tyres and test-drive Tesla’s models in a showroom, the cars can only be purchased by visiting the company’s e-commerce site. And it appears to be working. The company sold more than a quarter of a million cars last year doing it the DTC way.