Retailers who are losing market share to direct-to-consumer brands may be quick to moan and groan about how much cheaper it is to sell directly to the consumer from a warehouse rather than maintaining prime retail real estate and a full staff of salespeople.
That may be part of the equation, but here’s a secret: the success of D2C is not about being cheaper to run the business; thriving D2C brands just do a better job of understanding today’s digital-savvy consumer and focusing on customer experience.
Physical Stores are Being Edged Out by D2C
The days of physical stores being the primary shopping channel preference are long gone: while in 1992, non-store retailing (D2C, mail order, ecommerce, etc.) represented just 4% of the $2 trillion in US retail sales, by 2015, that number grew to 9.4% of the $5.3 trillion retail market. Today, you can bet, it’s booming even more.
Brands that sell both direct to consumer and through third parties see D2C taking up a greater portion of their sales: Unilever has projected that ⅓ of its sales will come from “experience platforms and e-commerce” by 2022, which is double what it generated in 2012. And Nike sees its D2C sales growing 2.5x in the next five years.
Some industries more than others are seeing D2C growth: in the men’s razors industry, brands like Gillette are losing market share to D2C brands like Dollar Shave Club and Harry’s. Mattress D2Cs took over 5% of the pie in 2016 and have grown that share since then. Meal kit companies are seeing skyrocketing growth. Online shoe brands are taking a stranglehold over shoe retailers.
Controlling the Experience is Key
Because D2C brands control the customer experience, soup to nuts, they ensure that there are minimal issues that might disrupt the consumer’s experience throughout the buyer journey.
Brands that sell through third parties, on the other hand, may struggle to own the customer service, shipping, and returns process since they’re at the mercy of the retail channels they sell through.
But It’s Not Just About Online
While the bulk of D2C happens through e-commerce, some brands like Everlane and Wayfair are opening popup shops and permanent physical stores as a way to give shoppers the piece of the customer experience that you can’t get online: being able to touch products and try on clothes. Having a physical location allows D2C brands to provide an extra avenue for customer experience.
Also, having brick-and-mortar stores allows them to speed up the returns process and make it easier for customers to exchange products or get a refund. Smart D2C brands are bridging the gap between online and in-store with services like buy online, pick up in store. In fact, 68% of consumers have used this type of service, which speaks to what they want and what D2C brands can easily deliver if they have a physical location. This is an experience that traditional brands can employ easily with their existing retail space.
There’s No Secret Sauce
The thing that traditional retail brands need to realize is that D2Cs don’t have some magical secret that’s making them successful. They simply focus on exceeding customers’ expectations at every step of the relationship.
They make that experience seamless, whether it happens online or in person. They respond instantly to customer service requests. Bonobos is a great example: by focusing on delivering a level of customer service that other businesses don’t, they’ve seen higher than a 90% rate of “great” email ratings.
The truth is: it’s not about whether your brand sells direct to consumers or not. It’s simply about how you treat people. Tony Hsieh of Zappos has said repeatedly that he doesn’t see the brand as a shoe retailer, but rather a customer service brand that happens to sell shoes.
Consider your company in the business of making customers happy. How does that fundamentally shift how you do things? How can you create experiences that deliver value to your shoppers? How can you leverage data from your shoppers’ online and offline experiences to better deliver what they need?
At the end of the day, it really doesn’t matter to a consumer how they got that pair of shoes. They just wants the experience to have been a positive one.
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