There has never been a more exciting time to invest in the combination of consumer behavioral change and technology acceleration, the key drivers shaping the future of the retail industry. Already, new direct-to-consumer (DTC) brands are looking to position themselves to take advantage of the growth in online shopping.
Stores created through Shopify Plus increased by 62% between March and April 2020, and that surge in adoption highlights the speed and ease with which new brands are able to get online to meet new demand in the new world.
The DTC “discovery to delivery” business model has many advantages. You own the end-to-end customer journey, and develop a direct, digitally-driven and engaging relationship with them. DTC brands using smart technology also have unfiltered insight into customer behavior and real-time data at every step along the decision-making process.
As many as 81% of shoppers want to buy products directly from brands. In the post-COVID era, brands should be looking to participate in and shine in the channels consumers are gravitating towards, with better value than competitors. However, this is actually trickier than most new DTC companies think.
Retail Ops: The Oft-Ignored DTC Backbone
While most brands know what they need to do on the front end, in the race to attract direct sales few address the operational complexities that lie beyond the buy button. In fact, many who are switching to a DTC model quickly learn that managing operations can be extremely difficult.
Once a DTC brand bypasses a retailer, they are responsible for every single scenario in the buying journey, including delivery and returns, inventory management and customer communications. They must recognize that at any given moment they risk getting things wrong, which can cause real backlash from their customers.
The challenge will be even tougher with ecommerce companies seeing greater competition and heightened demand. Retailers need to be asking themselves if their current setup, from inventory management, shipping to CRM, supports the increased traffic flow.
With that in mind, it’s clear that DTC is far from an open goal. Pitfalls are plentiful. Retailers need to be wary of prioritizing growth at all costs, resulting in poor execution, weak retail
Brands that are considering the DTC space have to understand that this channel is going to expand past what they previously had, and they will suddenly own every touchpoint in the customer journey. When you’re operating in different markets and you’re scaling quickly, you’ve got to have the right retail operations in place to respond effectively. Without those mechanics, for example, to handle inventory, shipping, and logistics across multiple channels and locations, or for more real-time customer-facing support, the business is quickly going to run into problems.
When talking about the importance of operations to successful DTC models, Eve Mattress Co-Founder Kuba Wieczorek puts it best: “That whole back end is so mega important that if you don’t get it right, you’re screwed.”
Wieczorek argues that brands must ensure the supply chain is as good as it can possibly be before they launch into the DTC arena, “Not just go ‘let’s just launch this and see what happens,’ which is what I think a lot of young brands are guilty of doing.”
The Secret Ingredient to DTC Success
COVID-19 will accelerate an already fast-moving trend and create a vast blue ocean of opportunity for brands with the right end-to-end infrastructure. Many retailers are impatient for their slice of the DTC pie, but this shouldn’t be at the expense of operations. Post-purchase experiences, from delivery to returns, will influence a customer’s loyalty, and collectively they should be recognized as equally important as those on the front end.
That doesn’t mean retailers need to spend an inordinate amount of time implementing technology projects. The real secret of the DTC model though relies on understanding that ownership of the total customer experience is more important than the product itself. When you’re a DTC brand, shipping, returns and incredible response times are all part of the proposition. This means DTC is more than simply a channel. You need to consider the feelings you want to create for customers along the entire journey and remove any potential bottlenecks.
Companies with superior DTC models, especially those with a successful consumer-focused strategy built on top of stable foundations, will gain share and over time become the new market leaders.
Derek O’Carroll is CEO of Brightpearl