Casting our minds back to March feels like an eternity, with empty supermarket shelves and the rush to buy toilet paper. It may seem like a distant memory, but above and beyond the panic buying, this month also denoted a broader shift in consumer behaviour, with a significant impact on brands, big and small.
March 2020 marked the first time that we experienced the very real possibility that large suppliers, such as supermarkets were unable to meet demand under pressure. With this came completely new opportunities for smaller players as consumers turned to alternative sources for their food, homewares and more. Although this may not have burst the door wide open for lesser-known brands, it did ensure that it was at least held ajar.
In particular, this had a significant impact on DTC brands.
Were DTC dividends destiny or just due diligence?
DTC brands have already been on the rise and growing in popularity for some time. Epsilon-Conversant’s research with the CMO Club showed that even before the coronavirus crisis, 80% of CMOs believed that DTCs were impacting their market. Furthermore, figures from Euromonitor revealed that the likes of Gillette even admitted that DTC competitors had caused a 20% decrease in its market share.
Although there’s no denying DTC’s existing popularity, the picture became murkier with the pandemic, which caused a nose-dive in consumer confidence and a general hesitation to purchase. However, there is also clear evidence that DTCs later witnessed a growth surge in the wake of the pandemic as lockdown continued.
Whilst many big brands froze their marketing and pressed pause on advertising efforts during lockdown – especially at the very beginning – many DTCs either continued their existing spend or ramped it up, looking to make the most of the potential new opportunities presented.
Consider the general brand exposure for a single consumer over the past few months: you weren’t seeing the same brands every day because you weren’t walking down a high street, while you were also seeing fewer adverts for them. Furthermore, if you did decide to shop with a high street brand, you’d often have issues ordering or receiving the goods. This ‘perfect storm’ all added up to a considerable opportunity for the DTCs that were advertising – and studies have revealed that consumers were willing to buy from alternative brands to get what they need.
Consequently, not only did DTCs benefit from a wider pool of new customers to reel-in, the negative impact on the cost of advertising was a positive for them.
Social is often the channel of choice for direct to consumer brands. Before the pandemic the costs of paid social were increasingly on the rise, holding DTC brands back when it came to acquiring new customers. Come the pandemic, the relative cost of social dropped because of the lower levels of competition, and many DTCs took advantage of being able to do more for less.
Simply put, many DTCs built brand equity during the pandemic by taking advantage of the lower cost of advertising.
Where are we now?
But will this all be short-lived? Clearly, the longer the high street remained shut, the better the situation for brands less reliant on physical stores – common among DTC brands. And with the reopening of all non-essential shops, many brands were holding out hope that customers who previously bought from them would come flooding back as we start to see a return to ‘normal’. After all, humans are creatures of habit.
However, consumers aren’t simply resuming their old habits. Published figures show that physical footfall numbers jumped 45% the week that shops opened in England, but this number is still 54% lower than the same week last year and it is looking unlikely that these numbers will be made up anytime soon. Some consumers are still cautious about shopping in person, whilst others have accustomed themselves to shopping online – both of which are good news for online DTC brands.
General consumer behaviours and expectations have changed, and some brands are better placed than others to respond. Consumers aren’t only looking to buy what they want, they also want to buy from a brand they trust and feel an affinity to. No-one wants to feel sold or marketed to, rather, they want real empathy and understanding from the brands that they interact with and for them to understand their needs as a customer.
To achieve this, brands need to be customer centric throughout their business, truly understanding and proceeding according to consumer preferences.
The DTC model is well-placed to collect insight to better understand consumers, with direct to consumer brands owning the entire consumer experience for their products. It’s a lesson many learned from direct mail, where older DTC brands often have their roots. At the risk of over-simplifying, understanding the consumer and acting on that understanding to optimise their products, processes, and communications increases a brand’s relevance to their consumer.
In terms of communications, similar to direct mail, DTC brands are able to harness their knowledge of consumers to build real, one-to-one relationships.
Today, this ability to harness insight for personalisation of communications is where DTCs often excel compared to their B2C competitors, delivering the right communications at the right time and providing a better customer experience. Indeed, pre-pandemic, 81% of B2C brands already believed that DTCs had changed consumer expectations of their own brands, making consumers expect much higher, and more personal levels of service.
The very nature of DTC brands also means they are focused, nimble and agile, able to adjust to changing circumstances – a winning formula for any brand when no one quite knows what will come next.
Into the future
Of course, this doesn’t mean it will all be plain sailing. Direct to consumer brands still continue to face the same challenges they had before, as well as new ones. At face value, social media advertising may be cost effective, but scaling up is still an issue. Ecommerce may now have more fish to catch, but DTCs can find it hard to cast a big enough net, especially when competing with more established brands.
Before the outbreak, we were also witnessing many a DTC, such as Casper and Made.com, looking to take a leaf out of their B2C rivals’ playbooks and opening up physical brick-and-mortar stores to help reach more of their audience through showrooming. Although existing DTC ‘showrooming’ stores have not been closed down, further openings have no doubt been put on hold.
Further adding to their challenges, DTC brands also tend to experience problems with holding onto their customers; even before the pandemic, consumers buying online were often fickle and price-driven, something that DTC brands have often combatted by building brand prestige. The coronavirus may have enabled DTCs to reach new audiences and draw in more new customers, but they still face the ongoing problem of keeping them coming back. And in that regard, they are not alone.
This experience has many lessons for all kinds of brands, highlighting that competition for customers is now fiercer, and retaining customers more difficult than ever before. To counter this as best possible, brands – whatever their business model – need to double-down on their customer-centricity, with real consumer focus throughout the business. By building genuine relationships with consumers, you’re building long-term demand.