Direct to Consumer:

An introduction

We have all seen the growth of Direct to Consumer (D2C) over the course of the last 18 months. During this time period entirely new categories of expenditure have emerged, and existing categories have grown. How much of this will stick post COVID? To investigate we surveyed 1,000 customers to test our hypotheses and understand the consumer sentiment which sits behind this growth.

In the 2012 US Presidential election, the Republican challenger Mitt Romney was derided by sections of the press for saying “Corporations are people, my friend.” At the time, the idea that a multinational could be anything other than a faceless and monolithic enterprise seemed strange.

Today it is anything but: brands strive to build direct relationships with customers and demonstrate that there are in fact people behind the brand. You don’t need to look beyond social media to see the latest efforts of corporations to inject personality into brands, with varying degrees of success.

So why is the D2C approach, where businesses bypass traditional retailers to build relationships and sell directly to customers, such a focus for businesses large and small? To put it simply: hyper-growth.

The Covid-19 pandemic has meant that the past year has generated as much growth in eCommerce transactions as the prior five years combined. In the US, research group eMarketer estimates that sales from digitally native brands will hit $21.15 billion in 2021, growing at roughly twice the rate of the wider eCommerce sector. According to Annie Little, Senior Strategist at creative agency Initials, the D2C market is expected to grow by 19.2% in 2021.

The pandemic has similarly pushed the growth of D2C brands in Western Europe, a “promising opportunity became a strategic must-have,” according to Izabela Catiru, product marketing manager at ChannelAdvisor, speaking to Emarketer. We see examples of this across sectors – the brewer Beavertown strategically focused on expanding their D2C offering end to end, investing in infrastructure and production capacity alongside their digital offering. The results were clear: 1000% revenue growth of the D2C channel during the last year.1 This demonstrates the potential for brands with a historically limited D2C presence to capitalise on the growth of D2C during the pandemic.

Beyond hyper-growth we also know there are multiple business imperatives which build the business case for D2C. For consumer products organisations it is the primary route to build a direct and sustainable relationship with consumers. It offers the opportunity to both capture and intelligently use customer data to better serve customer needs. By directly owning the customer relationship it offers the opportunity to grow new business models away from intermediaries and marketplaces based on value-based rather than transactional relationships.

We’ve also found that the importance for organisations to build a D2C capability is matched by consumer’s expectations. We interviewed over 1,000 UK consumers to understand their perspective on D2C and how their attitudes have altered over the last 12 months. The findings were clear – consumers want to engage online and expect to have a direct relationship with organisations. Only 10% of our respondents weren’t comfortable to buy household goods online. How customers engage with organisations has also started to change – with our research showing an embrace of social as a sales channel and significant appetite for subscription models.

Has the pandemic been transformative for D2C propositions, or prompted a temporary but necessary shift in consumer activity from physical channels to online channels? Our research suggests that many of the shifts forced on us by Covid are here to stay – and we will explore these trends in more detail in our D2C articles.

Personal touch

In the online world, organisations are largely pushing away from a one size fits all approach to something resembling a more personal, human interaction. Some of this has been forced – Covid has meant the virtualisation of the contact centre practically overnight and with it the background noises of people’s lives.

Future thinking organisations realise that direct relationships align with customers and business value. Personalising (or humanising) interaction equals a better customer experience which, in turn, equals sustainable long term business growth.

Most modern eCommerce sites either have or plan to have the capability to personalise a customer’s onsite experience based on their behaviour and pre-existing customer data. The trick is to do this in a way which is meaningful and valuable for a customer. For example, understanding the specific product attribute they are interested in and focusing on that, rather than “Hi [insert name], [push product we have overstocked]”.

Personalisation is of course just one aspect of a successful D2C strategy. In this article and others, we will explore a number of topics, including:

The role of social media as a sales channel:

What level of consumer confidence exists to buy through social media sites?
How do social media and search complement and/or compete as channels?
Does selling through social media require a different type of sales approach?

The role of personalisation and localisation:

Has consumer behaviour changed during the pandemic?
Do customers want a personalised experience?
Have the last 12 months shifted customer purchasing trends?

The impact of sustainability on consumer shopping behaviour:

How important is sustainability to customers?
Where does sustainability factor in a customer’s thinking in the purchase journey?
How easy is it for customers to make environmentally friendly choices?

To support our thinking across these areas we surveyed a representative sample of the UK population to better understand customer behaviour. Speaking to 1,000 customers about their online shopping habits has given us deep insights to support and challenge our hypotheses across these areas.

In this article we want to share the key insights we found in the first of these areas: social media.

1. https://www.thedrum.com/news/2020/05/07/beavertown-brewery-enters-dtc-after-covid-19-wiped-out-85-business

Direct to Consumer:

An introduction

What do consumers think of the increase in Direct to Consumer (D2C) brands, which you cannot find in shops and often have a playful brand identity? To investigate, we asked 1,000 consumers about their preferences and attitudes to social media as a sales channel, the role of personalisation, and to what extent sustainability is a factor for buying. We will reveal the results over the next few weeks, beginning with social media as a sales channel.

Today it is anything but: brands strive to build direct relationships with customers and demonstrate that they are in fact people behind the brand. You don’t need to look beyond social media to see the latest efforts of corporations to inject personality into brands, with varying degrees of success.

In the US, research group Emarketer estimates that D2C sales will hit $21.15 billion in 2021, growing at roughly twice the rate of the wider eCommerce sector. According to Annie Little, senior strategist at creative agency Initials, the D2C market is expected to grow by 19.2% in 2021. One of the reasons for this rapid growth is because D2C businesses represent a breadth of product and service propositions, covering local privately owned retail businesses up to large multinational consumer products.

The United Nations conference on trade and development indicated that global eCommerce sales rose to $26.7 trillion in 2020, making up 19% of all retail sales. D2C businesses represent an increasing proportion of this spend, with eCommerce and D2C propositions on the rise for the past decade.

The Covid-19 pandemic has, according to some studies, meant that the past year has generated as much growth in eCommerce transactions as the prior 10 years combined. This level of economic activity, concentrated in a number of advanced economies, shows the need for substantial infrastructure investment to enable the breath of D2C propositions that are now coming to market.

As the third most developed eCommerce market in the world, according to the IMF, the UK saw £200 billion spent online in 2019, representing 7.6% of UK GDP. By comparison France, the next most developed European market, spent €100 billion, less than half the UK eCommerce spend.

Has the pandemic has been transformative for D2C propositions, or prompted a temporary but necessary shift in consumer activity from physical channels to online channels? To answer this, we will need to compare GDP and eCommerce spend data from less mature eCommerce markets in countries that have been equally impacted by the Covid-19 pandemic – for example Italy, Spain and Portugal.

Personal touch

In the online world, organisations are largely pushing away from a one size fits all approach to something resembling more a personal, human interaction. Some of this has been forced – Covid has meant the virtualisation of the contact centre practically overnight and with it the background noises of people’s lives.

Future thinking organisations realise that direct relationships align with customers and business value. Personalising (or humanising) interaction equals a better customer experience which in turn equals sustainable long term business growth.

Personalisation is of course just one aspect of a successful D2C strategy. Over the course of the next few weeks I want to explore three areas which we have found particularly interesting and relevant over the year:

The role of social media as a sales channel:

What level of consumer confidence exists to buy through social media sites?
How do social media and search complement and/or compete as channels?
Does selling through social media require a different type of sales approach?

The role of personalisation and localisation:

Has consumer behaviour changed during the pandemic?
Do customers want a personalised experience?
Have the last 12 months shifted customer purchasing trends?

The impact of sustainability on consumer shopping behaviour:

How important is sustainability to customers?
Where does sustainability factor in a customer’s thinking in the purchase journey?
How easy is it for customers to make environmentally friendly choices?

For this article we want to share the key insights we found in the first of these areas: social media. Our next article will focus on personalisation and sustainability.