As it often happens, it was during a phone conversation with my 81-year-old Serbian grandmother earlier this week that I had an epiphany. We were making our usual chit-chat over Facetime, when she proceeded to conduct a little show and tell of some fresh produce she’d recently acquired. Corn cobs, pickled cabbage, various fruits and some cheeses. I scowled.
‘You shouldn’t be going out to the pijaca nan – it’s very crowded and busy, probably not the safest place for you to be with the current state of things.’
‘Oh no’, she said, her eyes glistening proudly, ‘I ordered these from the Internet. They come every two weeks now, straight from Vojvodina and a nice man brings then to my door. It’s very good’.
And that’s when it hit me. My 81-year-old baba had learnt to shop online. Not only that, but she’d successfully subscribed to a home delivery service. My mind was blown.
Oh no", she said, her eyes glistening proudly, "I ordered these from the Internet. They come every two weeks now, straight from Vojvodina and a nice man brings then to my door. It’s very good.
All over the world, we’re seeing this seismic shift in people’s shopping behaviour as the pandemic forces them to stay home and flatten the curve. Life, as we’ve known it, has rapidly changed and with it, so too has the way in which we purchase consumer goods. So, while e-commerce and direct-to-consumer (DTC) models are not necessarily novel in the business and marketing world, this shift in consumer behaviour has meant that brands who haven’t already entered the DTC and e-comm fray, need to start playing ball if they want to remain competitive and relevant in the marketplace.
The DTC model has been around for some time now, giving traditional supply chains a run for their money and brands greater control over their relationship with customers, managing their reputation, marketing and sales tactics. Everyone remembers the Dollar Shave Club that launched its online DTC business in 2012 with a revolutionary viral video that generated 12,000 new customers in the first 48 hours, growing to 330,000 customers by 2013. In fact, the business was so successful, that in 2016, FMCG giant Unilever went on to actually purchase the disruptive direct-to-consumer men’s razor start-up.
The fact is, DTC has been emerging over the last 36 months as a key strategy across many FMCG verticals. While the creation of most DTC businesses was the result of an arbitrage – cutting out the middle-men and investing the money saved in digital marketing – we are now seeing the end of this arbitrage as more brands embrace DTC and e-comm, resulting in a more competitive marketplace. While there’s no denying the benefits to consumers who can enjoy greater choice and convenience, the mounting competition has steadily driven up customer acquisition costs while driving down prices, ultimately affecting many business’ bottom line. And the pandemic is only going to further accelerate this shift.
So, what does the future hold for DTC and how can businesses, particularly those in the FMCG category, utilise this model successfully to create value for both their customers and their business? We think there’s a few key things brands should think about;
1. DTC brands and businesses that can generate organic traffic and have engaged consumer communities will prevail.
As acquisition and marketing costs increase, brands such as Warby Parker, that are great at social media, are able to organically build their online audience, generate UGC and put their customers’ needs and wants first, are going to become the most successful.
2. Content will become paramount in generating organic traffic.
Brands will need to start investing more heavily in content and technology in order to build more meaningful relationships with consumers and help to drive relevance, something retailer brands such as Sephora are already tapping into.
3. The need to create and retain real value.
While hyper-personalised DTC brands have the potential to disrupt entire categories (e.g. US vitamin company Rootine), developing a unique product or service offering in the market isn’t going to be enough unless brands add real value and solve genuine unmet needs/customer pain points.
4. Service will become the new frontier.
For consumer goods brands, success will come down to their ability to add additional value to consumers' lives, shifting away from just a category ‘job to be done’ to a more holistic view of what people want/need, particularly during these Covid times. This may even mean extending beyond just offering products, but also services, as make-up brand MAC have done with their virtual beauty consultations.
I don’t think it’s too much of a stretch to say that this pandemic has forever changed the way we shop and accelerated people’s e-comm literacy. As Albert Einstein famously said, ‘you do not really understand something unless you can explain it to your grandmother’, and if my 81-year-old Serbian grandmother can understand how to utilise DTC subscription models to purchase her groceries from the comfort of her own home, then I’d say this is a frontier brands can’t afford not to cross into if they wish to remain relevant.
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