How Legacy Brands Can Shift to Direct-to-Consumer E-Commerce
There’s no question that e-commerce is opening worlds of opportunities for consumer brands.
A recent report from eMarketer says that e-commerce accounted for more than 10% of all retail sales around the globe in 2017. Expect that number to keep rising. As Gideon Spanier at Raconteur points out, direct-to-consumer (DTC) brands are “dominating” in retail, precisely because they are building relationships with consumers.
It’s clearer than ever that established brands need to adapt, shifting to more DTC-based strategies. Unfortunately for them, the response has been far less than lightning quick. Why? Because their core businesses rely on them building relationships with retailers, not consumers directly. Shifting to DTC would require many of these brands to redirect their most fundamental strategies.
In the meantime, natively direct brands — which create, market, sell and ship products to customers themselves, without intermediaries — are thriving because they were born with a customer experience mindset. They intuitively understand the power of focusing on customer experience and engagement.
Thankfully for those more established brands, not all hope is lost! Let’s explore what traditional brands can learn from the customer experience mindset that digitally native brands are born with — and how embracing their tactics can lead to success.
Where the Disconnect Lies for Legacy Brands
Traditional brands are still built for landscapes in which sales and marketing live in different, physical places. Electronics brands, for example, would promote their products in TV ads and on highway billboards, but then needed to motivate consumers to go to their local Best Buy, or perhaps to a small, independent shop, to purchase the product.
That model worked for decades. As shopping moved online, however, it became clear that sales and marketing could share a common space, where both departments work in lockstep to create a seamless shopping experience.
Many legacy brands misguidedly imagine DTC as “just another sales channel.” These brands could reach more customers by understanding that this is a fundamental shift in the sales-marketing relationship and that resisting the change could be futile. In 2018, getting stuck in the old paradigm of product-focused marketing rather than customer-focused marketing could be borderline lethal to sales in certain demographics.
Returning to our hypothetical electronics brand, with the traditional world of raising awareness and driving purchase intent, it made sense to roll out and promote new features and new models — it’s how a brand could stay top-of-mind with consumers. However, when building a digital customer journey, brands can speak to consumers on a much more impactful level. There’s so much more to learn about each individual buyer, and through that data brands are able to craft a message that speaks directly to the customer’s needs and desires.
What Digitally Native Brands Are Getting Right
Brands that were born online can often reach web consumers more effectively than traditional brands formed in a pre-Internet era. This isn’t because these brands are “better” at marketing. It’s because they understand digital customers.
E-commerce companies are creating product experiences on socially relevant platforms, such as YouTube or Instagram. From sponsored makeup tutorials to product unboxings, digitally native brands are capitalizing on Internet-friendly marketing tactics and finding success in the process.
This success can be broken down into four specifics: a laser-focus on the customer experience, expertise in digital communication, personalization and controlled distribution. The bottom line is digitally native brands find where customers are online, and they connect with them. By investing in creating great digital user experiences, these brands are:
- Engaging consumers directly, thoughtfully and with relevance
- Contextualizing the product experience in a way that resonates with consumers
- Creating better brand experiences through direct engagement (especially on social media)
- Building brands that speak to what today’s consumers value
- Using customer data to optimize every aspect of the business
The result is a successful cycle of engaging marketing, qualified sales, satisfied customers and sales-worthy reviews that can create an ongoing, lasting relationship with consumers.
4 Things Legacy Brands Can Do to Embrace DTC E-Commerce
By learning what digitally native brands are getting right, executives at traditional brands can begin to implement their own tailored DTC strategies. Each brand’s audience will have its own set of specific needs and interests, but there are a few tips that will apply in nearly any vertical.
1. Engage With Consumers on Their Own Terms
Consider DTC shoe brand Allbirds, which entered the footwear market in early 2016 with a pair of wool sneakers. Sure, the brand launched with sensational press coverage — for example, TIME covered the brand’s launch with the headline “The World's Most Comfortable Shoes Are Made of Super-Soft Wool.”
But Allbirds didn’t rest on one big media win. The company capitalized on that attention by devoting significant marketing energy to Instagram, where it currently reaches 176,000 followers. And while there are millions of brands that broadcast on Instagram, few brands spend as much time and energy actually listening to their Instagram followers.
“That’s one of the aspects of our social strategy that we’re really proud of,” Allbirds VP of marketing Julie Channing told Digiday in 2017. “We listen to what consumers like and regularly receive pieces of feedback that we can use to make sure we are holding true to our standard of making better shoes, and that’s really about making continuous improvements.”
The brand equity Allbirds is building on Instagram is especially valuable, because audiences on that platform skew younger. Research from Omnicore finds that 59% of internet users between 18 and 29 years old are Instagram users. Within the 30- to-49-year-old group, that usage rate falls to 33%.
This puts Allbirds — and any brand engaging followers on Instagram — in a position to build long-term relationships with consumers. The 20-year-old commenting on an Allbirds post about how her insoles are slipping may very well remain a loyal customer at 30 years old if she feels the company is listening to her feedback.
2. Speak to the Sophistication of Digital Consumers
One of the most important paradigm shifts for brands in the 21st Century has been gaining an understanding of digital customers’ journeys. At any given moment, a consumer could be following 100 brands on Instagram, considering purchases from two or three of those brands, and trying to ignore irrelevant pay-per-click ads or promoted posts from dozens of other brands.
This has made for very sophisticated consumers, who have access to considerably more information about companies and brands than in generations past. Brands must work hard to earn their loyalty.
Research firm Radicle applies what it knows about customer sophistication to the personal fragrances market, where retail margins are traditionally high (Radicle puts the number at around 40%) and product information tends to be opaque. Brands that engage consumers could find success in this space, they argue, if those brands can balance a few elements.
First, there’s ingredient transparency: Digital consumers will appreciate knowing what, exactly, is in their bottle of perfume. Second, they’ll like a high-end fragrance brand that can cut out retailers’ high margins, and pass those savings on, allowing them to meet consumers with a strong value proposition.
Radicle points to digitally native brands Warby Parker and Casper as companies that have excelled in other markets with similar pricing strategies: “Fragrances, like eyeglasses and mattresses, do not offer obvious justification for the pricing differences between various brands. Why is one fragrance $50 and another $400?”
Technology has changed consumer expectations. Brands that can speak to those expectations can directly position themselves for DTC success.
3. Use Consumer Data to Personalize the Experience
Good conversationalists are good listeners, and brands cannot authentically engage with consumers without first understanding them. That’s where data collection comes in.
The digital channels you use to reach consumers are rich with information. At a glance, you can learn who people are, where they live, what other brands they like. All the information you collect informs what you say to your audience. The deeper your insights, the more relevant your message.
Personalization has been a key part of beauty products brand Glossier’s success. The brand collects user data to make the checkout process smoother and solicits feedback to inform its own product design process.
It’s imperative that brands go above and beyond to create genuine, one-to-one relationships with their customers. Personalizing the customer experience isn’t just about showing people products you think they’d like, it’s about tailoring the entire experience to their needs from start to finish.
4. Your Brand Has a Strong Voice — Use It
If your company has spent decades honing and refining its brand, then it brings a competitive advantage to the DTC space. Don’t neglect that strong brand voice as you begin to engage consumers directly.
Rather, lean on all that accumulated equity, so your brand can speak to consumers in a way that is authentic and builds rapport. By becoming more personal and transparent, and creating meaningful experiences, brands are building emotional connections and winning consumer loyalty.
That’s not a fundamental shift from building strong relationships with distributors and retailers. The audience changes, but the intent doesn’t. Ultimately, legacy brands got to where they are by building communities and earning loyalties. Embracing DTC is a critical way to keep that momentum going.