What retail can learn from the Direct-to-Consumer Business Model

October 11, 2023
Rebecca Wine profile picture
Rebecca Wine

The article discusses the Direct-to-Consumer (DTC) business model and its impact on the retail industry. It highlights how DTC, initially popularized in the late 1990s, gained significant momentum during the COVID-19 pandemic, making online shopping the primary mode of purchasing. Businesses with a strong DTC foundation demonstrated resilience and often thrived due to their robust infrastructure.

The article features insights from Brin Snelling, a Retail Expansion Strategist and Forbes contributor. Brin emphasizes three key lessons for traditional retailers to learn from the DTC model.

In recent years, the Direct-to-Consumer (DTC) model has set the retail world ablaze, but it's not an entirely novel concept. It gained popularity during the late 1990s, right in the midst of the dot-com bubble. Back then, it primarily referred to online retailers who utilized the Internet to sell their products and services directly to consumers, sidestepping traditional, offline, distribution channels like physical stores.

Fast-forward to the present, and the COVID-19 pandemic served as a turbocharger for the already-growing DTC trend as it pushed online shopping to be the primary way to buy products. During this period, businesses with a solid DTC foundation had a notable edge when physical stores were forced to close. Their investment in infrastructure like robust distribution, supply chain, and logistics systems allowed them not only to weather the storm but often to thrive.

To delve deeper into the secrets behind DTC's success, I spoke with Brin Snelling, Director of Retail Strategy for RetailUnion and Forbes contributor. She shed light on how the DTC model stands out from traditional retail, and what lessons there are to be learned.

Shift in Perspective: Stores as Marketing Powerhouses

Brin emphasizes a fundamental shift in how DTC brands view physical stores. They no longer see them merely as revenue generators; instead, they harness their potential as potent marketing tools that profoundly influence various channels, giving a tremendous boost to overall brand success.

Take the brand “Away”, for instance. Brin points out that, "Away can attribute ecommerce sales directly with the opening of a physical store. In fact, they saw a 150% increase in ecommerce sales in a market where they opened a physical store." This underscores how stores can impact ecommerce positively. They're not just money-makers, but strategic marketing assets.

Furthermore, she notes, "While it's true that one can expand web sales into a new market without opening a physical store, the dynamic shifts when a store is introduced. It not only augments revenue streams but also exerts a ripple effect on adjacent channels.” In one case study, online purchase revenue increased from 23% to 33%.

Lessons for Retailers:

DTC's triumph lies in embracing a new mindset, questioning traditional shopping patterns. Traditional retailers must recognize that stores can be more than sales channels; they can function as a marketing tool. By adopting this perspective, they can bridge the gap between physical and online stores to shape a winning strategy.

Customer-Centric Excellence

DTC brands have mastered the art of forging unique connections with their customers through personalization. In fact, 61% of consumers say that DTC brands offer a more personalized experience that they cite as being more desirable. In addition, a Harris Poll from 2022 found that 82% of shoppers want a brand’s values to align with their own. Traditional retailers often convey their products through the retailer's lens, while DTC brands leverage their freedom to express unique values, creating a profoundly customer-centric experience.

Brin points to IKEA as an example, a brand that champions this approach by putting their customer's values front and center. Their recent launch of a resale furniture program aligns seamlessly with sustainability, a concept close to IKEA’s customer base's heart. Additionally, IKEA is pioneering innovative store concepts, tailoring retail experiences to cater to unique customer preferences.

Lessons for Retailers:

Focus on personalized experiences that align with customer values. It's the key to differentiation, customer-centricity, and innovation in retail. In today's competitive landscape, retailers must focus on crafting memorable retail experiences that resonate with modern consumers.

Elevating Online Shopping Experiences

In the DTC world, the digital experience reigns supreme. Many DTC brands are renowned for their intuitive, user-friendly websites, setting a high bar for online retail. Brin highlights that DTC has to focus much more on the aesthetic of their websites. “They need to make it incredibly appealing online to get people to purchase products without ever seeing or feeling them in person.”

As a result, Brin emphasizes "that DTC websites tend to exhibit a level of user-friendliness and intuitive design that sets them apart, which especially appeals to the younger, digital native generation, who have come to expect it from ecommerce.”

Lessons for Retailers:

Traditional retailers must prioritize and enhance their ecommerce environments. It's about tailoring online shopping experiences to align seamlessly with modern consumers' preferences and expectations. While profitability considerations may pose challenges, striking a balance is crucial. The focus should be on creating an intuitive, convenient online shopping experience that resonates with today's consumers.

Wrapping up

The DTC model's rise has transformed the retail landscape. The pandemic catapulted online shopping, giving DTC brands with robust infrastructures an upper hand.

Traditional retailers can draw vital lessons from DTC's success. They should view physical stores as powerful marketing tools, adopt personalized customer experiences, align with customer values, and enhance online shopping experiences. As retail continues evolving, embracing these lessons from DTC will be a pivotal step towards a sustainable future for traditional retailers in this ever-changing market.

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