Ask any online retailer what they would like to perfect about their business and the chances are most, if not all will tell you the same thing: customer affinity.
It’s the oldest rule in the retail book, yet it is always changing. The core principle of keeping your customers happy, engaged and loyal is fundamental to the business of retailing; the means and methods change with the times.
Cue one of the most important trends of the 21st century: direct to consumer (DTC) retailing. In an age when brands and consumers can interact over multiple media and platforms, instantly, directly, socially, even personally, the potential for sales conversion is huge, and retailers know it.
Essentially, it’s about control. And it raises some fundamental questions about the relationship between a brand and its customers. Why take the risk of a retailer underselling your product among a host of rival brands when you can do the job yourself? Why place your brand rep in the hands of a middle-man who can’t possibly know it, or care for it as much as you?
It’s the thought process that major retail brands have been through all over the world, from Nike to Apple. Pureplay ecommerce brands looking at opening physical stores have been through their own version of the dilemma: whether to relinquish control to an established bricks-and-mortar chain, or set up shop themselves. In both cases, more brands are going the DTC route – and are reaping extraordinary rewards in the process.
But is it that simple? Will consumers be happy buying direct from a manufacturer-turned-online retailer? Can an online retailer with a big brand presence simply set up shop and expect the high street to follow suit?
Not without doing their homework, says retail consultant Richard Hyman. In his blog Hyman identifies the extent of the challenge. “No longer sharing the margin with a third party retailer is a massive attraction,” he writes. “However, a retail operating model is needed irrespective of who owns the brand. You still need to manage inventory, forecast demand and manage price and mark down effectively. To a large extent, you still need to think and act like a retailer.”
Whether they go the physical retail route, or simply pivot to selling, rather than making their products, neither move will work without the sharpest digital game to back them up.
If a brand wants to sell direct to its shoppers – or even better, its brand loyalists – it needs the perfect media on which to do it. For one brand that might mean selling direct through Instagram or Snapchat – wherever its customers are hanging out – for others, such as Naked Wines, a monthly subscription service might work best; or if you’re a Peloton, it means keeping contact through daily workouts.
Overarching to all of this is the need for the sharpest skills of customer experience management (CXM) – defined by research and consultancy firm Gartner as “the practice of designing and reacting to customer interactions to meet or exceed their expectations, leading to greater customer satisfaction, loyalty and advocacy – backed up with an intimate knowledge of a brand’s own consumer base.
When it’s done right, the results can be that holy grail of goals for online retailers, something that transcends loyalty: brand affinity, and a solid community base. To that desirable end, brands are investing major money and expertise in solutions that will touch consumers, and establish a vital, intangible connection that leads to tangible sales.
The DTC trend has been building, and evolving, since the turn of the 21st century. As they have been for so many areas of our lives, the seismic events of 2020 have had radical impacts on the status quo, and in the case of key retail trends, been a catalyst for existing change.
With the surge in online sales that have resulted from lockdowns around the world, ecommerce markets have grown in volume, but also in the intensity of the competition for them. As a result the brands are having to do more and more to stand out. In short, they need an edge.
The solution that many are turning to, and others are perfecting, is the art of personalisation – the art of presenting every individual customer with a tailored, bespoke offering. If you want to sell direct to your consumer, you have to let your consumer speak directly to you, and be willing to listen.
There are a number of ways that brands can do this. Not least, the use of subscription services, of which there are three broad categories: replenishment services, such as the automatic purchase and delivery of printer cartridges; access services, which grant loyal customers and subscribers access to discounts and unique deals; and, the most popular of the three, curation – the actual tailoring of products such as clothes and makeup into bespoke packages unique to each shopper.
There’s no denying that DTC retailing is hot at the moment. And for the brands that get it right, there is the potential for phenomenal sales growth, and customer affinity to be gained. But it can’t be just another retail buzzword. Cutting out the middle-man can be a lucrative move – or it can leave a big gap between brand and consumer.
To go for the extra margins that come from direct selling is a smart move. There is little margin for error along the way.