History tends to repeat itself. What once existed will eventually resurface, updated for new technology and tastes. Such is the case for direct-to-consumer — or D2C — retail. As early as the 1800s, companies like Avon (1886), the Fuller Brush Company (1906), Electrolux (1924), and Tupperware (1946) sold products by going into consumers’ homes.
Today, companies like Glossier, Warby Parker, and Everlane are reimagining the door-to-door business model to create dynamic and convenient shopping experiences that bypass the retail middle. What’s more, consumers are opening their arms and wallets to these digital sellers because they offer unique product choices and fresh combinations of goods and services.
With traditional retail, shoppers felt limited to product lines curated toward a target demographic and sold in mass quantities. D2C companies were born out of data. Online search habits and consumer data identified where shoppers had unmet needs.
Without the burden of having to pay upfront for brick and mortar and shoulder the operational overhead, D2C companies can nimbly source, market, and distribute their wares through invisible third parties to build a consumer base within months. With the recent rise of retail-as-a-service providers like Neighborhood Goods and b8ta, even brick and mortar is within easy reach of D2C sellers.
Customers Want the Best of Both Worlds
With the relative ease of launching a D2C company, the retail industry is experiencing a steady influx of competitors vying for the same shopper. Consumers are the ultimate winners — with more choices, more information, and more power than ever before. This new dynamic has forced all retailers to raise their game to build stronger engagement with their customers or face rapid irrelevance.
In this new retail reality, keeping shoppers engaged means all retailers must offer a more harmonic customer experience. Where omnichannel initiatives have worked for the past decade, they no longer offer enough flexibility for today’s hyper fluid shopper journeys. Consequently, while traditional retailers have been getting busy improving their e-commerce game to keep up with D2C, the digital-only businesses have realized their need for a physical presence.
Companies like Casper have done an excellent job getting consumers over the “I need to touch it” hurdle. Casper is discovering that it is easier to sell its more expensive mattresses — and get shoppers to buy their sheets and home goods — from a physical store. Online is notoriously bad at product upsell, where physical stores excel.
Additionally, shoppers are more likely to buy a product or service if they can put a “face” to the brand. A physical presence people can see in real life helps brands gain a level of trust not often attained through online-only interactions.
A Retail Industry Double Play
To keep up with customers who are increasingly well-informed and choice-rich in their options, the retail industry is shifting to a more harmonic operating model. To stay in tune with shoppers’ needs and preferences, traditional retailers can learn a lot from their D2C counterparts.
1. Try New Things
It’s easy to think outside the box when you never had a box to start with. D2C businesses have the advantage of a clean slate when it comes to adding brick and mortar to their brand experience. Not being tied to lease commitments or existing store designs means you are free to be anything.
Long-established retailers should look to D2C’s willingness to experiment. Just look at the use of unique formats like pop-ups, vending solutions, and even a temporary subway station takeover like Ikea did at La Madeleine metro station in Paris.
2. Take a New Approach to Key Performance Indicators
Measure KPIs like a D2C retailer. Traditional retailers often assign different KPIs to different channels. Sales per square foot measure store success and e-commerce success is measured by conversions and cost per click.
D2C companies understand the halo effect physical stores have on lifting online sales and measure accordingly. For instance, bedding company Nest Bedding saw a 15% increase in online sales in the cities hosting its stores; shoe company M.Gemi saw a 20% lift to online sales in cities where it has a physical presence; finally, accessories seller Cuyana saw a 50% uptick in digital sales in cities where it has stores and pop-up shops.
3. Help Customers Help Themselves
D2C retailers have dialed in their distribution network. They keenly understand the substantial cost burden of shipping to a customer’s front door. This has encouraged digital sellers to get creative in seeking ways to help customers help themselves.
Click and collect was initially born from the need for D2C companies to ease shipping costs. Only after testing was it discovered how much customers liked this service and the substantial benefits to the retailer.
Traditional retailers are slowly beginning to realize the true win-win this service offers:
- 68% of shoppers use click and collect.
- 85% of shoppers have made additional purchases when picking up in-store (and 15% say they do so frequently).
- Regular click-and-collect users return fewer items overall.
4. Open Your Doors
D2C retailers are a collaborative breed. Their need to get creative to source and fulfill customer orders and their willingness to experiment have motivated them to form unique partnerships. From setting up shop-in-shops within department stores to collaborating with restaurants or e-gaming companies, D2C sellers know the value of a great partner.
Traditional retailers are taking notice, and they have begun making space within their stores for digital sellers to offer their shared customers a more engaging range of products and services to get customers to frequent stores and websites more often.
Walgreens was quick to see the benefits of integrating subscription service Birchbox and national grocer Kroger into its stores. Macy’s liked Bluemercury and Story so much that it bought the companies, and Ulta Beauty, one of our clients, has a regularly rotating range of online-only beauty products that its customers are eager to try.
Harmonic retail is a North Star for brands and retailers to create engaging and responsive customer relationships to build long-term value. As D2C and traditional retailers learn from each other, it may one day be difficult to discern which is which to the consumer, to the benefit of all.
What else can traditional retailers learn from their D2C counterparts? Let us know in the comments below.
