So you’ve decided to launch your brand direct-to-consumer. Yeah! This is a major step and a fascinating project to take on. With COVID changing buying patterns, retail chains closing, and more shopping habits shifting online, this is a great time to take the leap. But no need to feel anxiety at everything you have to do and all the unknowns. We’ve got you covered.
What brings many merchants to D2C are the margins, and what makes them leave D2C is not nailing the consumer experience on day 1. But before we get to the customer experience, we need to first look at the business case to balance direct-to-consumer with retail and wholesale. After looking at the business and consumer considerations in-depth, we will finish by looking at the logistics and operational must-dos that will make or break your D2C/DTC play.
Business Considerations
Whatever has brought you to D2C -- decreasing retail foot traffic, better margins, or pandemic-induced buying pattern changes -- balancing your new channels with retail and wholesale requires thoughtful care.
The first question to answer is whether you saw a dip in retail revenue last year. If so, spend time investigating using your available data, shopper surveys, and competitive landscape research. Use whatever the answer to inform your D2C go-to-market strategy.
The next question to answer is to what degree do you want to own your customer relationship? D2C also gives you more ownership of the brand and its position to consumers, around factors like price, marketing campaigns throughout the journey, ownership of customer data (more on that later), and building brand loyalty.
Another crucial consideration is to determine if you get value from increasing customer lifetime value? This will depend on the need cycle of your product and consumer habits, but exploring this will help inform strategies around subscriptions, email outreach, and engagement metrics.
Additional foundational considerations include:
- Who are you targeting with the website?
- How do you market to those individuals to get them to the site?
- How do you offer value buying directly from the website (exclusive products, exceptional service, engaging campaigns, deals/promos, etc.) rather than retail?
- How do you keep retailers incentivized and happy? For example, can you share your customer data with them so they can sell better?
- What is the pricing model interplay between D2C and retail?
- Can you use D2C to test and refine new products before launching them to retail?
- What is your rollout messaging plan for both retailers and consumers?
With all of these questions explored, you should now be able to put together a comprehensive business strategy.
Let’s move to the next step: setting goals.
Setting Goals
With business considerations addressed, the next step is to identify your goals.
What does success look like? What are reasonable and ambitious goals around revenue, margin, and customer satisfaction? Do you need goals around average order value, or repeat customers, or quality of reviews?
Having a clear set of quantitative and qualitative goals will inform later strategies and answer questions around the tools you need to capture data and derive insights.
Remember, for better and worse; you get what you measure. (Just ask Wells Fargo.)
OK, with goals locked down, it’s now time to talk about your brand loyalty strategy.
Brand Loyalty Strategy
The first foundational question is: How will you use a D2C experience to build brand loyalty?
How will you use your brand tone, mission, origin story, outbound marketing efforts, the copy you publish online, your social channels, the buying experience, and the store itself to turn customers into fans?
What metrics will you use to measure this progress?
After answering these questions, it should become self-evident if you need a subscription strategy, what kinds of lifecycle promotions to start with, and whether a (and which) loyalty platform is required.
Data Strategy
One of the most significant benefits of going D2C is being able to gather consumer data directly on your customers. Gone is the black hole of customer data on Amazon or a grocery store shelf, and in its place is a rich, modern digital data set. Ensure you have a modern approach to collect, distribute, and derive insights from this data.
First, consider storage: Do you need a customer data platform? Do you have a system already in place that can handle this information? Are these systems modern enough to give you insights that will be a competitive advantage? Be doubtful of legacy players like Microsoft Dynamics, Oracle, and Salesforce and instead look closely at leaders like Segment and Snowflake.
Next, identify every downstream system that needs or would benefit from the customer data you gather. Logistics, finance, and product development are prominent places to start.
Lastly, and more importantly, what is your strategy for deriving insights from this data? Remember: Collection and storage are pointless unless you have a real system to extract value from raw data. It’s also important to be realistic: You aren’t a data scientist (and you might not need one!), nor do you have 10 hours a week to become one.
Next, let’s turn to the land of operations with a look at logistics considerations.
Logistics, Logistics, Logistics
Tactical concerns make or break an effort, and nowhere more in commerce than logistics.
The words of the great General Dwight D. Eisenhower are as valid in literal war as they are in retail war: “You will not find it difficult to prove that battles, campaigns, and even wars have been won or lost primarily because of logistics.”
If you are an established retail business, you are probably already great at shipping pallets to retailers. That’s terrific, congratulations, and none of that is going to help you.
Critical considerations for D2C logistics are:
- How will the product be packaged?
- Will you use a 3PL or your facility?
- What is your shipping cost strategy?
- Is Shopify’s new fulfillment network a good fit?
- How will you fulfill better than Amazon?
- Do you have to support a first-order experience (see next section)
- How will returns work? Will you process returns?
- Will returns be processed at a different facility than the orders you are fulfilling?
- How will fulfillment impact customer experience (see next section)?
Consider what business writer Tom Peters has to say: “Leaders win through logistics. Vision, sure. Strategy, yes. But when you go to war, you need to have both toilet paper and bullets at the right place at the right time. In other words, you must win through superior logistics.”
Sometimes hustle really is strategy.
Getting the Experience Right
But remember: For D2C, it's not just about fulfilling orders. It’s about meeting consumers' expectations of modern digital experiences. You need to create an experience that people enjoy coming back to; you need to give them a reason to come back.
First, be sure to pick your aspirational brand target. What brand is the north star for the experience you are trying to create with your customers? See, the thing about north stars is they tend to produce their own gravity and pull you towards progress. It also helps align the team to the mission to have a shared vision of the experience you are trying to create.
Sure, your north star brand may seem like they operate at another level that you couldn’t achieve. But remember that they are just a bunch of people like you and your team. Ask yourself: If they can do it, why the hell can’t you?
Great search, product landing pages, product detail pages are table stakes. You need to go beyond this for an outstanding customer experience.
Key considerations include:
- Package Opening Experience (POX): What will your customer experience of opening a package from your brand be like?
- Unexpected cleverness: Are there opportunities to use packaging requirements (the stuff in the package that isn’t what the customer bought) in unexpected ways? For example, We had a food & beverage merchant that had to insert cardboard dividers between a pack of glass bottles. Instead of just using regular cardboard dividers, we suggested turning those dividers into recipe cards and staff favorites.
- Surprise strategy: A gift is most impactful when it is unexpected and personal. Take a note from terrific phone case brand Casetify: Customers often found a pack of free cleansing lens wipes in their order. Super useful during the pandemic and completely unexpected. But brand loyalty was instantly obtained.
- First-order strategy: Similar to the surprise strategy, do you have a strategy on how to spark joy in the first order of a new customer, something you won’t do for repeat customers? Think like Warby Parker, that used to send your first pair in a much nicer glasses case than in subsequent orders.