How brands are becoming a major force in direct-to-consumer retail
In 2010, a pair of New York corporate climbers decided to quit the town and move to Vermont. It was 2 years since the Great Financial Meltdown, when a lot of people didn’t have a lot of money to spend — which was when they decided to launch a brand of luxury shaving cream; in a state where most people grew beards.
After a year of R&D, they launched the first Ursa Major-branded shaving cream, which was immediately declared by Esquire as the best shaving cream in the market, in spite of trend headwinds from bearded hipsters.
Six years later, Ursa Major has transformed into a major brand in the skincare category — with various magazines including Forbes singing their praises. They still sell most of their product online, via their Shopify-hosted webstore, along with various collaborations with other online shopping experiences like Bespoke Post.
The story of Ursa Major isn’t new, but it’s a growing trend in the eCommerce space; brands are increasingly shifting a sizable portion of their sales online, and increasingly focusing on online direct-to-consumer (D2C) sales.
Online D2C is undergoing a sort of renaissance — with many newer brands positioning their webstore as their flagship to engage customers, build their brand loyalty, and to provide a rich shopping experience for customers.
Chacos (www.chacos.com) employs this tactic. It owns its webstore, and sells D2C, with a strong focus on content — customers may initially come to buy a pair of shoes, but leave hours later after browsing through their picture books, taken a virtual trip to Mendocino, or designed a custom pair of Chacos.
The strategy works brilliantly. Chacos has a fan following most CPG companies can only dream of, with dedicated hashtags on Instagram for chacos-fans: #chacosnation :
While incumbent brands don’t need to go to that length, there’s plenty of scope for them to explore online D2C as an alternative sales channel.
The medium lends itself well to converting advertising impressions quickly into revenue.
Additionally there’s a powerful drive behind D2C — it allows brand; particularly FMCG companies to directly track the conversion of their billions of dollars of adspend.
FMCG companies spend container-loads of money on TV, print, radio and online ads, with limited opportunity to measure the effectiveness of these ads.
Its a colossal waste of their money — case in point, I’m constantly bombarded with ads for Pampers on my Comedy Central streaming service. Even though we don’t have any kids (San Francisco — go figure)
But by making it easier for targeted customers to buy directly from the website, brands can easily convert adspend into revenue — and instantly validating their advertising expenses.
Additionally the upsides are compelling:
Better margins — by skipping the traditional retail channels, brands realize higher margins
Market reach — brands are not beholden to their distributor’s reach when they market and sell direct to their customers online
Consumer data — the wealth of data available online beats any form of survey data collected by in-person teams at retail locations. Brands no longer have to rely on stale data provided by retailers (if any)
Happier customers — Brands can leverage the rich customer metadata to own their customer relationships and deliver a more targeted value proposition
How brands are becoming retailers
In today’s eCommerce environment, it’s easy for brands to set up an online storefront and start selling directly to consumers. There are many eCommerce tools to create a webstore and free tools to market your brand. No longer are the days when brands are limited to wholesale, and rely completely on retailers to push their product amongst a flurry of other products in a retailer’s catalogue.
So why is this shift is happening?
Consumers expect more when shopping
The average consumer is well-equipped with information to make an educated decision before purchasing, and the shopping experience can be done on multiple devices and simultaneously online while in-store. While this is great for consumer, this presents a challenge to brands. A brand’s knowledge of a customer’s shopping experience with it’s product is very limited. Once the product is in the hands of a retailer, the brand has lost control of the shopping experience.
By going direct-to-consumer, brands can showcase it’s story and directly engage with the customer in a meaningful way. And the customer data from the direct sales gives the brand the opportunity to strategize and re-engage with its customer based on concrete data.
Going direct-to-consumers helps other sales channels
While it may seem obvious that selling direct-to-consumers offers better margins and an additional channel of sales, it is less obvious this route can increase a brand’s other sales channel. Selling directly to consumers creates brand awareness that can have a positive ripple effect on retailers. So, the pie is big enough for everyone in this case.
We recommend a hybrid approach for established retailers to leverage existing direct-to-consumer channels
According to Deloitte,
“By combining traditional distribution and direct channels, these brands already enjoy a large reach. Owning their own channels — and in some cases, their own loyalty programs — gives these brands some consumer data, though traditional retailers still own much of the rest. Prices must still be negotiated with retailers and other traditional partners, though owning direct channels does provide these brands with the opportunity to release different products through different channels.”
Ready to start selling directly to your customers?
If you are a brand, it’s very likely that you’ll have your own eCommerce store and continue to work with retailers.
What and how you sell your products on your site should not be viewed in isolation from wherever else you are selling your products.
In order to manage your brand and your own eCommerce store, you’ll need retail analytics for pricing and inventory availability on your products across all retailers. This will you give you the intelligence to understand and position your product in the market.
And if having your own direct-to-consumer eCommerce site helps the sales of your retailers, you should invest in a webstore analytics solution.
Semantics3 offers a RealTime pricing and inventory availability solution to provide data on your product across all your retailers.
Additionally, our Hits Analytics can provide the customer insights you need to improve your product and marketing strategies, effectively giving you a command over your own webstore sales and influencing your other sales channel.
Are you a brand looking for a solution for your eCommerce store or for retail analytics? We’d love to hear from you and learn what your specific challenges are in the current eCommerce climate.
Email us at firstname.lastname@example.org, schedule a call with us or start digging on your own at semantics3.com!Semantics3 operates the world’s largest eCommerce product database. We’re a trusted and reliable provider of ready-to-use structured eCommerce product pricing and metadata, with coverage on all of the top 800 internet retailers.