Anyone needing verification of the newest trend in commerce needs to look no further than Unilever’s $1 billion acquisition of direct-to-consumer (DTC) poster child Dollar Shave Club. The writing is on the wall, and big multi-national sharks are looking to gobble up smaller DTC fish as quickly as they can as a result.
eCommerce DTCs meanwhile – such as meal kit provider Hello Fresh, which has been around for about five years, and healthy snack food box maker Graze, founded in 2007 - are essentially looking to bypass traditional retailers for two compelling reasons: the potential for greater profitability and direct access to consumers in order to build a lasting relationship on the back of an improved customer experience.
However, it’s not just newer companies and brands that are adopting direct-to-consumer selling as part of their sales strategies. As consumer traffic to bricks-and-mortar stores continues to decline established brands are also beginning to offer the DTC option, effectively removing both distributors and physical shopping from the buying equation.
That said, it’s not all one-way DTC traffic though. For example, Jessica Alba’s hugely successful Honest Company, while starting out in 2011 as a straight online DTC phenomenon, has recently realized that bricks-and-mortar outlets should not be ignored and is looking to place its products in high street stores other than their existing Wholefoods and Target partner chains.
Many smaller DTC companies though are the classic little-engine-that-could when it comes to competing, and ultimately, unseating, the big dominant industry brands. As in many expansive marketplaces, it is often the smaller companies that have the advantage because large firms cannot respond to the market events and trends quick enough to take advantage of ever-evolving economic conditions.
With new and small DTC companies however, they have the malleable corporate infrastructure and management flexibility to innovate, and in doing so, respond quickly and effectively to their customer demands. And the company-to-costumer relationship, just as with the evolving customer experience, is set to be a key element in any eCommerce related industry in the future.
Additionally, aside from not wanting to damage their existing, and often highly successful, retail relationships by committing to evolving DTC marketing and sales strategies, legacy brands find themselves in a catch-22 predicament.
As a result, the writing is truly on the wall concerning future DTC strategies. But established brands have to tip-toe the fine line between not alienating their established retail distribution infrastructures and falling too far behind in the global DTC economic trend. Staying loyal to their established physical retailers may be sound advice in the short term, but leave it too long and marketplace control may have irreversibly shifted to the newer DTC players, ultimately impacting the dominant brands’ industry share in the longer term.
The world is changing and with it the retail and eCommerce horizons. The new generations of consumers, and the tech savvy older ones, are digital first when it comes to communications and shopping. Not only that but consumers’ research, from grade schoolers to CEOs, is now for the most part accomplished online.
The future key to any business success inevitably lies with the strength of a company’s evolving relationship with its customers. The more a retailer knows, the easier it is to customize the shopping experience for each individual buyer. Direct-to-consumer business models provide just that. Bricks-and-mortar stores trapped in the physical world struggle to keep up. That said, as much as 90 percent of all shopping is still done at some point through physical retail stores. The question is though, how long will those numbers keep up.
By contrast, the DTC business model gives eCommerce customers added value and a more fulfilling consumer experience, while at the same time giving online retailers and eCommerce linked companies better insight into who they are and, more importantly, when they will buy. Like it or not, even dominant industry giants will have to eventually embrace the direct approach to stay relevant.