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12/03/2020

Evolving Your Direct-to-Consumer (DTC) Offering

In-store sales and shopping behaviors changed drastically at the onset of COVID-19. As consumers stayed home more and ventured out less, retailers had to find creative ways to serve their customers. For groceries, this led to a mix of online orders, curbside pickups and limited in-store experiences that typically resulted in fuller carts but fewer trips than before the pandemic.

As the pandemic progresses, more changes are likely to follow. It’s possible that the way people shop will never completely return to our previous version of “normal,” which opens up new challenges and opportunities.

In this new mixed mode of shopping — in which consumers shop in person at physical retailers and at home via e-commerce — consumer goods companies are looking for ways to innovate.

Directly Target New and Existing Customers

As concerns about the pandemic continue, brands are evaluating their go-to-market (GTM) strategies and assessing new opportunities to reach and engage consumers, which in turn will drive sales. Direct-to-consumer (DTC) strategies are at the forefront of this conversation, and for good reason.

E-commerce has proven to be a driving force behind consumer goods, accounting for 82% of all growth within the sector. Major brands are starting to take notice. Earlier this year, PepsiCo introduced two DTC websites to directly sell products from their many brands, including Quaker, Gatorade, Lay’s and Tostitos. This is a smart first step, but how can other brands implement a profitable DTC strategy?

Find Shoppers and Go There

Most DTC strategies will not include a fleet of retail locations. Therefore brands can expand via e-commerce avenues even after the pandemic has subsided. This might seem like a major shift to CGs, but selling their products through many channels such as physical and online grocery retailers alongside DTC can actually bring them closer to consumers by offering purchasing alternatives — such as a monthly subscription model that frequently replenishes consumables while generating recurring revenue. Better still, it will give brands the chance to reach customers who may be less aware of their products.

For example, a brand could identify which social media platform — Facebook, Twitter, TikTok, Pinterest, etc. — aligns with its prospective customers and activate relevant campaigns there. Brands could also analyze and determine which platform led to the highest engagement and outcomes and shift strategies accordingly. This information will be invaluable in forming a winning DTC strategy that transforms chatter and curiosity into actual sales.

Drive Interest and Evade Competitors

One of the benefits of a DTC offering is that it can draw more customers to the brand by zeroing in on their interests while avoiding the noise of competitors that exist in traditional retailers. Whether relying on a specific website or social media platform to facilitate these sales, brands can use DTC to increase their customer intelligence. The close communication and relationship that can develop with consumers by adopting a direct approach could be invaluable in launching new products and initiating new campaigns, especially in a market with such immense growth potential.

That potential is evident in eMarketer's 2019 DTC Brands report. The report shows that 40% of U.S. internet users anticipate that DTC brands will account for at least 40% of their purchases within the next five years. eMarketer’s 2020 report shows that DTC could account for $17.75 billion of total e-commerce sales for the year, an increase of 24.3% from 2019.

That report also estimates that the number of DTC e-commerce buyers will rise 10.3% to 87.3 million. And according to a report by the Interactive Advertising Bureau (IAB), 90% of DTC brands are already profitable.

Go Direct and Take Advantage of the Growth Opportunity

The pandemic has given brands the opportunity to rethink their strategies and consider new ways to connect with consumers, and DTC is a fascinating avenue to explore. By going directly to shoppers with an e-commerce offering, brands can target new customers, offer a subscription model that delivers recurring revenue and avoid competing with others for physical or digital shelf space.

Chad Summe is chief strategy officer at Quotient.