What Can Retail Learn from Direct-to-Consumer Brands?

The face of retail is changing. Over the last few years, spending with direct-to-consumer (DTC) brands has nearly doubled. While the retail industry suffered pandemic-driven setbacks, DTC ecommerce steadily grew. According to Cardlytics first-party data, DTC spending jumped from 8% in 2020 to 14% in 2021.

The growth in DTC eCommerce spending reveals bountiful opportunities for retail brands to improve sales performance by taking a page out of the DTC playbook.

Key takeaways:

• DTC companies capitalize on the tech-enabled service model, abandoning traditional retail outlets.
• As the demand for online purchase power increased during the pandemic, DTC ecommerce brands met that need effortlessly.
• DTC brands know how to build authentic customer relationships by delivering consistent and honest messaging.

How Has the Direct-to-Consumer Model Transformed ecommerce?

Direct-to-consumer companies cut out the middleman to save consumers money. But this business model is much deeper than a cost-saving ploy. Direct-to-consumer trends feature niche companies that embrace a digital-first operating model, appealing to younger adult audiences with significant buying power. 

Successful DTC ecommerce brands leverage technology to enable a complete product lifecycle feedback loop. These brands maximize their value proposition by providing simple solutions to common consumer complaints. When the cost of disposable razors had reached a fever pitch with shoppers in the retail market, DTC brands, like Dollar Shave Club, offered a solution–quality razors at affordable prices, delivered to your door.

What Can the Retail Industry Learn from DTC Brands?

Consumers flocked to DTC ecommerce, and while the easy success seen with these models began with a good value, there's a little more to it. These disruptors are doing more than filling a need. They're breathing new life into stale business models by abandoning traditional retail outlets for a tech-enabled service model. 

DTC companies are capitalizing on the digital experience by focusing on user-friendly design to create a simple, effortless shopping experience. And, with quality products and genuine interactions – all things the modern consumer craves, DTC brands are going beyond marketing claims to build authenticity.

DTC Marketing Abandons Outdated Systems for Reimagined Service Models

The idea that manufacturers don't need to rely on retailers to distribute their products fuels the entire direct-to-consumer market. The retail market, ranging from mom-and-pop shops to big box stores, might be the clear winner of the one-stop-shop experience; but there's something more convenient out there–home delivery.DTC brands are keen on data-driven strategies with nimble agility. They wholeheartedly embrace the idea of riding life on the leading edge of change. For example, when Warby Parker closed its 160+ physical locations during the pandemic, its tech-friendly, digital-first strategy paid off big. The brand effortlessly slid back into its eCommerce roots with the right technology in place to meet the needs of those looking for prescription glasses from a safe distance.

Capitalizing on a Mobile-First Experience

The customer experience is the top priority in DTC marketing. These disruptive brands understand that consumers want quick, simple, endlessly personalized interactions to their specific needs – something that's hard to achieve without technology. 

According to Salesforce, over three-quarters (76%) of consumers think companies should understand their expectations and needs. And as of 2020, Gartner says that over 40% of all data analytics projects are geared toward improving the customer experience. Retail is making headway, but this is one area where DTC brands are gaining the most ground.

These companies have built their service model based on the tech-friendly culture of millennial and Gen Z consumers, investing most of their resources into building a simple and efficient customer experience. Ordering products and services with user-friendly apps and AI integrations feels almost effortless.

Focusing on User Design & the Customer Experience

We've also noticed many DTC models obsessively prioritize the customer experience. It's not a coincidence that these brands favor clean, simplistic web design with intuitive features. Sure, the business model of providing just one specialized product or service helps keep the clutter down. Still, it's more than that – these brands are hyper-focused on delivering a seamless customer journey filled with big promises, bigger follow-throughs, and effortless upkeep.

While some retailers might shy away from the scaled-down product catalogs serving as the cornerstone of DTC ecommerce, there's something to be said for offering too many options. Decision paralysis, fueled by an overabundance of choices, often leads to abandoned carts. The feature of the traditional retail business model might be what stands in the way of future success as direct-to-consumer commerce gains a foothold, eating up competition across multiple categories.

Living and Breathing Brand Authenticity Through Social Media

Another cornerstone of successful DTC ecommerce is authenticity. Consumers are more driven than ever before to spend their money with values-aligned services and providers. In the last few years, hot-button topics like sustainability, diversity and inclusion, and employee culture have made news headlines. Many retail brands have been quick to take note of how important these issues are to consumers.

DTC brands seem to already be in the know, placing authenticity high on the company values list. Given the small, curated audience and built-in need for strong loyalty, the DTC business model is rooted in building authentic relationships. These brands are very hands-on with their customer communications, weaving between an active social media presence and a strong customer relations approach. Wherever customers are in their journey, the DTC business model is there, delivering a consistent and honest message.

Retail Brands Can Adopt a Similar Approach, Meeting Consumers Where They Are

Direct-to-consumer marketing trends and business models have laid out a clear path for the retail industry to follow suit. Instead of relying on convenience or bargain prices to get foot traffic, retail brands must adapt to modern consumerism with technology and a passion for customer-driven simplicity. This change requires the courage to try new things and a willingness to engage with customers on an authentic level. Change begins with quality insights, from reimagining the customer experience to embracing a digital-first approach. Cardlytics purchase intelligence can provide meaningful insights to help retail brands harness the same level of loyalty and engagement that direct-to-consumer brands have found. Imagine a future where weekly groceries arrive on auto-delivery and smartphones become personal shoppers, finding and previewing curated collections of new retail merchandise. Cardlytics first-party data insights can help transform your retail strategy.