Imagine: It’s the late aughts (around 2009) and we are enduring the long lines and impersonalized retail experiences of the past. Then fast forward a few short years and everything changes. New brands emerge with clean logos; they feel like they were made just for us and then Direct-to-Consumer (DTC) busts on the scene. While there is nothing new about brands selling directly to the consumer (as opposed to selling through an intermediary, looking at you big box retailer), brands like American Apparel primarily leveraged their traditional physical locations to reach their customers. The meteoric rise of digitally native DTC brands truly came about through their ability to leverage technology to provide their customers with a simple, personalize experience. This is where their innovation has thrived.
A 2018 poll found that nearly 81 percent of consumers planned to shop at DTC brands within the next five years. In less than 10 years, DTC has gone from relatively unknown to a full-on disruptor with brands like the wooly shoe brand, Allbirds, racking up over $100M in revenue over its first two years in business. This success hasn’t been on accident. A hyper-focus on product categories, the elevation of the customer experience by leveraging data, and a fanatical focus on the customer has given these brands the ability to interact with the customer wherever they are throughout their engagement lifecycle (social, web, mobile, etc.).
Digitally native DTC brands have changed the way we interact with brands in our daily lives. With all of this said, what happens when brands realize that the digital experience can only take them so far?
Evolving the channel, transforming the experience:
In the attempt to meet the demands of today’s omnichannel consumer, the DTC brands that began by ruling our screens are now coming to our streets. But why? Why make a move that is seemingly backward in terms of innovation, channel, and scale? It’s all about the experience. According to a study from a top national research firm, 71 percent of surveyed shoppers spent $50 or more when shopping in-store. This compares with only 54 percent of respondents spending more than $50 when shopping online. This presents a prime opportunity for DTC brands to scale revenue and increase brand loyalty with their newly pioneered storefronts. This can come in a few forms:
- Focus on product experience:
- Casper took the stagnant mattress industry by storm by promoting their 100-day at-home trial, delivering a bed-in-a-box and leveraging social media to drive viral mattress unboxing videos. But with their new brick-and-mortar strategy, they are taking a data-driven, test and learn approach to establishing their footprint with plans to open 200 stores across the country within the next three years. This includes leveraging their current “nap-up” locations, The Dreamery, where weary customers can book a quick snooze, on a Casper mattress of course, in a completely branded atmosphere. What better way to tap into an emotional connection with your customers than to provide a great experience tapping into their most basic needs, sleep?
- Connect the digital experience:
- Research has shown that 87 percent of consumers want a consistent experience across their retail experiences. Bonobos, the DTC chino giants, has taken this literally. With the expansion of their Guide Shops (small spaces where guys can try, but not buy, on Bonobos’ wide selection of gear), Bonobos is focusing on connecting the ease of their digital shopping experience with the “try and feel” experience only available in-store. And, it doesn’t hurt when they have the big data backing of Walmart to paint the full picture of online/offline experience.
- Interact face-to-face
- The decline of legacy retailers is opening up millions of square feet of retail space at good prices, something that DTC brands are jumping all over. A key engagement challenge digitally native brands have had to overcome is the fact that they primarily interact with their customers digitally, but that’s changing. Walking through your local suburban mall you may notice new brands popping up that you haven’t seen before, like shorts purveyor Chubbies who leverage their 10+ retail locations to not only sling 5-inch shorts, but to entertain and interact with customers, with some locations offering functioning tiki bars. The ability for DTC brands to reach beyond their typical engagement channel is providing access to entirely new ways to interact with their customers.
Considerations for brands looking to transform their customer experience: Data is key
- Test before you dive in
There are emerging services to help facilitate this trend like Uppercase, a Software as a Service (SaaS) firm that labels itself as, “providing tech-enabled flexible retail stores for brands to launch, measure, and grow their retail presence” that helps emerging DTC brands find retail space to test their concept with pop-up shops before they fully dive into physical retail. Brands can also leverage their e-commerce data and other first-party data sources (like loyalty program member data) to identify locations that provide the greatest opportunity to engage with customers who have the most to gain from their physical presence. (Note: this may not always be the customers who buy the most from you, but those who have the most opportunity to buy more from you).
- Set up your customer engagement infrastructure to scale the experience
To create a seamless online to offline experience, systems need to work together. This includes utilizing digital purchase data to inform the in-store experience to make it a seamless channel experience, like the aforementioned, Bonobos. This also includes establishing methods to leverage data to personalize the traditionally impersonalized experience of traditional retail, including connecting with customers on an emotional level to understand what motivates them in order to establish an elevated person-to-person interaction. Products like Kobie’s Emotional Loyalty Scoring (ELS™) tool can help capture the motivations that influence your customer’s advocacy and buying behaviors. Large traditional retailers who may have a robust technology infrastructure in place are primed to leverage their resources as they start increasingly adopting DTC-esque tactics. Nike’s Consumer Direct Offense initiative is a great example of how a retailer has shifted its thinking to leverage big data and varied engagement channels (online, in-app, etc.), and tie them all into an evolved in-store and online experience that feels personalized.
We will undoubtedly see these trends continue as physical retail continues to transform and the elevated customer experience that DTC brands are driving becomes the new norm. Brands that are able to optimize their physical footprint and leverage their digital experience as an extension of that footprint (and vice versa) will hold the key to growth in the changing retail landscape. This begs the question, “what’s next?”
We’re ready to help with your DTC brand’s loyalty transformation. Read our solutions page to see how we can help you drive meaningful loyalty.