News of direct-to-consumer (D2C) prescription glasses retailer Warby Parker and its IPO in late September put all eyes on the D2C pioneer’s business model. Warby reached a $6 billion valuation, 50 percent higher than its valuation in 2020, with much fanfare and anticipation for similar IPOs like that of D2C sneaker retailer Allbirds.
Selling directly to people online rose significantly through the pandemic, with 78 percent of consumers valuing convenience even more now than before Covid-19, according to Salesforce’s State of the Connected Consumer report.
The future looks bright for the Warby Parkers of the world that are built on the consumer direct selling model. What does this mean for enterprise retailers, heavily reliant upon global distribution networks?
Let’s first explore why D2C businesses have advantages over incumbent companies. The easiest way to explain it is that they operate with higher margins and lower prices because they’ve eliminated supply chain intermediaries. Yet there’s more to it than the fact that they lower prices for high value items like prescription glasses, mattresses, and luggage.
Know Thy Customer
What draws the consumer to a D2C brand over traditional businesses? Two words: customer closeness. That is, the ability for organizations to feel directly connected to the users of their products or services — understanding their motivations, lifestyles, opinions, and attitudes.
D2C businesses are able to get personalization right with customized experiences built on customers awareness, closeness and empathy. They don’t rest on their laurels and depend on brand awareness. Instead, they keep the pulse of the consumer through feedback at every stage of the customer lifecycle, creating a strong CX that can strengthen brand loyalty over time.
Strong CX is increasingly critical in retaining a loyal consumer base, particularly in times like these when consumers are pointing the finger at retailers amid supply chain disruptions. Although incumbent businesses are gaining steam on D2Cs in terms of social media word-of-mouth marketing, purchases made through D2C companies are on the rise.
In a U.S.-based survey earlier this year, 69 percent of American consumers purchased at least one D2C brand in 2020, and 79 percent of those familiar with D2C brands said they plan to increase their D2C purchases in 2021, Diffusion’s2021 Direct-to-Consumer Purchase Intent Index.
D2C Best Practices
Here are five ways that traditional companies can borrow the best business practices of D2C brands:
1. Engage with customers directly: In addition to providing strong lines of communication through customer support, companies must continue to communicate through follow-up emails, post-purchase surveys and customized promotions to provide a steady stream of feedback.
2. Track both quantitative and qualitative data: In the D2C space, the only thing that separates consumers from products is a website that tracks a consumer’s every purchasing choice. Offering even more ways for prospective customers to interact with a product pre-purchase can give a business new avenues for tracking customer information and understanding their preferences.
When they first started the business, Warby Parker did something that no other online glasses retailer was doing at the time. They offered a risk-free option for prospective customers to try glasses on at home and send the frames back before making a purchasing choice. This popular feature gave the company even more information on customer preferences.
3. Become more value-centric: Aligning your brand with the values that consumers hold dear isn’t just a nice-to-have, it’s an imperative. Also from the Salesforce State of the Connected Consumer report, 62 percent of customers claim to have stopped buying from companies whose values didn’t align with theirs.
“Consumers have raised the bar and are looking to companies to advance progress on important issues within and outside of their operational footprint,” Alison DaSilva, managing director, purpose and impact of Zeno Group told Forbes.
4. Close the empathy gap: Again, according to the Salesforce report, 68 percent of customers expect brands to demonstrate empathy while 37 percent of customers say brands generally demonstrate empathy.
Consumer insights must be shared across an organization at all levels to close this empathy gap. Teams on all levels must have the ability to speak to their consumers directly rather than keeping those conversations in customer support or marketing.
The only real way to better understand consumers and to gain empathy is to walk in their shoes. New tech innovations for online qualitative researchers are being developed each day to help businesses do this. Utilizing mobile shop alongs to understand mobile UX pain points is just one way that competitive enterprise brands are getting closer to consumers to better understand their experiences.
5. Re-evaluate your offering to solve consumer problems: In the boom and bust environment of D2C brands, the companies that have staying power understand customers the best and offer them a product or service to solve their problems in a way that no other brand can. Speaking directly with people that use products just makes businesses more proactive, agile, and hyper responsive to changes in consumer needs.
We all know that shopping behavior has changed; there are less and less brick-and-mortar stores, and online commerce is the future. In times like these, where we’ve seen an unprecedented digital transformation of the marketplace, it’s imperative that organizations use every tool at their disposal to have a window into consumers’ perspectives, opinions and attitudes.
Ultimately, consumer closeness is the key to thriving in this environment. Understanding people’s lifestyles and how they’re evolving only leads to better customer experiences and more empathy. To truly stay ahead, businesses need to understand consumers to know where they’ll go next.