Why Old Playbook of Growing D2C Channel is Dead in the New Normal?
This article was originally published on Indianretailer
With e-commerce adoption rates at an all-time high, consumers have moved to a digital-first shopping mindset. These savvy buyers demand better from the legacy brands, often choosing ones that are more conscious towards the communities and planet. They’re also willing to share their preferences and pay a premium for exclusivity, experience, and personalized engagement. These trends are reshaping the commerce landscape and giving a unique advantage to digital-native brands.
D2C definitely is experiencing the zeitgeist moment as all the dots seem to be connecting for unprecedented growth. HUL, ITC, and Marico have set up their digital stores, over 30 percent of Lakme’s Q2FY22 revenue came from its D2C brands such as Baby Dove, Simple, and Love Beauty And Planet. But the craze is only beginning to get started. On one hand, where millennials are becoming more aspirational, content-driven consumer base, Gen Z is obsessed with the community and hell-bent on taking stances. At this point, brands following the old playbook ‘paying a lot of attention to the paid facets rather than evolving with a close-to-consumer strategy’, will be missing out on efficient, long-term growth.
D2C is the Most Strategic Growth Channel for Brands and They Are Going All In
Brands have started to realize that the D2C channel is a moat they need to bet on in order to grow organically, better control their customer experiences while avoiding the marketplace and retailer bullying. Over the past year, there has been a 65 percent increase in Indian brands developing their own websites, leading to more self-shipped orders. At the same time, brand websites witnessed 88 percent order volume growth compared to 32 percent for e-commerce marketplaces. Since brands have started to spend even more on ads to increase traffic to their website, the D2C channel is becoming more expensive to maintain and grow over time. As more new brands enter a low-barrier market, further pressuring the spend levels on auction-based advertising platforms, CAC (customer acquisition cost) has gone through the roof for D2C.
Is it viable to scale a brand using this ‘Build with Shopify and Sell with Facebook' technique? The economics of performance marketing can quickly become unsustainable, especially when their performance is subject to the algorithms of the primary ad partners (Google, Facebook, and other social platforms) that can change on a dime. With Apple’s iOS14.5 updates, browser privacy changes, and Google’s phasing out of third-party cookies, many brands will struggle for profitability and growth. The easy golden days of growing a business on performance marketing seem to be over.
D2C brands’ ability to create unique products and connect with a powerful story can only insulate them from Amazon and retailers when they begin to invest in authentic ways for consumers to engage with them. Otherwise, there is no motivation for consumers to choose a brand’s website over the Prime-like convenience of the marketplaces. Brands are trying to solve a content and experience problem with a commerce-only solution.
What’s the New Playbook Then?
Convergence of Content,
Community, and Commerce
Brands need a new playbook, one that is designed to help them effectively attract, engage, delight, and retain customers across all channels. A playbook with a core moat of 3Cs - Content, Community, and Commerce. Once brands attract customers with great content, retain them with engaged communities, commerce growth happens as a by-product. Instead of appearing like yet another e-commerce site, you make content and community the core of your brand story. And you make it 10X easier for Google to rank your site, so your future customers can find you –– without spending an arm and a leg on ad spend.
Currently, brands offer a siloed and disjointed consumer experience around content, social communities, and commerce. For consumers who expect to be able to research products to help them make a decision (content), engage with other consumers to validate their decision (community), and purchase their chosen product (commerce), browsing your website, is a rather confusing and often frustrating experience.
This is even more frustrating for the brand to effectively stitch data together and manage performance. As a result, brands are often handicapped in consumer service, getting stuck in creation and maintenance cycles, operating with a fragmented view of their customers, and data siloed across the locations. This eventually lead to brands falling behind on the innovative efforts they should be investing their time in to stay ahead of the competition.
Now imagine if you could display relevant community questions and answers next to the browsing product category, add user-generated and specially created content on your product detail pages, including educational videos, customer reviews, and more. This is easier said than done, right? The separation of content, community, and commerce is a technology restriction, driven by the complexity of back-end systems and brands end up struggling to find ways to syndicate content, community, and commerce in a seamless manner whilst avoiding the integration nightmares.
Technology Continues to be an Achilles Heel for Brands
Brands Need a Modern, Agile, and Full-Stack Tech…Purpose-Built
Commerce tech platforms used by retailers and CPG companies were built over a decade ago using legacy architecture standards. Cheaper DIY platforms mostly used by SMB entrepreneurs are cookie-cutter, restrictive, and serve a limited purpose during the early stage of brands. Both these tech options are not suited to meet the scale needs of digitally-native brands. In absence of any purpose-built solutions, brands have been either settling with these ill-fitted platform options or opting to custom build their tech platforms in-house or with partners.
The global D2C market is projected to be $1.1 trillion by 2025, with US and India contributing $266 billion and $100 billion respectively. The D2C market is ripe for disruption and brands that adapt quickly to differentiate and grow with 3Cs are sure to create ripples in the post-pandemic world.