Why Consumer Goods Brands need D2C Model in 2024 and beyond?

It is the age of customers- they lead the way, decide when and how to interact with retail brands and leave some to match their expectations. Now, personalization is not a luxury they ask for, it has rather become a pre-requisite online shopping as per consumer preferences.

Given how things are changing rapidly, there isn't a single day that doesn't witness a new turn in the world of digital commerce. The overwhelming customer expectations, changing consumer behavior and bulging new entrants are forcing B2B and B2C brands to consider new methods of fulfilling customer expectations. It is also blurring the concept of brand loyalty, for all the world cares about is CPG brands' capability to meet consumer demand.

Around 84% of customers agree that the experience they get with brands is as important as products and services. So, traditional brands as well as digital natives, becoming more customer-centric than ever by effectively utilizing customer data in their marketing strategy.

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Shopping Trends in Consumer Goods Industry

The advent of pandemic coupled with digital transformation is a historic event for the consumer goods industry. Retail stores are disappearing at an alarming rate and there seems to be no road back home. The online shopping landscape is expanding more than ever. It has taken over traditional shopping to a level that shoppers don't want to go back to stores now.

Consumer Goods brands across the globe are trying to adapt to the changing customer expectations. They are giving up on traditional retail practices and learning marketing from Digital Native Brands to stay up in the race.

D2C companies such as Away, Bonobos, Casper, Allbirds, Warby Parker, Dollar Shave Club, better known as Digital Native Brands (DNBs) are inspiring legacy and other brands to adopt Direct-to-Consumer Model (DTC). When we talk about D2C Businesses, the success of these consumer goods brands cannot be overlooked. In the coming sections, we will see how these D2C startups have acquired large market shares in such a short time span, taking away customers from legacy brands.

Why Consumer Goods Brands are adopting D2C Model?

Today's customer-centric and data-driven consumer market requires businesses to fulfill customer expectations and add value to every interaction with customers. As customers expect CPG brands to understand them and add value to every interaction, it becomes really important to know your customers well. And for that, consumer brands need to align with Ecommerce trends such as social media marketing, influencer marketing. A distinguishing trait of D2C brands is their passion to predict consumer behavior and this is exactly what ambitious CPG brands need to establish a two-way relationship with their customers.

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Here are some Consumer D2C brands and their marketing strategy:

Warby Parker: Founded in 2010, Warby Parker is an eyewear brand headquartered in New York. Its official name is JAND Inc. and its trade name is Warby Parker. The brand mostly sells its eyewear online but has retail stores at multiple locations across Canada and New York.

Why D2C Strategy: Warby Parker sourced a large chunk of their eyewear from Luxottica which has a near-monopoly over the industry. To sell their eyewear range, retailers needed to pay the franchise price, which inflated the product price.

As a solution, Warby Parker started making its own frame, cutting down the licensing fee which was passed to the consumers. Changes in Warby Parker now:

• Direct selling through a digital storefront
• 100% control over customer experience
• Easy try-on facilities
• Hassle-free returns within 30 days
• Instagrammable packaging

Casper Sleep Inc: Casper is a Direct-to-consumer company that sells sleep products online. Launched in 2014, the company is headquartered in New York and has multiple stores across New York and Chicago.

Why D2C Strategy: Realizing the hefty costs involved in the supply chain of mattresses and the lack of personalized experience, Casper took the mattress buying experience to a better level. They utilize customer data to get feedback and enhance D2C relationships with their clients to keep up the brand affinity:

With complete control over customer experience, buyers at Casper can experience:

• Personalized shopping experience
• Easy to install mattresses in the bedroom
• Home delivery of mattresses
• Mattresses compressed to the size of a small refrigerator

Allbirds: Launched in 2016, Allbirds is a New Zealand-American company founded by the vice-captain of the New Zealand Football team. They are pioneers of making shoes from eco-friendly materials which are comfortable to wear in addition to being stylish.

Why D2C Strategy: The competition in the shoe industry is immense and being successful among traditional retailers is a herculean task. By adopting a direct-to-consumer model, Allbirds decided to cut down on manufacturing and logistics expenses to make the shoe more marketable. They do not have a third-party wholesale setup and thus control their demand and supply. Top benefits that Allbirds experience with their D2C model include:

• Minimum manufacturing and distribution cost
• Personalization because of selling directly from their website
• Products resonate with their audience's needs
• Comfort along with style and affordability

Benefits of D2C Business

• Clear understanding of customer needs: Since D2C brands are mostly digital, they understand omnichannel customer behavior and curate tailored user experience. D2C brands succeed because of their understanding of millennials and their shopping patterns.
• Elimination of middlemen: D2C brands do not have middlemen and mostly operate through an online platform. Their shorter supply chain makes shopping and delivery experience decentralized, improving the affordability of products.
• More customer data: Because most D2C brands are born in the cloud, they get valuable customer data such as email addresses, personal information, etc. which can be managed with a Customer Data Platform. It helps them get more information about their customers for a personalized shopping experience.
• Effective customer acquisition: Because of being predominantly digital, D2C brands have the expertise of capturing customers through an omnichannel approach. They know when to send the right message to the right people and how.

Benefits of Direct-to-Consumer business model

• Data-driven decisions
• More Margins
• Customer centricity
• Production efficiency
• Enhanced customer safety
• Better business reputation

Future of Direct-to-Consumer

Direct-to-Consumer brings value to customers and enables businesses to control the production and distribution with the least resources. DTC brands are passionate about customers and with customers' focusing more on experience, DTC brands have a longer likelihood.

With the widespread digital transformation and global pandemic, online sale has taken a different route. There are more digital stores than ever now and every day there's a new entrant in the industry.

Marketers are and will be in the hot seat till a complete digital transformation takes place, hence DTC marketers need to swear by customer-centric strategies. They need to keep delivering omnichannel personalization for a seamless customer experience across channels, devices, and platforms.

To know more about how a D2C approach can boost the relevance of your business, you can drop us a 'Hi' at Altudo in partnership with Sitecore and we can get you in touch with our digital commerce experts to answer your queries.