There was a time when the only way to get a Dell computer was to go directly to the company. The PC giant long ago decided to sell through partners and retail channels too, but today some established brands are opting to experiment with their own direct-to-consumer (DTC) models.
They have good reason. According to Nielsen, 90 percent of consumers would rather buy directly from a brand if they could. The Dollar Shave Club is an excellent example of such consumer behavior. Nearly five years after its inception, not only is it frequently cited as a success story, but also as a indication of a significant shift in the consumer products industry as more manufacturers consider bypassing traditional retailers to sell directly to consumers.
The DTC model offers several advantages. It allows brands to gain data and deeper insight into the behaviour of customers, greater control over marketing and ultimately, greater profit margin. Selling directly to consumers could reduce costs and enable brands to invest in direct marketing that builds loyalty.
As the following examples show, big brands from established industries are embracing DTC—and getting promising results.
Just do it….directly
Last year, Nike underwent a fundamental shift to focus primarily on serving athletes on a one-to-one basis by leveraging mobile technology. Its DTC approach is based on the premise that consumers will increasingly use their phones to purchase shoes and apparel and that it must lead in digital to maintain its market share.
The Nike+ app is example of how DTC is more than just about selling product directly to the consumer, but expanding the relationship around broader interest and lifestyle. In the case of Nike, it’s about making athletes better while extending and deepening its relationship with customers. The Nike+ app not only gives the athlete a dashboard of useful data, but Nike as well.
Nike’s rival, Under Armour, is considered the “definition of omnichannel,” which includes an e-commerce site and mobile retailing platform. But its DTC model also includes bricks and mortar in the form of its own retail stores.
While its e-commerce efforts will help grow its business internationally, particularly China, Under Armour’s physical stores play a critical role in delivering “breathtaking and exciting consumer experience” that helps apparel maker not only sell functional products, but stylish ones as well, based on the insight it gathers through direct relationships with consumers. Owning its stores means it has more control over the in-store experience (although it continues to have presence within other physical retailers).
Nerds are also serious about their chosen brands. In the past few years, pop culture toy manufacturer Funko has rapidly permeated science fiction and comic book fandoms, among others, through its own omni-channel approach. This not only includes a presence through bricks and mortars retailers, online stores and vendors that focus on the convention circuit, but also a DTC model that’s digital.
Funko has also built a channel for limited editions through an online subscription program. For example, it has leveraged its Star Wars license to sell its exclusive Smuggler’s Bounty, a bi-monthly delivering of Pops and other collectibles from a galaxy far, far away that can’t be found through other channels. By building an air of cachet around specific products, Funko can engage directly with its customers and cement affinity with nerds worldwide to understand what future pop culture toys they would like to see.
Never run out
Proctor & Gamble’s high-profile brands are ubiquitous in retail stories, but that hasn’t stopped one of the most established consumer packaged goods (CPG) companies from experimenting with DTC. Last year it launched a subscription service for its Tide brand that allows consumers to get regular deliveries of Tide Pods laundry detergent.
Not only is P&G’s DTC approach digital, but it’s also forward thinking as it anticipates the role the Internet of Things (IoT) might play to make the lives of consumers more convenient by anticipating their household needs. In the shorter term, it provides P&G with a method of collecting more data about its customers, and demonstrates how CPG companies are looking to reduce their dependence on physical shelf space.
It’s not the only CPG company to the DTC route; Bear Naked granola, launched its first e-commerce site last year to allow customers to create their own granola mix and buy directly from the site. It’s part of a broader trend towards CPG strengthening their brand by taking the DTC route.
Take advantage of the DTC opportunity
For many brands, DTC is a new frontier. Although it does provide more control and eliminates costs, the onus is solely on the brand to maintain strong customer relationships and effectively leverage customer-validated insight to improve products and marketing campaigns.
Check out this page to learn how companies can take advantage of the direct-to-consumer opportunity.