If You Are Not Studying D2C Brands, Here Are Two Big Reasons to Start Now
April 16, 2019By Pini Yakuel
Direct-to-consumer brands have transformed shopping. Consider that one-third of consumers will do at least 40 percent of their shopping with direct-to-consumer retailers in the next five years, while 81 percent will make at least one purchase from such players.
What's more, if recent tech festivals — SXSW, Mobile World Congress, and CES — are any barometer, it's clear that the buzz around direct-to-consumer isn't going anywhere. For instance, there was an entire MWC track dedicated to the convergence of digital with physical stores.
If anything, the D2C movement heading into spring is gaining even more steam. Here are two big reasons why.
Reason #1: It's Multichannel Commerce 3.0
Direct-to-consumer brands like Rent the Runway, Adore Me, Rockets of Awesome, and Super Heroics are focusing on the customer journey and offering truly personalized shopping. They use data to transform the customer experience; they have a holistic understanding of how customers shop and blur the lines between channels. It's multichannel commerce 3.0, and it's working! After all, Rent the Runway has been valued at $1 billion, and legacy brands are starting to learn tricks from such direct-to-consumer brands.
Recently, we learned Foot Locker has made an incredible revenue rebound after seeing sales plummet in recent years. Its executives pinned its success on partnering with direct-to-consumer brands like Rockets of Awesome and Super Heroics. Inspired by direct-to-consumer, Foot Locker has entered its bricks-and-clicks phase, focusing on how stores and digital need to be meshed to enrich the customer experience before, during and after the purchase.
Reason #2: Direct-to-Consumer Brands Disrupt and Succeed
What do direct-to-consumer brands do? They identify inefficiencies in the marketplace and exploit them, disrupting legacy players' ability to grow.
Houzz is a great example that hasn't received as much attention as it should have in recent years. Buying furniture causes stress for most people. It's incredibly difficult to know for certain if a couch or bed will fit in a room, and you don't want to spend hundreds or thousands of dollars buying one and hiring movers only to find out you made a bad choice. Houzz wants to make all of that tension disappear.
The online service lets consumers furnish their entire house or apartment — from living room chairs and mattresses for the bedroom to rugs and lamps — without leaving home. Its interactive features let users upload floor plans and situate furniture on the screen before making purchase decisions. Houzz's AR-powered iPad and iPhone app allow users to visualize 300,000 different products in their house or apartment. Such app users are 11 times more likely to purchase, and they engage with Houzz three times more often than other consumers.
Houzz clearly identified an inefficiency gap, a consumer pain point, and solved a big problem. It also uses email, social media and mobile effectively to meet customers' expectations. All of that is why the Palo Alto, Calif.-based startup has a $4 billion valuation.
Find Your New Game
More than anything, these first few months of 2019 have taught us that direct-to-consumer will continue to be a hot topic at industry shows while reinventing retail and marketing in general. It's all about the power of meeting and exceeding customers' expectations. It's all about multichannel 3.0 with customer-minded and data-enriched services.
All told, direct-to-consumer brands like Rent the Runway, Adore Me, Houzz, Rockets of Awesome, and Super Heroics should inspire legacy retailers and entrepreneurs alike about how to win the future of retail. Just look at Foot Locker: the 45-year-old company became inspired by direct-to-consumer partners and found a whole new ballgame.
Pini Yakuel is CEO of Optimove.
The views and opinions expressed in Marketing Maestros are solely those of the contributor and do not necessarily reflect the official position of the ANA or imply endorsement from the ANA.