Today, countries, institutions, and businesses are facing tough choices with unprecedented degrees of uncertainty. Moreover, with the volatile shifting of market trends and changes occurring in industries due to the COVID-19 pandemic, brands need to adapt and innovate to stay afloat.
Furthermore, efforts aiming to contain the outbreak from home working to entire city lock-downs have resulted in significant shifts in our daily habits, consumption patterns, and ways of thinking. As a result, the demand for online and non-contact services massively increased — including essential items and entertainment platforms.
Hence, whether by necessity or desire, customers are shifting towards online shopping and eCommerce. Besides, people who never engaged in online shopping before the pandemic may not shop again like they used to back in 2019.
With that, many established Australian brands have moved towards direct-to-consumer (DTC) eCommerce due to its promising advantages against existing and upcoming challenges. This is leaving the lesser-known, smaller brands struggling to get the digital cut through and build their online sales channels. Small, medium, and family enterprises really need to explore DTC eCommerce as a way to improve their business bottom line (as margins are not reduced through the traditional distributors and wholesale model). Fortunately, those wanting to implement a DTC eCommerce strategy can get help and even outsource a lot of the scaling and costly aspects of the DTC approach.
D2C is a business model where companies sell directly to customers, skipping over traditional distribution and retail. It’s often thought of as brands “going direct,” and in most cases, this means cutting out retailers and wholesalers. But D2C isn’t just about selling things directly through your website or storefronts – It is a whole new modern way of connecting with and selling to consumers. The focus is not so much on selling a commodity as it is providing an experience and interacting with consumers on social media, and other digital channels. The model prides itself on direct communication as much as it does easy and convenient transactions. It eliminates the anonymity of buying from a corporate entity and replaces it with a brand persona whose values and interests are often aligned with that of the consumer.
Every D2C brand has different needs when it comes to its go-to-market strategy, but they all share one goal in common – to get products into consumers’ hands quickly and efficiently while delivering an exceptional customer experience. In many ways, D2C is a way for start-ups with small budgets to compete with big corporations.
The value D2C brands place in authenticity and community engagement resonates well with Millennials and Gen Z’ers especially, who now happen to make up the bulk of the online buying force. As a result, D2C has carved out a place for itself in online retail, and many Australian businesses are sitting up and taking notes.
Even before the pandemic, eCommerce accounts for 9% of Australia’s total retail sales — that’s equivalent to A$28.6 billion overall eCommerce sales. Statista projects that the Australian eCommerce market value will skyrocket to A$35.2 billion by 2021.
People aged between 35 to 44 dominate the online shopping landscape, covering 24% of online sales, which is the highest among all age groups. Additionally, people 65 years and older account for only about 9% of total online spending. The figures imply that even elderly consumers shop online (although engaging them is different via digital marketing). Besides, as most of them are in self-isolation or self-imposed quarantine, we expect their online shopping habits during the crisis to continue.
With almost all customer interactions happening online, it makes it easier for marketers to identify and track customer patterns and behaviors. Most viewed or frequently brought products, preferred shipping and payment methods, preferred means of communication, can all be tailored to the user and to improve offerings for future campaigns.
They also have complete control over their first-party data allowing them to build a pure, comprehensive customer profile that they can then use in look-a-like models to target larger audiences with similar behaviors and traits.
Retailers and wholesalers often demand 35-60% discounts on the RRP before selling it to consumers, but direct-to-consumer brands are able to avoid the additional costs of a middle man.
One other big advantage is that they don’t have to spend as much on above-the-line marketing. Some companies don’t even do any traditional (offline, print, OOH) advertising at all! Instead, they rely heavily on digital marketing, especially social media to reach customers across Australia and the world. This allows many of these brands to have a lower overhead at the start to grow quicker and expand reach. With a relatively small marketing budget (circa – $1000/mth), brands can establish paid and organic social media programs on Facebook and Instagram to engage with potential shoppers. Look out for live streaming as a key method to sell in 2022.
The D2C market has become increasingly saturated and expensive as more businesses recognise the need to implement a direct-to-consumer model..Newer, especially smaller brands find it difficult to enter the market and to be recognised by their target audience since their established competition is already so well-known.
The cost of customer acquisition, particularly on social media platforms like Facebook and Instagram, has also skyrocketed in recent years, which has made it hard for newer companies without well-established budgets to have a successful marketing strategy. The use of social media ‘influencers‘ is fraught with high costs and seemly random success.
Another obstacle that might arise for the small and medium brands is the overhead in packing orders and providing customer service – although at the start, it seems possible to be able to do it all as a start-up the fact is that the time taken doing these activities could be better used to develop new products, consolidate on your brand messaging and just give yourself space to build your business. It is common for the Fulfilment by BuyNatural (FBN) team, who operate a 3PL business to hear brand owners say they should have done the outsourcing earlier – the costs can be as low as $2.50 a pick, as well as their shipping costs being cheaper due to the 3PL’s bulk shipping discounts – which makes having a 3PL partner a key to your DTC strategy.
To remain successful in the long run, D2C focused enterprises need to focus more on their business fundamentals and deep knowledge of their shopper’s wants, desires, and needs. They can start by focusing on building a strong eCommerce foundation (fast website loading speeds, great user experience (UI/UX), and fast product searching capability), This will help decrease some of those customer acquisition costs and make it easier for companies to compete with established online stores. Additionally, once the order is placed, the shopper’s demand order fulfillment and always-on customer service to get updates on tracking if they need – even with a tracking online function, many shoppers just want to ask someone where their package is.
And remember what has made D2C so successful in the past. Those core values will continue to resonate with emerging consumer markets, and drive customers away from established competitors:
Life after the pandemic will be significantly different. That is the universal truth — and the eCommerce industry will dramatically benefit from it. Brands that engage directly with their consumers will have lower prices and companies greater profits. With these factors in mind, there’s no question this trend will continue into 2022. With that, eCommerce brands that adapt to the monumental shift will more likely come out as victors in the long run.
Achieving your long-term DTC business goals can be possible through a best-in-class eCommerce website supported by a Digital Agency (BuyNatural Marketing) and a 3PL (providing outsourced warehousing and fulfillment services (Fulfilment by BuyNatural). At BuyNatural, we offer a range of tools and services to assist natural, organic, and eco-friendly product companies with their DTC eCommerce needs.
Ready to bring your business to the next level? Call us at +61 2 9415 3888 or submit an inquiry and speak with us today.