Direct-to-consumer brands are paving a clear path for themselves utilizing the advantages and strategies discussed in the previous DTC blog. But those paths to success also come with their share of challenges for DTC brands to navigate around.
1. An investment in data
Despite having access to a large amount of customer data, many DTC brands are struggling to achieve a single view of the customer. It’s a challenge that digital retailers as a whole are dealing with. A February 2019 survey from CommerceNext reported that 52% of digital retailers were not satisfied with their ability to unify customer data.
As a result, customer data platforms (CDPs) and personalization technology were the leading channels that DTC marketers were prioritizing in 2019, regardless of their business model, and were the focus of much of those brands’ budgets. Notably, 78% of DTC companies increased their marketing budgets from 2018 to 2019, a rate “dramatically” higher than traditional retail peers, of whom about 60% reported increasing their marketing spend.
2. Personalization and customer service
The ability to provide a personalized experience is a hallmark of a DTC strategy, but many brands are still falling short of expectations. Just 11% of U.S. internet users thought DTC brands offered more personalization or buying assistance than traditional ones, 9% thought DTCs provided better customer service, and 7% said the returns process was easier.
Another challenge is that traditional retailers are stepping up their game in areas that were mainly popularized and thought of as a differentiator for DTC brands. For example, auto-replenishment features are a common selling point for CPG brands going direct to consumer. Yet now that the giants of the industry—including Amazon and Target—are offering similar auto-replenish and subscribe-and-save programs, the features are not as exclusive to DTC brands as they once were.
3. Retail partner conflicts
Established brands got that way by building strong relationships with traditional distributors and retailers over the years. Opening up direct-to-customer channels creates news, profitable opportunities for brands, but it can also create conflicts with their traditional channel retail partners. This is especially true for brands with a legacy wholesale channel, and not those built solely on a DTC model.
Those brands with both DTC and retailer-partner options must work to keep the latter happy, while still fostering a customer-centric approach through a DTC strategy. A few ways to play well with partners—while maintaining a primary focus on building the best brand experience possible—are to include driving foot traffic to their stores or events, highlighting them as purchase options in owned digital experiences, and co-marketing.
Capitalizing on opportunities
Challenger brands can’t succeed without clearly understanding and meeting customer needs. The wide acceptance of online shopping has resulted in new ways to approach retail, and DTC brands have used the evolving landscape and customer demands to increase in popularity and success.
For these brands to continue on this trajectory, they must continue innovating in order to capitalize on opportunities. Check out our full DTC Trend Report for a look at the four ways brands can use their competitive advantages and continue changing to meet customers’ needs.