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The Phenomenal Ascent of Direct-to-Consumer Brands

How the influx of challenger brands is changing the face of the retail industry

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Tomer Tagrin
Tomer Tagrin
CEO of Yotpo

Tomer Tagrin is the Co-founder and CEO of Yotpo, the leading commerce marketing cloud. Yotpo’s suite of integrated solutions for customer reviews, visual marketing, loyalty programs, and referrals helps commerce companies accelerate growth by enabling advocacy and maximizing customer lifetime value. Yotpo proudly serves thousands of brands including 1-800-Flowers, Away Travel, Glossier, and MVMT.

The Future of Commerce is Brand Commerce

You can buy practically anything you want on Amazon. The price will be competitive and the shipping will be quick. By nailing these 3 essentials: supply, cost, and delivery, Amazon has managed to corner the eCommerce market, and they’re only getting bigger: The company’s valuation recently hit $1 trillion.

But for all its growth, Amazon is missing a key ingredient that has sparked the rise of direct-to-consumer forces like Chubbies, Glossier, Harry’s, and Thinx: Even though it has a monumental retail brand, Amazon-branded products are perceived as cost-effective commodities. Buying face wash from Amazon may be cheap and easy, but you won’t get the same emotional return that you will getting the latest cleanser from Glossier. The connection and relationship with the brand isn’t there, meaning emotional loyalty is nonexistent.

With companies like Shopify making it easier than ever to sell online, direct-to-consumer brands find themselves in the unique position of being able to control every aspect of their experience: from marketing to production and fulfillment. This results in highly individual brands that connect with consumers throughout the entire buyer journey for reasons far deeper and more complex than utilitarian needs.

If you take a successful direct-to-consumer brand like Chubbies for example, everything from their product to their microcopy, and even their brick-and-mortar presence is designed to appeal to their specific “college guy” audience. They keep a pulse on customer feedback and make decisions that reflect their audience’s needs and wants, creating a strong bond with them. Fostering this kind of direct relationship is near impossible when selling via third-party retailers or online marketplaces.

As the chasm between marketplaces and direct brands grows, the future of commerce is being split between two paths: Giants like Amazon and Walmart and brands. In the new era of eCommerce, you can either risk commoditization or build a brand that survives. For the latter, brand commerce is the only way.

Shifting Consumer Expectations

The growth strategy for direct-to-consumer brands relies on two things: decreasing customer acquisition costs and increasing customer lifetime value. As social and search become more crowded with ads, decreasing CAC is becoming tougher and tougher. To fight this trend, D2C brands are exploring alternate acquisition channels, but more than anything, they’re throwing their weight behind strategies to increase CLTV.

Direct-to-consumer brands have an advantage over behemoth retailers when it comes to inspiring the diehard loyalty that moves the CLTV needle. Because they control their supply chain, these brands can quickly make changes to reflect customer preferences and requests. This kind of authentic connection can’t be replicated on Amazon.

As more and more direct-to-consumer brands enter the fray, today’s consumers are coming to expect these specialized brand experiences when purchasing anything other than utility products.

D2C brands raised the bar for customer experience industry-wide. Consumers no longer feel connected to brands that don’t “know” them: they anticipate a return visit to a website that feels different from an initial visit, a device-specific online experience, engaging content on-site that seeks to bring them into a community and lifestyle, rather than just sell them a pair of pants.

Department stores are being left in the dust because they can’t offer these one-to-one experiences that consumers now crave and need in order to fall in love with a brand. And without that personal attention, Amazon becomes the obvious choice.

How Brands Can Compete

As you’ll read more about in the coming lessons, the key opportunities for brand growth rest on building an emotional connection with customers through experience. This is where branding intangibles come into play: everything from your mission to the causes you support, your service, your pricing philosophy, and your holistic user journey are now paramount to success.

This is especially true for brands selling utility products, like soap or batteries. There’s a big difference between buying organic soap with proceeds going to support endangered bees than clicking “add to cart” on a standard soap bar on Amazon.

In many ways, even the smallest direct-to-consumer brands are in the ultimate position to compete in this new eCommerce reality. By cultivating an early group of customers and treating them to the ultimate purchase experience with everything from impeccable UX on-site to content about your brand mission at every touchpoint, these brands can foster a community of evangelists.

Once your most loyal brand fans start sharing their experiences — whether that’s on social, by word-of-mouth, or in reviews and photos — growth will happen organically. Not only that, shoppers who come in through referrals and WOM are more likely to spend as they trust the recommendations that brought them to your site, and they’re more likely to become repeat purchasers.

Conclusion

  • Choose a path – Over the next few years, commerce will split into two paths: giant retailers and specialized brands. To survive as an independent business, you’ll need to cultivate a rock-solid brand.
  • Loyalty is everything – With rising customer acquisition costs, you need to make sure the shoppers you do acquire come back again and again.
  • Perfect the intangibles – Invest in experience and emotional connection to boost customer loyalty and lifetime value.
  • Foster a community – Brand fans will always be your best source of relevant traffic. Make sure your customers have great experiences to share.

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