Direct to Consumer: 3 Lessons to Get you Started
Product producers have been selling their wares directly to the end-user for as long as buying and selling have been a thing. We forget it's only been over the last 100 years or so that retailers have become the aggregators, gatekeepers, and curators of goods, wooing us with low prices and convenience. Then came the internet, allowing brands to usurp the retailers again. The main appeal of a direct to consumer business is that it can offer better prices: there is no middle man; better choice: it can carry more varieties, it can personalize; and more convenience: no need to get in the car, it will deliver it to the door - want it tomorrow? No problem.
Businesses such as Casper, Graze, and Bloom & Wild have all been built on the promise of a better product at a lower price that can be accessed and consumed in a more informed and enjoyable way. What’s more, it’s true. These direct-to-consumer innovations have lived up to their promise by being better than what had come before. Yet, there is still plenty of cynicism around DTC, with critics citing lack of profits, low revenues, and customer ambivalence as the main reasons why DTC brands are not worth getting excited about. So what is it? Can DTC offer consumers a better deal, or are we all victims of the hype cycle, meaning we will soon be back in the megastore on a Saturday morning to find what we need?
It's still early days
The first thing to say is that DTC is still a recent development, which means there will be plenty of uncertainty and instability for the pioneering companies operating in this space. With newness also comes scepticism and cynicism from the old guard, suspicious of change. The turbulent environment makes it easy to cherry-pick brands that fail to deliver on their promises and then hold them up as proof that DTC is not the future. However, those naysayers rarely consider the counterexample, where a DTC business has succeeded in upending the industry norms, gaining significant market share, and legions of happy customers. The big difference between the winners and the losers is understanding the framework that enables success.
The first thing for any successful DTC business is to make sure they offer innovation, to make their customers grateful and excited. Oliver Bridge from Cornerstone told me that for a DTC brand to triumph, it must be 10X better than what is already there. This sort of step-change requires significant improvements in quality, cost, and service.
Graze showed that you could make food personal, offering a huge number of healthy snack choices through the post. In addition, they used the vast amounts of data they received from their customers to constantly refine, redevelop and introduce new products, making them better and better each time. They then went on to take this process into retail, reducing the standard cycle times of new products appearing on the shelf down, from months or years to just weeks.
When Aron Gelbard founded Bloom & Wild, he was obsessed with transforming the once frustrating process of buying someone a bunch of flowers into an act that made everyone feel good. Before he did this, the cost, quality, choice, and process of buying flowers were likely to leave either the giver or recipient a bit flat. He achieved success by understanding where and how he could disrupt the florist supply chain to develop his Letterbox Flowers concept. Letterbox flowers may seem more obvious now, but at the time, it was revolutionary.
When I met Julian Hearn, the founder of Huel, he told me that when he developed his powdered food product, it was for people like him. He believed, "I am probably a bit weird, but not that weird, so there must be other people out there like me, looking for similar products". He initially built his business around serving only a tiny segment of the market, reducing his risk and allowing him the time to develop his products and brand. His success today would not have been possible without his modest launch mindset.
What all these examples have in common are brands that are committed to providing a better way to serve their customers and solve big problems. Not only do they enter the market with something new, they never stop making that product better. DTC allows for rapid iteration and innovation, meaning they can stay ahead of the brands that have come before, and the brands following in their footsteps.
The power of a personal connection
The second thing all the best DTC brands do is to use the fact they are serving their end customers directly to forge a personal relationship with them. These relationships are based on shared values, desires, dreams, and fears. The beauty of a DTC brand is that it is not diluted by the reliance on other businesses to serve their customers. In the traditional retail model, between the brand and the end customer are wholesalers and retailers. Wholesalers and retailers serve an essential purpose; however, they are separate businesses with their own cultures and agendas, which are almost certainly different from the brands they serve. When a consumer picks a product off a shelf in a superstore, they only get a limited view into who the brand is and what they stand for. When they buy direct, they see so much more of the business they are buying from. Beyond the physical products, they see how much they care and what they stand for. Even better, not only does a brand have the ability to connect with its customers, the internet enables like-minded customers to connect with each other by creating communities around the products.
TRIBE makes snack bars, serving a community of fitness fans, which has been built around the regular athletic events it hosts. Sugru's community of DIY fanatics, makers, repairers, and tinkerers do all the marketing the brand ever needs by sharing their inventions and innovations using the products on the Sugru website and social media pages. Heights knew they would need to build a community before launching their brain health supplements. So they spent a year writing newsletters, assembling experts, and hosting events and podcasts before they launched their products to sell to the community they had built. Furthermore, not only did that prebuilt community buy the products, but they also went on to invest in the company via a record-breaking crowdfunding campaign.
Helping, not selling
The last thing the best DTC companies do is make sure they do not have to solely rely on digital marketing to acquire new customers. Over the past five years or more, the cost of adverts on platforms like Facebook and Instagram has gone from a cheap and effective way to find new customers to an expensive and unreliable one. The main problem brands face is increased cost driven by competition (even the biggest multinationals are now diverting their marketing investments away from traditional media like TV onto the net). And then, even worse, changes in the way a user can be tracked on platforms like Facebook has made it harder for brands to serve the right information to the right customers. As a result, digital marketing can now be expensive and inefficient.
As it has become more pricey to find and introduce yourself to prospective customers, brands have had to find new ways to make a connection. The best way is to generate helpful content which is sought out rather than pushed into feeds. Companies like the paint brand Lick invest heavily into providing interior directing advice and inspiration; if you want to know how to best paint a wall and what will look great, you will likely end up on the Lick website or social pages. While you are there, they make it easy for you to buy some paint.
Hiut denim sells high-quality jeans; however, most of its marketing does not mention denim. Instead, it talks about other makers and mavericks who are also doing something unique and valuable. They know their customers are not only interested in jeans, so they give them a steady stream of other topics to inspire and inform. They do this as they know that, as long as they can keep their customers engaged when they do want a pair of jeans, buying Hiut will be front of mind.
Allplants provides the information needed to convince their customers that a flexitarian approach is better for the planet and their health; they do this in a way that is accessible and engaging but non-judgemental or preachy. These efforts mean when topics like the climate crisis pop up over dinner, allplants becomes part of that conversation.
Competition has made DTC hard, but so long as you can innovate, serve your customers something genuinely useful, and make sure they have a personal connection to your brand and mission, you will be able to convince even the most cynical person that you are doing something worthwhile.