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Direct-to-Consumer: three critical inflection points

  • 16 June 2020 / By Jacob Gascoine-Becker
  • Retail Advise

The growth of UK ecommerce sales had been slowing, with last year (6.7%) at an all-time low. But if it had felt like death by a thousand cuts for some brands over the past decade, Covid-19 dealt a hammer blow to physical retail and provided a shot in the arm to ecommerce, which will undoubtedly accelerate once again this year.

Digitally-mature, multi-channel retailers have been best placed to minimise exposure to (or sometimes benefit from) the dystopian shift over the past three months. While commentators (us at Kin + Carta, included) debate the exact shape of a ‘new normal’, at the very least Covid-19 has brought into focus the criticality of business agility in the face of increasing macro-environmental instability.

For many brands and manufacturers, the shutdown of physical retail and the de-prioritisation of fulfilment of non-essential products by retail partners has meant an acceleration of plans to launch a D2C offer. But is this part of a wider strategy or simply jumping on a bandwagon without a clear direction?   

The need to reimagine and redeploy, fast, is clear, but this doesn’t mean the fundamentals of planning are any less relevant. Our observations over years of launching and accelerating D2C sales for our clients have highlighted both pitfalls and successes.

Woman scanning product in a warehouse

There are three critical inflection points in D2C planning:

1. Validating the opportunity

It’s fair to say some lockdown launches have been more compelling than others. Ultimately D2C success depends on your consumers’ desire to forge a direct relationship with your brand or your ability to reduce friction relative to alternative distribution channels. It remains to be seen if subscription baked beans will stand the test of time. Not every product or service is a smart choice for D2C, but the good news is there’s an easy way to be sure – just ask your end-consumer.

2. Choosing the right operating model

Customer-centric D2C propositions and legacy wholesale operating models rarely go hand in hand. Just compare Mighty Small with Brakes Food Shop. Both have launched D2C grocery ecommerce sites during lockdown. The former is a fully-transactional ecommerce site launched by a community of SME food brands offering nationwide delivery in 2-4 days. The latter, launched by a subsidiary of the world’s largest foodservice company, requires orders to be placed over the phone and limited regional delivery. 

While fully-integrated operations may ultimately yield the highest margins and the greatest control at scale, hiring in-house and repurposing existing resources can be slow to reveal what works initially. There are a range of alternative models worth considering (fully-outsourced, marketplace partnerships, in-house startups, to name a few) all with different strengths and weaknesses. Aligning your D2C model with your objectives and customer proposition is critical to speed-to-value.

3. Achieving marketing alignment

A key advantage established manufacturers have over startups when launching D2C is that many will already have sophisticated consumer marketing campaigns and established awareness. However, brands launching D2C for the first time frequently align campaigns to distribution channels, planning for each in silos. A joined-up, omni-channel, approach to marketing is key to maximising ROI and creating a consistent consumer experience. Whether in-house or outsourced, ‘traditional’ or digital, getting marketing teams on the same page from the outset is critical.