Written by: Abdu Alhadithi, Executive Contributor
Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.
The rise of digitally native brands has disrupted the traditional B2C landscape, posing significant challenges for established companies that cater to frequently purchased products. This confluence of factors, including waning market dominance, soaring customer acquisition costs, and elusive consumer loyalty, has prompted many traditional B2C firms to explore direct-to-consumer (DTC) strategies as a means of regaining control and establishing a direct connection with their customers. However, despite these efforts, many DTC initiatives have fallen short of expectations, leading to limited success or even outright failure.
The pitfalls of traditional DTC approaches
The shortcomings of traditional B2C firms' DTC endeavours can be attributed to several fundamental mistakes:
DTC as an additional online sales channel: Traditional B2C companies often perceive DTC as a mere extension of their existing retail channels, solely focused on incremental revenue generation. This narrow perspective fails to recognise the broader potential of DTC, which lies in building deeper customer relationships, fostering brand loyalty, and gaining valuable insights into consumer behaviour.
DTC as a good-to-have project: DTC is often relegated to a secondary status within traditional B2C organisations, treated as an experiment rather than a core strategic initiative. This lack of commitment and investment leads to half-hearted efforts that lack the resources and attention required for success.
Legacy B2C Mindsets and Unclear Role of DTC: Traditional B2C companies struggle to adapt their legacy mindsets and organisational structures to the demands of DTC, or understanding the role that DTC plays in their commerce ecosystem. They lack the necessary talent and expertise to effectively engage with consumers directly and build personalised experiences, often relying on outdated marketing practices and failing to grasp the nuances of digital customer engagement.
Overcoming DTC challenges through a problem-based approach
To overcome these challenges and achieve sustainable success in the DTC realm, traditional B2C firms need to adopt a problem-based approach that focuses on addressing specific market challenges:
Over-reliance on Retailers: Many brands face an over-reliance on retailers, who often dictate pricing, promotions, messaging, and brand positioning. In such cases, DTC can offer an effective brand destination where the brand itself controls these elements, allowing for a consistent and authentic brand experience. In addition, DTC can help brands harness customer and product data to inform NPD strategies, as well as decisions on product placement and pricing, reducing the risk of price competition which often reduces sales margins.
Struggling to Enter Retail in New Markets: New brands often struggle to gain retail entry without first proving market appetite. While marketplaces and distributors can provide an initial sales channel, they may lead to heavy reliance on discounting and hinder brand building efforts. A DTC-first market-entry may seem expensive initially, however the efficiency it offers in the long-term growth journey of the brand will more than outweigh the initial investments. Brands can use DTC insights to ascertain which retailers they need to enter, as well as informing decisions on product placement, as well as stock quantities by store-branch. Initiatives like this can have a huge impact on improving margins by reducing risks of over-stocks and out-of-stocks.
The broader benefits of a problem-based DTC approach
Adopting a problem-based approach to DTC yields several broader benefits:
Unlocking First-Party Customer Data: DTC provides direct access to customer data, enabling brands to gain valuable insights into consumer preferences, purchasing behaviours, and demographic trends.
Enhancing Customer Loyalty: DTC opportunities allow brands to establish direct relationships with customers, fostering loyalty through personalised experiences, exclusive offers, and targeted communication.
Improving Retail Partnerships: Customer insights gained from DTC can be shared with retailers, enhancing joint business planning, trade marketing activities, and overall sales performance across all channels.
Key considerations for effective DTC implementation
For a problem-based DTC approach to succeed, brands should consider the following:
Pragmatism and Patience: Brands need to be pragmatic about short-term profitability expectations and consider DTC's role in their overall eCommerce strategy.
Holistic Evaluation: DTC should not be judged in isolation; its impact on overall brand awareness, customer relationships, and future retail opportunities should be considered.
Strategic Resource Allocation: DTC efforts should be adequately resourced with the necessary talent, expertise, and marketing investments to drive success.
Solving the previously mentioned shortcomings of traditional brands
1. DTC as an additional online sales channel
To overcome this challenge, B2C companies need to adopt a more strategic approach to DTC, viewing it as an integral part of their overall business strategy. This involves:
Developing a clear DTC strategy: This strategy should outline the company's goals for DTC, the target market, and the specific initiatives that will be undertaken.
Integrating DTC into the overall business: DTC should not be treated as a siloed initiative. It should be integrated into the company's marketing, sales, and customer service functions.
Investing in the necessary resources: DTC requires dedicated resources, including personnel, technology, and marketing budget.
Measuring and tracking results: B2C companies need to track the performance of their DTC efforts and use this data to make informed decisions.
2. DTC as a good-to-have project
To elevate DTC to a core strategic initiative, B2C companies need to:
Gain executive buy-in: Secure the support of senior management to ensure that DTC is given the necessary resources and priority.
Establish clear ownership: Assign clear ownership of DTC to a specific team or individual to ensure accountability and focus.
Allocate dedicated resources: Allocate the necessary personnel, technology, and marketing budget to support DTC efforts.
Set realistic goals: Set realistic and measurable goals for DTC that are aligned with the company's overall business objectives.
Track progress regularly: Regularly track progress towards DTC goals and adjust as needed.
3. Legacy B2C mindsets and talent gap
To bridge the gap between traditional B2C mindsets and the demands of DTC, companies need to:
Embrace a digital-first mindset: Cultivate a company culture that values digital innovation and customer-centricity.
Invest in training and development: Provide employees with the necessary training and development opportunities to acquire the skills needed for DTC success.
Hire for DTC expertise: Recruit individuals with the specific skills and experience required for DTC marketing, sales, and customer service.
Break down silos: Break down silos between departments and foster a collaborative approach to DTC initiatives.
Embrace data-driven decision-making: Utilise data and analytics to inform DTC strategies and measure the effectiveness of initiatives.
Conclusion
Traditional B2C firms seeking to navigate the complexities of DTC must move beyond the transactional mindset and adopt a strategic approach that aligns with the specific challenges and opportunities of their respective markets. By addressing over-reliance on retailers, overcoming retail entry barriers, and leveraging the broader benefits of DTC, traditional B2C companies can establish a direct connection with their customers, foster brand loyalty, and drive sustainable growth in the era of direct-to-consumer commerce.
Abdu Alhadithi, Executive Contributor Brainz Magazine
An experienced leader in Digital Transformation as well as eCommerce sales & marketing with a Bachelor of Science (BSc) focused in Mathematics with Finance from The University of Leeds. With 14+ years' experience in digital, I've helped numerous brands establish and grow their global eCommerce and Digital strategies, creating 3-5 year growth plans and developing large teams to execute best-in-class results. Thorough experience in Beauty, FMCG and Travel.
