This article is contributed by Sumit Suneja, Managing Partner of Merlin Brands, an urban consumer goods company that owns the leading brands - Rabitat and Headway.
The Covid-19 pandemic has completely disrupted our lives in so many ways. It has changed the way we communicate with each other, work, and even buy things on a daily basis.
This unprecedented scenario has led to brands adopting the Direct-to-consumer model to grow ever since the time the pandemic hit us. Mr. Sumit highlights some key factors driving this change and how D2C brands can make the most of the situation, to thrive and not just survive!
A Paradigm Shift in Consumer Behavior
Covid-19 pandemic has induced a more isolated and contactless way of operating/living, significantly transforming customer preferences. With limited physical movement, consumers are migrating into the virtual environments at a tremendous rate thus accelerating the adoption of digital media & platforms. And it’s unlikely to be coming back to a “non-virtual” set-up, as more and more consumers are drawn in and getting used to the convenient experience provided by online platforms. In addition to being the more obvious safer option, people are preferring to just sit back and shop from the comforts of their homes.
In a nutshell, here are the key factors influencing behavioral changes in consumers during a pandemic -
- Digital adoption: More people are shifting to digital platforms for everyday needs.
- Mobility preferences: Limiting public transport and unnecessary travel; Greater inclination towards remote working setup.
- Purchasing behavior: Shift to online shopping more for convenience and a better experience.
Offline Presence becomes a Liability
In response to evolving customer preferences, more businesses turned towards digital and online platforms as their primary outlet for selling products as compared to traditional brick-and-mortar stores. This process has proven to be a double-edged sword for companies.
Smaller and upcoming brands open to Direct-to-Consumer (D2C) models found the scenario ideal for growing their presence. These brands benefit from the fact that D2C eliminates the role of dealers as companies can get across to consumers directly. However, the legacy brands which have been heavily relying on physical presence and more traditional ways of marketing found it far from ideal. Moreover, the restrictions levied in travel across different parts of the world adversely impacted the supply chain, making businesses look for alternatives.
With more focus on online, social media came into the picture with platforms like Facebook/Instagram acting as a marketplace for sellers fuelling further growth and bringing down Customer Acquisition Cost (CAC), at least in the initial phase. This championed the development of the D2C brand ecosystem. Social media platforms are filling the void of online presence for companies that relied primarily on legacy distribution channel partners to reach customers.
Survival of the fittest
As the D2C model became the core of every consumer brand’s marketing strategy, competition intensified among companies. Apart from reaching and communicating with customers directly, brands had to work on creating a unique value proposition driven by brand-building exercises and delivering better quality products. Standing out from the crowd became ever so important with both small/upcoming and larger legacy brands competing in the same platform and space.
The competition can only get stiffer and challenging from here on. Players who are here for short-term gains will face even bigger challenges as customer acquisition costs are bound to further increase. This is inevitable as more and more legacy brands rush towards social media platforms as they try to harness and understand the importance and power of this network in building their sales strategy. Soon advertising costs will have quadrupled, which will eventually push away temporary players who are here for the short run.
Thus, only the serious and long-term players who would not solely rely on social media channels will be able to sustain and make it big as a successful brand. Companies will need to focus on creating a cohesive marketing strategy leveraging other communication channels like email and SMS marketing. These mediums are likely to play a more important and bigger role in the long run in establishing the brand and reaching out to the masses.
Learnings as a D2C brand
One key aspect of building a successful brand that is valued is understanding the importance of customer retention. While companies put in a lot of effort and capital in acquiring new clients, not a lot of focus is given to retaining an existing one. To begin with, it is proven that acquiring new customers is far more expensive than retaining ones. Also, even if your business has a high customer acquisition rate but at the same time it is equally losing out on many existing ones, the overall customer base will remain nearly stagnant. Moreover, having some loyal customers onboard can enhance brand reputation as well as develop a constructive relationship with customers and understand their needs better.
For us, customer retention has been a key factor in driving brand success. To ensure that we bring value for customers and get those recurring purchases, at Rabitat and Headway, we provide benefits such as – doubling the warranty, compliance with European norms, and lower pricing. This helps us to keep the customer acquisition costs down by 40% than our immediate peers.
Getting genuine reviews from the customers and working on it to improve on the company’s shortcomings has helped enhance customers’ experience. Staying in constant touch with the customers through email and messages also helped in building the brand’s trust.
Also, Brands that have transparency throughout their business strategy (production, supply chain, etc.) will be able to build trust and credibility in the long run. D2C allows companies have total control over these various factors for them to sustain with no hindrance in their journey.
Advice for fellow entrepreneurs
Companies trying to shift to D2C from the traditional model might face bigger challenges. They should be clear about what they exactly want, either go solely D2C or go hybrid model (both traditional and D2C). Adopting new processes, training employees, or hiring new ones for the new model can cost a lot of money while ensuring efficiency, profit, and providing value to the customers at the same time.
As the competition is growing one needs to think beyond the current buzz of D2C, work towards building a stronger brand. While building it, one should think in terms of being sustainable and not fly by, think in terms of decades and not years.