Strategy

How DTC Became the Retail Experiment of Quarantine, Part II

The global pandemic has offered clear reasons for companies to adopt a DTC model. Here are some of the less obvious ones.

In an earlier post this week about DTC adoption during the pandemic, we talked about how major conglomerates and small brands alike were adopting the DTC model for (pretty) obvious reasons—to stay relevant and afloat as well as to maintain control of their story and their operations during turbulent times. In this post, we'll be discussing the subtler benefits of why businesses are increasingly shifting toward DTC.

The New Convenience

In an earlier time, maybe not all that long ago, eCommerce seemed inconvenient and even risky to some for all the familiar reasons: You had no idea what you were actually getting or when you were going to get it. How much hassle would there be if you ordered moss-colored joggers and they turned out to actually be pea-soup colored? (A more common gripe than you might imagine!) Then, there were those potential extra fees.

In 2020, however, the concept of convenience has been redefined. In the framework of a socially-distanced marketplace buying online saves time and limits a consumer's exposure to coronavirus. An added perk of the DTC model is a shorter, simpler supply chain—a benefit that enhances transparency in a climate of heightened uncertainty.

Of course, the irritants of buying online still exist, but they also matter less in this environment. After all, while delivery and scheduling are still big concerns for many shoppers, it's much less important for consumer bases that's overwhelmingly stuck at home all day and a godsend for those angling to spend a little time in the outside world as possible. As a McKinsey study of consumer sentiment notes, customers are habituating to the new normal of their shopping habits and some already claim that they see no reason to go back to the old way.

In another era, when you went to a grocery store and they were out of ketchup, you might have been willing to settle for catsup. In this environment, there's increasingly no guarantee that they'll have either and at a reasonable price.

In another era, it was also easier to anticipate substitutions. If you went to a grocery store and they were out of ketchup, you might be willing to settle for catsup. In this environment, there's increasingly no guarantee that they'll have either and at a reasonable price. This dynamic doesn't just speak to the evolving convenience of predictability; it also hints at another unheralded benefit of the DTC model. Built into digital-first companies is the capacity to know what its customers want and to adjust accordingly.

Indirect Value of Data

Last summer, the internet officially went nuts over a polka dot dress designed by the Spanish retailer Zara. Instagram accounts were created to document sightings of the dress. Media outlets swooned and, this year, Zara even repurposed the now-iconic design as a face mask. Much of what enabled Zara, a fast-fashion brand, to succeed was its use of data. By keeping meticulous track of online orders, monitoring interest in certain items in retail stores, and constantly analyzing its stock, the company could snap its fingers and create more of what was popular and be sure to limit production of what was not.

This episode qualifies as the direct value of data. Zara and the fast-fashion movement generally succeeds in part because it can respond quickly to evolving tastes, trends, and, most of all, consumer demands. The harnessing of data offers constant feedback, a way of knowing of what’s coming down the pike and how to be ready for it. And it's what the DTC model offers at a very minimum.

But there's also the indirect value of data, which enables a measure of personalization and loyalty-creation that bigger companies just can't compete with. “DTC allows CPG companies to build relationships with customers through the organic use of first-party data, which was historically difficult or unfeasible to access via traditional retailers and e-commerce marketplaces,” writes one industry analyst about the rise of DTC offerings in the Consumer Packaged Goods (CPG) space. 

What data means in a DTC model is more than just the ability to be reactive to feedback from consumers. It means the potential to truly know your customer and forecast proactively based on a detailed understanding of a consumer base. It means experimentation with a safety net. And, in a moment when no one knows what's going to happen next, it's hard to think of many better advantages.