By Nicky Tozer, VP EMEA, Oracle NetSuite
Retailers across the UK are rushing to make the most of the lucrative holiday season. Shoppers usually spend around £50bn leading up to Christmas and retailers can’t afford to miss out on this vital revenue in an already challenging year. In advance of the winter months, many small retailers have been adapting business models to recover from the first lockdown in spring, preparing themselves with stock for Black Friday promotions and the holiday period. Online sales hit record levels on Black Friday this year, but figures from Barclaycard show payments made in UK stores and online fell by more than a tenth compared to 2019. This suggests retailers can rely on ecommerce channels remaining strong.
And as we head in to 2021, retailers will need to drive direct-to-consumer (D2C) strategy. The pandemic has encouraged a deep introspection on how consumer expectations, purchasing patterns and priorities are speeding up a shift to online-first, D2C retail strategies. The prominence of ecommerce and social media means that brands themselves are engaging directly with customers, without the need for a physical location. For some, this means being able to offer specialised, niche products, while for others, offering better costs on basic items.
With further challenges expected next year, the recent surge in D2C and ecommerce offers hope – here’s how retailers can ensure they aren’t missing out.
- Bridge the gap between the virtual and physical experience where possible
Ecommerce is the foundation of D2C retail and, for most, the primary sales channel. Most startup or new retailers were born in the social media age, so their online experience has needed to be a step above the competition. Websites are both visually appealing and user-friendly, suited to digital natives who expect seamless site navigation, a frictionless checkout experience, photo galleries and detailed product information for every item. Many offer free shipping and returns, which increases conversion and encourages repeat purchases.
Brands that usually sell to customers in a physical store need to tie together the online and offline experiences depending on local restrictions. After losing access to stores, consumers that prefer the ability to try an item before committing to purchase can’t do this. Where permitted, retailers should introduce pickup and local delivery for online orders, and easy return processes if the item isn’t right for them. Online shopping may have been more of a necessity than a preference for some, so brands should be speaking to consumers to see if this is a service that they’d like to use again, even when stores reopen.
A true D2C strategy requires brands to learn from each consumer transaction. No longer is the sole purpose of having an online presence about reaching new customers and convenience, but also keeping up to date with current customers’ preferences. By observing their shopping habits and generating insights from customer data, retailers can adapt products and services accordingly in the future.
For example, when supermarkets closed in the Spring, and pet owners felt less comfortable making a trip to the shops, D2C subscription dog and cat food brand PetShop.co.uk saw a 300% increase in sales. It achieved this by using tools and technology it already had but was not maximising before, which led to improvements in invoicing, stock management and cashflow forecasting, and also helped to provide a better service. PetShop.co.uk has invested more time into social media channels such as Instagram, Snapchat, and others, which weren’t really on its radar before. These channels are helping it to communicate with new and existing customers, learning more about their preferences and gaining valuable insight into how it can provide customers with a better online experience in the future.
- Support customers and they will support you
One distinct advantage D2C businesses have over traditional brands is their ability to cultivate a loyal customer base. Shoppers today are focused on finding brands with values that align with their own, and they then become engaged, loyal followers of that brand. This is the community that will support initiatives like new product releases or pop-up events, or advocate for brands on their behalf.
Loyal customers are also less likely to abandon the brand during challenging times. They will feel a stronger desire to support this brand because they have a personal relationship and are invested in the business’ success. Most retailers have changed their communication with customers during the last few months, but D2C retailers have used this time to really deepen their relationship with customers. They’ve shown empathy and concern for customers while also being transparent about their own priorities.
Online homeware brand Cox & Cox has been able to achieve 70% year-on-year growth as consumers have looked to spend more on improving their at-home experience. This success follows decisions made by the retailer back in 2016, when the brand made a concerted effort to improve its ecommerce foundation. This year, to further boost its D2C sales, the brand turned its attention to attracting a younger loyal community, growing its Instagram following by 100,000 users as it taps into the demand for home décor.
- Invest in what really matters to the customer
D2C businesses often do more with less. These brands have a deep understanding of their typical customer profile, including their interests and values, and they know how to speak to them. That allows them to spend advertising budget wisely while leveraging free channels like social media to pull in prospective and existing customers.
Brands that sell directly to consumers are usually more flexible, too. They often have no stores, or only a handful of them, and a smaller workforce, so there are fewer fixed costs. That’s a key advantage as retail undergoes a sudden shift and faces a less certain future. Other brands must embrace this willingness to change gears quickly as consumer preferences and the overall market continues to fluctuate.
There is no question that it’s a challenging time for retail, and the festive period offers some respite. Consumer spending won’t stop at Christmas. January sales offer another opportunity for small retailers to bring in much needed revenue. Initial ‘browsing’ will continue to happen online, and the bulk of the purchases will remain online. Retail brands need to be ready, look inward and focus on what they can control. D2C offers a tremendous opportunity for retailers that can both drive revenue in the near-term and become critical to their long-term success.