No doubt the COVID-19 pandemic has changed the retail landscape, but how are companies coping with shifting consumer habits?
As traditional retailers struggled to stay open, direct-to-consumer brands have used their online infrastructure to grow and connect with their audience.
Those who have been successful during the pandemic learned early on that adopting new technologies, marketing strategies, and customer experiences was key to remedy low in-store traffic.
The ability to pivot in these new directions is clearly seen by DTC, or direct-to-consumer retailers, who have shown an incredible level of resilience during the last 18 months.
Today, they dominate Google’s search results and accrue more followers across social media platforms than anyone else—but how are they doing it?
Taking a look at the most recent trends in the DTC space will give us a good idea of how they’re able to thrive when others aren’t.
Secure funding for DTC brands
Consumer buying habits aren’t just evolving with the times, they are rapidly headed in the direction of e-commerce.
E-commerce sales in 2020 were 32.4% higher than they were in 2019, and it’s hard to imagine such a rise without the lasting effects of the pandemic. What else? DTC brands had very few brick-and-mortar locations to worry about in light of the lockdown and could use their time to capitalize on online purchasing habits.
For an average DTC retailer, an uptick in sales also meant an uptick in its customer base—growth that appealed to investors who were looking to make a profit during the pandemic.
Further, investors saw an opportunity to stay ahead of the curve when it came to predicting trends that would continue well beyond the wake of COVID-19.
Young and tech-savvy consumers will favor DTC retailers
The rise in social media and online audiences has been inevitable for well over a decade, but almost nobody could predict the steep decline traditional retailers would face as a result of the pandemic.
Because of this, retailers across our industry understood the need for an effective e-commerce platform.
Luckily, DTC brands were already equipped with the digital tools they would need to target a demographic who spend most of their free time online.
Further, DTC brands had an edge on young people when it came to appealing to sustainability, flexible shopping, and social media engagement.
Digital brands are reinventing the traditional retail space
Even if the last 18 months weren’t shaped by a global pandemic, digital brands would still be hard at work reinventing themselves for the future, as many DTC retailers had planted seeds in the online space many years ago and are now on the hunt for more optimized sales solutions.
Whether it’s creating partnerships with traditional retailers, pop-ups, or establishing permanent locations, DTC brands across the board have tested the waters of brick-and-mortar.
For a DTC brand like Casper, reinventing the traditional retail space meant opening more than 200 stores across the US and Canada while continuing to push their product line digitally.
For others, a jump into the physical retail space meant adopting a showroom model where customers are able to windowshop products before heading to the retailer’s online store to make a purchase.
Traditional retailers such as Nordstrom and Ikea have incorporated aspects of this merchandise-free concept into their stores as a result of changing consumer habits—an indicator that traditional brands are attempting to enter the DTC arena as well.
Traditional retailers will Enter the DTC space
Traditional retailers are in quite a pickle if they continue to operate per usual.
With less foot traffic in-stores than ever before, retailers mentioned above like Nordstrom and Ikea will need to rethink their marketing habits if they want to compete against their direct-to-consumer competitors.
For this reason, brands that were once strictly brick-and-mortar such as Nike and Under Armor are accelerating their DTC strategy by exiting thousands of their wholesale doors.
In Under Armor’s case, their direct-to-consumer revenue skyrocketed 17% to $540 million last fall—a boost of over 50% in e-commerce sales.
DTC brands have an edge when it comes to design
Traditional retailers have always been limited by the amount of shelf space they have. Just like a grocery store, this incentivized them to stock the most popular merchandise more than the underperforming goods.
Wired editor Chris Anderson has written about the evolving potential for retailers with the advent of the internet since the early 2000s. Without having to conserve shelf space, Anderson pressed that e-commerce brands wouldn’t have to make tough decisions about what to stock.
Without the brick-and-mortar approach, a company like Casper isn’t held back by a storefront’s capacity to sell products to its audience.
To back their approach, Casper opened its doors with a single mattress they advertised as the “perfect” bed. This “no alternative” product line cut through the noise and got people’s attention right off the bat.
Digital retailers are getting the most from their online audiences
Instead of the slow-growth strategy we’ve seen from many of the top traditional retailers, DTC brands like Casper went for “shock and awe” as a means to tell their story.
Direct-to-consumer marketing strategies differ from company to company, but when well-known traditional retailers have millions to spend on advertising each year, startups in the DTC space need an immediate response to survive.
To further separate itself from competitors, Casper described itself as a “digital-first brand around sleep” from the very beginning.
They reached out to various Twitter and Instagram influencers like Kyle Jenner in order to get high levels of buzz around their product line—a marketing ploy that resulted in more than 800,000 likes on a single post and more than doubled net sales for Casper mattresses that month.
Casper was able to do something very few traditional mattress retailers had done before: build a culture around sleep.
Customer experience is at the root of DTC brand creation
Slim and tailored product lines that have been marketed by influencers is almost enough to get a DTC brand off the ground, but customers care just as much about the overall experience of buying a product.
When it comes to consumer experience, DTC retailers could not have a further approach from their traditional counterparts.
When influencers post about their new Casper mattress on social media, the delivery and unboxing process is always front-and-center.
This is for good reason. DTC retailers understand consumer habits lean towards simplicity while avoiding limitless features to choose from.
Amazon is the perfect example of a company that gives its customers the tools to pick from a variety of options but will often lead to painful compromises.
DTC retailers are grounded in the internet
If there was one advantage DTC brands have over traditional retailers that makes the difference in a post-pandemic world, it’s DTC’s ability to grasp the inner workings of the internet.
Not only are direct-to-consumer companies at the steering wheel when it comes to social media and influencer marketing, but their top-down strategy of third-party referrals and SEO tactics solidify widespread recognition of their brand.
To name one more reason Casper has done so well as a DTC brand—the company funneled money into Google AdWords while building search-specific landing pages that would elevate them above rivals who shared the hundreds of thousands of monthly “mattress” search results.
Once a customer is drawn to Casper’s website because of their SEO strategy, they are confronted with the product’s sleek design and simplistic delivery method.
The tides are changing for traditional retailers
Traditional retailers aren’t going anywhere anytime soon, but long-time brick-and-mortars like Nike have demonstrated how companies that fit the bill can dip their toes into the DTC space without compromise.
To this degree, retailers are coming to understand the difference between DTC-first and DTC-only.
No matter, there’s little evidence to show DTC-only brands are going to slow down anytime soon.
Casper isn’t the only growing brand to do it—Allbirds, Bonobos, and countless others have opened the playing field for entrepreneurs with ideas to generate interest.
Even if companies that were once at the forefront of our lives are no longer, there are always-evolving retailers operating in the digital world ready to replace them.
