Wednesday 7th April 2021
Going DTC – The Stresses and Successes: An Interview With Dan Conboy
Going DTC – The Stresses and Successes: An Interview With Dan
If you’ve dipped your toes into the direct to consumer (DTC) waters, you’ll already know there’s a whole new eCommerce world just waiting to be explored. Whether your DTC project is underway or you’re considering this selling model, there’s more to it than simply building an eCommerce website.
Speaking to Statement’s managing director and all-round retail specialist, Dan Conboy, he shared his invaluable advice on navigating the challenges and opportunities that DTC presents so you can make your project a success from start to go-live and beyond.
How has direct to consumer evolved in eCommerce?
Where to start! eCommerce was historically made up of retailers who sold other brand’s products such as an online department store, for example. Typically, a lot of eCommerce in the early days was just a way for retailers to extend their reach and sell branded products.
Then an evolution occurred where retailers shifted from selling other people's brands and onto developing their own - think of ASOS for example. But they were in a difficult position because they weren't eCommerce specialists themselves and they had long-standing relationship with the traditional distribution channel. The challenge became where do these brands sit in that relationship with their customers?
We know year on year that eCommerce has been growing and we also know the effects of COVID have accelerated that trend. In the last year, we’ve seen many brands, especially FMCG (fast moving consumer goods) brands, who have suddenly reimagined how they use eCommerce as a channel. They’re now using it to reach customers in a completely different way than they would have done two years ago.
Take Heinz as an example. They launched an eCommerce store very early into COVID allowing customers to buy their favourite Heinz products direct from them. You can still get Heinz products through supermarkets, but the DTC site provides them with an opportunity to engage with their customers in a different way.
What other opportunities does direct to consumer present to brands?
I think the first is there's a need for customers to be able to access a product. When demand for certain products were higher and restrictions were put in place due to the pandemic, people's shopping habits changed. Whether it was through stock shortages or for whatever reason, there were certain products that the customer was struggling to get a hold of at their local Sainsbury's.
A brand having their own eCommerce website allowed that brand to provide the product to any customer, anywhere. Firstly, this means they’re not disappointing their customers, but secondly, it also reduces the risk of that customer switching to a rival brand. That's one major opportunity, which is very functional.
On the other hand, there are more interesting and exciting opportunities too. So, think about brand collaborations, limited edition, launching products which you wouldn't necessarily have the business case to put through the usual channels. A brand might only be able to produce ten thousand units of a particular product. Logistically, they don't have enough supply to get it into the normal channels anyway and they might not have the demand to do it either. But by having a website, it gives them a channel to offer customers something a bit different and they have a very reliable means of being able to supply that.
There are loads of secondary benefits that come with this too such as brand profile, brand equity, generating a talking point – essentially allowing the brand to elevate themselves above the competition and be more memorable. It also gives the creative teams and the product development teams a chance to come together to not only create a product, but to create conversations.
You've also got great opportunities for market research. So, through a DTC website, you could actually launch a limited-edition product and use this as a chance to see if people actually like it before taking it to the wider market.
The key thing with DTC is that it allows a direct consumer connection for brands when historically they've missed out on that because they've always had the retailer as the conduit. Now, I don't think anyone thinks that the Heinz website is going to become their primary sales channel, but it provides them with a tool to test, learn, innovate and differentiate in a crowded, competitive market. It's gone beyond the business case of ‘how many tins of beans can we sell?’ to ‘what can direct to consumer provide our business from a holistic point of view?’.
DTC for brands is never going to be based upon a pure unit sales model. Yes, you should still aim for that venture to be profitable and commercially successful, but it has to be seen in terms of what value can this bring to the table beyond just sales.
What advice would you give to brands trying to create a successful direct to consumer go to market strategy?
At the moment, I'm having a few conversations with brand managers who are saying I've seen other brands doing eCommerce - would it work for us? Who would this project involve? How do I get feedback and information from the stakeholders? Once you've got buy-in and once you've got stakeholders saying, yes, we want to do this, how do you then run that operation?
You've got to remember that many of these brands are used to manufacturing pallets of products, putting them on a lorry, sending it to a distribution hub and invoicing it. That’s essentially their business model. But sending a product to a customer, dealing with the shipment, handling the customer service - that's different. It's about taking it back to the start and questioning, is there an opportunity here? For all the reasons we've just discussed, brands are increasingly recognising that there is in fact an opportunity.
In terms of who's involved, there's a marketing element because DTC is a compelling vehicle for marketing teams to use. There's a product development angle such as what innovations could eCommerce help to support? There’s also an IT element - if you're using an eCommerce platform, what type of eCommerce platform should you use, and will the IT team approve a new software solution? In terms of operationally, how would you go about fulfilling orders when you’re used to sending pallets? Do you have a team within the business that can do that? Then there’s customer service - if you send individual orders to customers, how will you deal with customer enquiries? You might find there's already a team within the business who could help with this, but they would probably need additional resource.
I think it's important to map out all parts of what an eCommerce team structure and operation would look like. While you might have some pioneering organisations that want to get everything up and running in a matter of weeks, many businesses have more structures in place to consider. No one wants to be seen as anti-progressive but in reality, big organisations are risk averse. As such, the challenge isn’t always technology, it's cultural. Yes, we can spin up a Shopify store pretty quickly, but getting the IT team, the legal team, the ops team to sign it off, they're the bits that can slow it down if you don't have everyone on board.
To then actually craft a go to market strategy, it’s asking the question of what’s the purpose of going DTC? Is it to serve a functional purpose by providing customers with a different distribution channel? Is it about product innovation and releasing limited edition products that get people talking? Or is it for market research, building a community and a connection with your customers to capture really great feedback that can inform future product development?
Really, there are two angles to DTC. You have DTC for established brands and then there’s those organisations that aren’t a consumer brand at all, the manufacturers who work behind the scenes and solely supply to the consumer facing brands. How do they create a consumer facing part of their business?
A lot of the logistics and the foundational elements we’ve just discussed are exactly the same. What's different is that the risk profile for a consumer brand going DTC is actually quite low because people are probably going to talk about it or buy it or both, so they've not got much to lose.
For a manufacturing brand like a food manufacturer or a furniture manufacturer, if no one has ever heard of you before, you’re starting from scratch. The challenge for these businesses is they have to build a brand, tell stories and drive traffic. While they have all the core expertise of making the products, they don't have the rest. Essentially what these businesses need to do is formulate a good old fashioned consumer marketing campaign.
The reality of this is that it's not without its challenges, it's likely to be expensive and it's likely to take some time. It requires a significant investment in leadership for someone to say the future of our business has to change - we have to be more diversified, we can no longer rely upon the trade customers that have fuelled us for generations, we need to take a bold step to transform the business from B2B to B2C. But if you've got the right vision, the right driver and the right people leading it, it can definitely be done.
In terms of how that would be executed, firstly, it requires a genuine commitment. Competition is intense. Customers are not without choice these days. To be successful, you need a clear vision and the determination to create something compelling because today's consumers don't settle for mediocre.
Then it's about building a team who can actually deliver. Do you have the people in-house? If all you've ever done is deal with trade, probably not. Are you willing and able to bring in new people to develop teams who can actually build a consumer brand? You either need to build your own team internally, outsource it to agencies, or, more commonly, take a hybrid approach where you have a blend of agency expertise alongside a really good in-house team who can develop the strategy.
How can direct to consumer brands acquire loyal customers?
Loyal customers are formed from offering something that is extremely in tune with the needs and desires of the customer. If you're already a well-loved, respected consumer brand then you've already got loyal customers - DTC is just a way of leveraging that loyalty.
Whether you’re a known or new consumer brand, it’s about creating a compelling proposition and putting the customer at the centre of that. We all see this customer centricity approach being talked about but what does that mean in practice? For starters, it’s having an absolutely brilliant product. It doesn't have to be a unique product it just needs to be a good product but sell it in a way that's more compelling to the customer than your competition.
Take Gymshark for example, they didn't invent sports clothing. They've had plenty of competition, but they created products which were designed around the needs, wants and desires of the customer and really thought about the customer journey from start to finish.
Your aim should be to become a brand that people want to buy into, a brand that people feel a connection with. Bring the customer into your conversations so they can be part of that journey - they’ll be more likely to buy into it if it’s a product they’ve had the opportunity to shape.
So, how do direct to consumer brands ‘create hype’ around their offering?
You either need to create it yourself by doing something bold and different or you need to attach yourself to someone who's doing it already. If you have a specific target audience, then why not collaborate with influencers to create a community and ultimately hype around your brand?
A key thing for a brand that’s becoming DTC for the first time is to create pace around their offering. A lot of eCommerce sites perform terribly in the first few weeks and months after launch because they haven’t built any momentum. You want people to be talking about you before your website launches. It’s human nature to follow the activities of others around us so if you can get people talking, more and more will want in. It’s about creating anticipation, curiosity and even capturing data before you go live so that when you do launch, you already have warm customers.
Following on from this, when you go live, it’s super important to deliver a great customer experience and make a good first impression so they'll keep coming back. The exciting part of building a brand is often around the glamorous bit of building interest but it's so important that your operational team get close to the experience too. Test the user experience with prospects to make sure that it’s spot on. Make sure the dispatch and the operational process of getting the product to the customer is just right. Ensure the customer service team is tested and can handle a high volume of questions, particularly if you're doing a prelaunch.
Create a compelling narrative around the brand, build interest, deliver a great customer experience and then capture that customer delight through reviews, testimonials, social media, and use this social proof to build confidence with more customers. And finally, give them a reason to keep coming back.
When it comes to DTC, we can help you with every stage of your project – not just building a website. As a Shopify Plus partner, we don’t just build websites, we build brands. Working with the likes of Prestige and Taylors of Harrogate, we’ve helped many brands build a DTC presence and thrive in the competitive online world. If you’re questioning whether a DTC business model could be the right strategy for you, get in touch with our team and we’d be happy to advise.