Covid-19 speeds rise of Direct to Consumer (DTC), says ParcelHero
The coronavirus epidemic, in addition to the High Street collapse that was already well underway even before the lockdown started, has meant many manufacturers have had to question the way they ensure their products reach their customers.
ParcelHero’s head of consumer research, David Jinks, said: “In the last few years, many specialist UK brands have emerged, selling their products directly to customers. From Abel & Cole, Simply Cook and Riverford, to Made.com, Bloom & Wild and Birchbox, DTC businesses are selling everything from food to flowers and furniture to fashion.
“It’s no coincidence that these DTC brands have, in many cases, thrived during the lockdown, even as many big retail names have struggled to get their products to consumers.
With department stores closed, and even third-party online channels such as Fulfilment By Amazon (FBA) blocking the distribution of non-essential products, many brands and manufacturers have been left stranded. In complete contrast, some new direct selling retailers, including recipe box seller Gousto, have reached such a peak during the Covid-19 crisis that they can no longer take on new customers.
“A few years ago, DTC seemed impossible and specialist brands could only sell through High Street shops such as department stores. But the internet and social media have created new ways to sell and create awareness, with the result that direct to consumer retail has boomed.
“From Abel & Cole’s subscription food boxes to make-up boxes from Birchbox and razors from Harry’s, DTC companies are now thriving. One of their chief hallmarks is that they make full use of the direct relationship with their customers. E-commerce is infamous for its lack of customer loyalty, but DTC brands are a notable exception to this rule; many customers of DTC brands form a strong bond with the product and act almost as brand ambassadors. Such customers are also willing to pay more for customised products and convenient delivery.
“DTC has rapidly risen from niche to almost mainstream retail. Today 97% of the UK’s online shoppers are aware of the leading DTC brands and 37% have purchased from one, according to Rakuten Marketing. As many sales are repeat subscriptions for items including ingredients, make-up and underwear, such customers represent pure profit for DTC sellers. There’s no middlemen to pay and no advertising or PPC spending on those customers already signed up for regular deliveries. Instead of relying on stores and distributors to promote the brand, successful DTC brands make full use of social media to connect directly with new and existing customers. Facebook, YouTube and Instagram are currently the most popular platforms for DTC targeting. Communicating through social media reinforces customer loyalty and helps keeps sales flowing, even throughout steep downturns.
“DTC brands vary from local businesses such as Riverford organic foods, which delivers its own produce from a handful of farms nationwide, to Lifebox Food, which uses its knowledge of the market to box up health snacks from selected companies. Some DTC retailers have expanded to operate their own stores and sell through other retailers, but this dilution may also serve to dilute the success of the concept. The US brand Casper, which specialises in mattresses, expanded from online only to selling through its own stores, as well as retailers such as John Lewis. This decision has come back to bite them with the outbreak of Covid 19. The company admits: “Our retail stores remain temporarily closed, impacting our overall direct-to-consumer channel.” As a result, Casper has decided to wind down its European operations to concentrate on its core North American business.
“In contrast, some DTC companies have been so successful that they have attracted the attention of multinational giants. Unilever, in particular, has been eyeing up the market and it now owns the likes of DTC pioneers The Dollar Shaving Club and health food company Graze. It’s refocusing its sights on selling more premium products direct to consumers.
“From the smallest craft business to massive multinationals, the coronavirus epidemic has forced many businesses to reach out directly to customers. That’s one result of this crisis that may well prove something of a silver lining.”
For more information on how retailers can compare and contrast carriers’ services to ship direct to customers, see ParcelHero’s updated guide at https://www.parcelhero.com/en-gb/uk-courier-services