Part II: Direct-To-Consumer Business Model Innovation and Emerging Trends

D2C

“The Best Service Is No Service” – Picked from authors Bill Price and David Jaffe, the best way to satisfy customers is eliminate the need for service altogether. The need of the day for DTC seller is to progress beyond offering personalized service to true customer excellency with “No Need for Service”.

In continuation of last series, elaborating further on business model innovation and evolving trends in direct-to-consumer marketplace that are fueling the growth. The following is summary of few of trends.

“Direct-to-Patient” Model: For example Telehealth, is likely a strong area of interest due to its potential for significant impact on care delivery. While virtual visits may have the ability to shift significant volumes of care and expand access, uncertainty remains for many institutions regarding reimbursement levels, compliance standards and best practices for planning. Very promising D2C model to keep an eye on.

“Drone-enabled” Delivery: D2C can really be fueled by drone-based delivery. The ideal candidates are replenishment products where shoppers essentially repeat-purchase, building online channels makes a lot of sense for a brand, especially in the age of 1-hour drone-enabled delivery. Repeat-purchase models also help the brand get and remain entrenched with shoppers, often opting for convenience and loyalty over price

Brand experience via “Commerce-as-as-Service”: Consumers are demanding a enriched experience. Direct-to-consumer business model combined with a distinctive, compelling and focused public-facing brand experience, lets manufacturers control and cultivate relationships with customers that transcend retail channels.

Instagram Buttons: PepsiCo is one of the classic use case of leveraging Instagram Buttons for its D2C strategy. PepsiCo succeeded selling its IZZE – a range of carbonated drinks – aimed to sell online effectively to ‘hipster millennials’ by following e-commerce trends in Instagram buttons, links to Amazon and early adoption of Amazon Dash buttons

Hybridization: The hybridization of brick-and-mortar, e-commerce and pop-up retail is creating interesting new business practices. Chacos footwear is a classic example – owns its website and sells direct-to-consumer supplemented by a series of nomadic pop-up shops in cities, at music festivals.

Uberization of Payments: Uber and Airbnb have been at the forefront of integrated commerce, a trend that many in the payments industry refer to as the ‘Uberization of payments’. In this space, mobile is key to DTC opportunities because it reduces the number of steps between browsing and buying. In the case of Uber, the mobile app turns many would-be cash or card transactions into automatic digital payments. Apps such as these have introduced many first-time mobile payment users to the concept of mobile-enabled commerce. We know how quickly this industry is evolved.

Facebook AR Model: Facebook thinks the future of smartphones lies in AR and AR enables advertising and social hellscape. Ubiquitous and free-to-use AR built right into smartphones is fast approaching. That paves the way for aggressive advertising overlaid over every inch of our line of sight, and the kinds of public ranking systems that split society into the have’s and have not’s.

Amazon Algorithm: The core of D2C strategy here is an all-out price war between Amazon and Walmart. I would like to mention about “Amazon algorithm“ – as media reports say Amazon algorithm that works to match or beat prices from other websites and stores. It finds the lowest price per unit or per ounce for a given product — even if it’s in a huge bulk-size pack at Costco — and applies it across the same type of good on Amazon, even when the pack size is much smaller.

IKEA “Co-creation Platforms”: IKEA achieved double digit growth for digital sales with a user-generated platform engaging buyers from the design stage to purchase. This platform became a gateway for social commerce showcasing the homes of IKEA’s online community and transforming them into real life product showrooms.

Google’s Zero Moment of Truth: Unlike the earlier days of mass media advertising, zero movement of truth in DTC arena is often more peer- and social media-driven. Marketing channel that arguably is poised better than any other to both create that moment of truth. The customer becomes a co-creator in the creative process and consumers are evolving into prosumers.

Let us meet in Part III of the Series ….

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Direct-To-Consumer (DTC) Strategies fuelling Retail Growth – Part I

DTC

Direct-To-Consumer companies  through new retail channels are driving two fundamental changes in the business models fueling next-level growth. 1) Offer shoppers ways to cut out physical store visits avoiding traffic, 2) Enable bypassing middle-man distributors. Innovation in DTC e-commerce and Omni-channel strategies is playing a key role in retail business sustenance and growth. DTCs primarily focus on designing and selling apparel, accessories, and many more directly to consumers through their own online channels. DTCs offer a superior shopping experience, higher-quality goods, cheaper products or greater convenience overcoming the constraints of incumbents monopolistic companies. Let us examine how DTCs enabling next-level growth with few use cases below.

1) Legacy companies usually sit on large profit pool and accustomed to doing business one way being constrained to pivot and think outside the box. Take a closer look at Warby Parker from its emergence in 2010 as it redesigned customer experience featuring home try-on and dramatically reduced price points as compared to dominant industry players. Warby Parker succeeded in establishing a business model to directly reach consumers.

2) Razor market is another classic example. As Gillette having cornered the retail market and established high price points, a DTC subscription model got emerged with upstarts like Dollar Shave Club and Harry’s which succeeded in bypassing the retail channel completely, which enable them to offer hugely discounted prices. And despite Gillette trying to play catch-up with its own DTC offering, its prices are still higher as compared to new crowd favorites.

3) Dental hygiene is a tough market, with just a few familiar consumer brands from which to choose. Goby has circumvented traditional distribution channels by aligning itself with dentists who have come to recommend the product. Goby is aiming to change that paradigm, offering the first subscription-based DTC rechargeable electric toothbrush that’s simpler and half the price of retail brands

4) Fresh start of DTCs enables them with innovative B2C marketing strategies. While Huggies and Pampers have been the diaper mainstay for generations, for example, Honest has been giving them a run for their money, thanks largely to its superstar spokeswoman and brilliant marketing tactics.

5) Take a look at Wine industry. Vying for customer attention with digital-first brands in a highly fragmented industry where brand loyalty is notoriously low. Penrose Hill, which is reinventing the wine club experience through homegrown wine brands offer improved value, selection and convenient delivery formats direct to consumers.

One key take away is DTC companies are less shackled by the legacy technologies, risk-averse cultures that large companies so often are, but on the other hand established players will need to do far more to emulate their DTC counterparts if they want to tap into high-growth market opportunities.  The next post in this series focus on DTC business model innovations.