How the Starbucks Red Cup Campaign Became a Cultural Phenomenon
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The direct-to-consumer (D2C) industry is entering its second decade, and it’s looking very healthy indeed. A U.S.-based survey indicates that consumers will steadily increase their online shopping in the coming years, with one in five saying that 40% of their purchases will be with D2C companies. As the market continues to explode, what are the notable shifts taking place in D2C retail? From advanced tech and traditional marketing to global expansion to personalization, here are 10 D2C trends to watch in 2020.
A key aspect of any D2C business is building strong customer relationships. D2Cs need to find effective ways to both establish and maintain direct online interactions with customers, and that’s where chatbots come into the picture.
AI chatbots are a fast-growing solution for customer service and support, enabling D2Cs to conduct natural, “human-like” conversations online, without the costs of employing live chat representatives.
Chatbots have now reached 54% of users globally, although consumer trust in the tech is not quite there yet. In fact, just 33% of consumers agree that chatbots and virtual assistants make it easier for them to get their issues resolved. Even so, as artificial intelligence technology improves and becomes more precise, AI-based chatbots will gain more ground as a cost-efficient option.
For D2C brands, search engine optimization (SEO) and search engine marketing (SEM) are key drivers of web traffic and sales. Now, voice-based search is fast becoming one of the D2C trends that can't be ignored
According to Adobe, 48% of all online searches are already voice-based. Currently, most voice usage on smartphones is for things like driving directions while in the car or making phone calls. However, as voice-assisted search gets more accurate and popular, it will become the first choice for searching products and services online. In 2020, D2C brands must adapt their SEO/SEM strategy to include conversational-style search terms that will boost their voice search engine rankings.
More than just wanting personalized experiences from D2C brands, 51% of consumers expect that brands will anticipate their needs and make relevant suggestions. Ad Personalization can mean customized emails and offers, retargeted ads based on the user’s previous web activity, and even reminders or incentives for abandoned shopping carts. However, in 2020, personalization will need to be much more than just adding the customer’s name to an email subject line. D2Cs must develop novel ways to provide personalized experiences that will excite and engage a discerning customer base.
A great example of personalization comes from Universal Standard, a no-limits, inclusivity- based fashion brand for all bodies and all sizes. Their D2C line, Fit Liberty, allows customers to exchange any item of clothing for a different size within a year of the purchase. If the customer goes up or down a size, Fit Liberty will accommodate the exchange at no extra cost. This not only ensures a clothes shopping experience literally “fitted” to the individual customer; it also powerfully aligns with the brand’s core values.
According to Shopify, 42% of all e-commerce transactions happen in China, and international markets are growing at a rapid rate. By 2022, some say that cross-border purchases will make up a fifth of D2C sales worldwide.
While local D2C brands might balk at the idea of selling abroad, the fact is that the international market offers massive potential for increased sales. E-commerce platforms already offer D2C sellers a range of global services, such as multi-currency options, customized tax calculators for different countries, and integrated fulfillment services that cover international shipping and distribution. In 2020, selling globally is one of the top D2C trends.
In a survey by Big Commerce, less than 10% of Gen Z consumers reported buying products from a physical store in the past six months. The figure is higher for millennials (31.04%) and Gen X (27.5%), so the fact is, retail shopping in 2020 is a mix of online and brick-and-mortar experiences — for all generations. The omnichannel approach, which blends the digital and real-world customer journey, empowers D2C brands to deliver what today’s consumers are really looking for: unique experiences and products, and a sense of excitement and curiosity.
In the coming years, digital-first D2Cs will invest more in the physical retail setting, with the increased use of pop-up stores, experiential stores, and co-marketing initiatives with traditional retailers.
What’s the #1 way consumers discover a brand before they make a purchase? Video.
Video is the ideal marketing medium for the D2C industry, as it fits seamlessly with the digital-first consumer experience. D2Cs can use videos to inspire an emotional response and effectively engage customers online. Videos can also give consumers a deeper understanding of D2C products when “try before you buy” in a brick-and-mortar store is not an option.
D2C mattress brand Purple did all that and more with their “Goldilocks Egg Test” video, which showed an experiment of raw eggs being dropped onto a Purple mattress (spoiler: they didn’t break!), demonstrating the mattress’s quality, comfort, and support. In 2020, D2C companies will continue to invest in video storytelling, and will even increase their video budgets, as this kind of “e-commerce entertainment” takes over.
In the past five years, D2C subscription brands have grown over 100% each year, and 15% of consumers have signed up for a subscription to receive products on a regular basis. A classic example of a D2C subscription brand is the Dollar Shave Club, the shaving accessory subscription company that disrupted an entire industry and was eventually bought by Unilever for $1 billion. A newer subscription D2C company is Beauty Pie, which is challenging the monolithic cosmetic industry with a radical approach — luxury cosmetic products for subscribed members at a far reduced markup than equivalent designer brands.
Especially for the FMCG (fast-moving consumer goods) category, where consumers are making routine purchases of perishable or usable goods, the subscription model offers something that consumers today are craving: value for money, convenience, and exclusive “members-only” perks, like free shipping, insider discounts, and loyalty points. This direct-to-consumer trend will continue to grow, as D2Cs search for ways to strengthen customer relationships and encourage recurring purchases and a steady revenue stream.
Without scaling, D2Cs cannot survive in a tough marketplace riddled with copycat competitors. In the foreseeable future, Amazon will clearly maintain its position as the largest, most prolific partner for D2Cs. However, many D2C brands are looking for different options to scale, outside the walls of Amazon.
“Retail as a service” (RaaS) platforms are emerging as a key tool to support D2C growth, with ever-expanding services and solutions that are starting to rival Amazon’s capabilities. For example, Shopify now offers a fulfillment network to cover shipping and distribution, while Microsoft’s cloud services, such as cashier-less checkout and smart store tech, put it in the running for D2Cs in the fast-growth phase.
D2C brands live online, so they naturally do all their marketing online, too, right? Not anymore.
One of the most surprising D2C trends to rear its head is a return to traditional marketing tactics, such as out-of-home and word-of-mouth advertising. Over 20% of consumers surveyed by eMarketer discovered a D2C brand via traditional marketing channels. In 2020 and beyond, expect to see D2C brands trying to capture this chunk of the audience with marketing tactics such as billboard ads, street ads, transit ads, TV, and even radio. Another focus for D2Cs will be on instigating consumer conversations, helping to create traditional “water cooler moments” that are highly effective at increasing brand awareness.
In 2020, branding will remain the key to differentiating a D2C company from its competitors. Branding is the foundation from which D2Cs can create unique experiences that engage customers and persuade them to buy.
The recent news that Brandless, a D2C company offering non-branded, low-cost groceries and essential goods, is closing down only serves to reiterate the importance of branding in the world of D2C. Once the “darling” of the D2C world, the demise of Brandless proves that low pricing alone is not enough to capture the attention and imagination of audiences in a competitive marketplace. Rather, D2Cs will focus even more intensively on building their brand identity with those extra touches that set them apart.
For the moment, the most popular D2C brands come from a small number of specific consumer goods categories, such as health and beauty, clothing, and furniture/home products. Is that set to change? What other surprises are in store for the D2C industry in 2020? With the 10 D2C trends described above, the D2C industry is definitely heading in directions that have yet to be imagined.
Now that you know the top D2C trends, it's time to explore the top challenger brands to watch in 2020.
Last updated on August 16th, 2022.