SME growth being led by DTC. According to McKinsey and Company, the growth in ecommerce in the first six months equalled that of the previous decade.
The accelerated adoption of eCommerce has introduced existential threats for many traditional retailers, while creating fresh opportunities for brands that are comfortable with using digital channels to develop a personalised relationship with their customers.
What’s driving DTC?
As the name suggests, direct-to-consumer (DTC) describes the sales model whereby creators sell directly to consumers, bypassing third-party retailers, wholesalers, or any other ‘middlemen’.
DTC offers a win-win situation to both brands and consumers. Brands thrive by directly engaging with their customers, reducing costs, and experimenting with operating models. Consumers stand to gain more value and satisfaction, through brand loyalty programmes which offer discounts, and frictionless sales processes, such as the ability to purchase directly from social media posts. Tailored promotions, based on previous purchases, encourage additional sales, while delivering more data back to brands, which increases the opportunity to personalise future offers.
Why consumers want to buy direct
Many DTC brands are founded with a mission, such as supporting environmental sustainability, which particularly appeals to Generation Z and Millennial consumers. An example of this is the DTC toilet paper brand, ‘Who Gives a Crap’, which uses recycled paper and pledges 50% of its profits to Water Aid to help to improve sanitation and reduce disease in the developing world.
Like many DTC brands, this brand operates on a subscription-based model, which provides convenience to the customer, and repeat revenue to the brand. Dollar Shave Club was founded on this principle: offering customers the value add that they would never run out of razors, without having to remember to purchase them. Meanwhile, Gillette, offers DTC subscribers their first razor kit free, to foster loyalty. But in fairness, they were themselves slow off the mark and are only now reacting to new kids on the block DTC companies like Harry’s, Dollar and Dorco.
In some instances, even though they could get a similar product cheaper from traditional retailers, consumers are willing to pay more for the convenience, personalisation, ethical values, and premium experience offered by buying directly from the brand.
Key components for composable commerce
Depending on specific use cases, a composable commerce ecosystem for a brand could consist of several pluggable solution blocks. Regardless, it is important to ensure that the architecture is built with the underlying principles of sustainable agility, scalability, and speed.
At the very least, a DTC solution needs headless commerce and content management systems that are brought together in the loosely connected head or the presentation layer.
Core commerce: Like the traditional monolithic commerce platforms, modern headless commerce platforms provide packaged commerce capabilities such as product catalogue, pricing and inventory, discounts and promotions, customer record management, and order management. Unlike the traditional platforms, these modern SaaS platforms are built from the ground up for elastic scalability, speed, version-less upgrades, API pluggability and multi-tenancy. Such systems can support numerous brands and channels at a global level with exceptional ease and consistency.
Ensuring excellent experience: The experience-driven approach to attracting consumers requires engaging content that is functional as well as fun and exciting. Smooth checkout journeys supported by informational content must be routinely available. However, this does not deliver the ‘wow’ factor and hence is not enough to prevent consumers heading elsewhere. To differentiate from competitors, brands must provide a consistent CX at every digital touchpoint, in a way that provides an emotional connection with the brand and encourages loyalty.
Digital touchpoints: An omnichannel experience supports existing touchpoints such as web, mobile, social, and in-store, and emerging interfaces such as IoT, chatbots, voice, smart TVs, and AR/VR. Interfaces with these are developed via a mixture of front-end/device-type-specific code and are loosely connected with the underlying capabilities via APIs. Gartner defines these many heads as ‘multi-experiences’.
Personalisation: or better still predictive personalisation, where a predictive analytics algorithm learns what each individual on your database is most likely to buy next using their buying history and impressions, which offer a unique fingerprint on each individual’s next most likely action. Personalisation is the future of ecommerce. It monetises the data by offering the exact products at the perfect time, even before that individual knows they want it. Not only is a march stolen, but loyalty guaranteed. This amplifies both their average order value and customer lifetime value. One of the world’s leading solutions is SwiftERM, a plugin offering zero human input (no training, or cost per “seat” etc). But beware imitations though, as many companies purport to offer personalisation, but checking the fine print, you will notice they actually only offer segmentation, which is not personalisation.
Leading industry analysts Forrester, Gartner, and IDC have predicted that the future of retail requires investment in holistic DTC strategies which embrace composable commerce with headless modular technologies. Leading brands are set to follow these recommendations. However, such innovation comes with increased responsibility for enterprise architects. Developing a clear understanding of ‘true’ vs ‘me too’ headless is critical for making informed technology decisions. Additionally, short-term, and long-term risks associated with emergent technologies and complex solutions cannot be ignored.
Nonetheless, the time to commence DTC initiatives is here and now and requires organisations to take a holistic approach to becoming agile. Organisations that act swiftly and commit to build sustainable and scalable DTC operations will be more likely to thrive, are more likely to survive and serve the next generation of consumers.