Agility Over Perfection: Employing Retailer Sticky Tape in Your DTC Strategy
Retailers have embraced the art of digital transformation, with retail ecommerce sales forecast to hit 6.3 trillion dollars by the end of this year. This is due, in great part, to their innovative spirit. Although consumers might perceive a seamless shopping experience (paired with targeted media and efficient service) when they interact with retailers, its often a different story behind the scenes.
Retailers have embraced flexibility by necessity more than design, focusing on constant improvement rather than striving for perfection. When launching a MVP (minimum viable product) concept to meet a real consumer need, there is often both a physical and digital equivalent of sticky tape for short term solutions. But their willingness to take risks, experiment, and iterate rapidly, has seen adaptions in offerings and optimized experiences in the face of changing consumer needs and market dynamics.
In a world where every dollar counts, a retailer mindset is particularly relevant today for Consumer-Packaged Goods (CPG) and Fast-Moving Consumer Goods (FMCG) brands as they navigate their own DTC strategies, growth strategies and pursuit of market share. Both Nike and Nespresso embody this retailer mindset, with DTC strategies that are yielding massive returns.
Nike invested in digital innovation to enhance their online shopping experience and prioritise customer-centricity. In order to combine fiscal incentives in 2016, Nike launched its membership program, NikePlus, offering exclusive access to products, personalised recommendations, and seamless omnichannel integration. The program focusing on delighting customers through targeted experiential rewards. Today, Nike has evolved to deliver personalisation at scale. In the fiscal year of 2023, Nike's Direct owned sales to customers generated revenues of approximately 21.3 billion U.S. dollars, 43.7% of total revenue. Like Nike, brands should engage with their audience to build a community around the brand, offer personalised experiences and loyalty programs to increase retention, and frequency, while also feeding innovation.
Nespresso (Nestle’s DTC platform) sold 68% of Nestle’s hot drinks e-commerce sales during 2022, while Amazon accounted for only 19% of Nestlé’s hot drink sales. Nespresso allows Nestlé to keep ownership of its online user experience and first party data. As Nestle demonstrated with Nespresso, they can leverage DTC to their advantage and keep ownership of their online user experience and first party data. Brands should invest in data analytics and AI (Artificial Intelligence) to gain valuable customer data. No one should know your consumers better than you.
It is all too easy for brands to focus on technology selection, translating their brand promise and focusing on current assortments. Often launching comes with a fanfare but is weighed down by heavy investment, large targets, and an inevitable failure to meet internal expectations. Do not get caught in this trap.
For the first few years DTC brands need to run a lean team and budget. If the brand is a shoe or food or beauty business, they do not need to become a software expert or build a huge product team. Here’s where partnerships can help - identifying the best tools and tech you need, and they come with expertise to support you. A DTC does not have to be expensive – Shopify demonstrates this with being market leaders in off the shelf solutions.
That frees you up to know your purpose and DTC strategy. Then you can identify your audience, develop your value proposition, and develop a go to market strategy. Here are some best practices to keep in mind.
Six Key Takeaways:
- Embrace Digital Transformation: Consumers want access regardless of channel and they expect direct connection and new products. Put transformation at the centre to meet consumer demands and drive growth.
- Prioritise Customer-Centric Experiences: Look to the huge DTC brands and identify what can you emulate (like we just did with Nike and Nestle). Engage with your audience, build a community around your brand. Offer personalised experiences and loyalty programs to increase retention, frequency, and feed into innovation.
- Leverage Data-Driven Insights: Invest in data analytics and AI to gain valuable customer data. No one should know your consumers better than you. As Nestle demonstrated with Nespresso, they can leverage DTC to their advantage and keep ownership of their online user experience and first party data.
- Optimise your operating model: Full funnel optimisation is all about finding efficiencies; from media targeting, to optimised consumer journey, to logistics partners because marginal gains mean efficiency and profit.
- Keep Good Company: Ensure you partner with the right providers/partners, be comfortable that you’re going to be living with a MVP for a while and develop a tough retailer mindset to weather the ups and downs to come.
- Innovate Constantly: Keep an eye on emerging technologies and trends. DTC is all about staying agile and adapting to change. Retailers do not limit themselves to one channel or platform. Your DTC is part of your brand’s ecosystem and growth planning. Create a value proposition that determines portfolio now and embraces omnichannel to go where your consumers are.
Your business will thank you once they see the consumer insight, the impact to your innovation pipeline and your ability to create better consumer connections as you innovate, flex and take healthy risks. Be more retailer and see how much change you drive.
