In the past Decades ago, established brands like meal replacement food Huel and men’s hair care company Harry’s built multi-billion dollar retail businesses using social media and advertising. digital preferred advertising to sell directly to online consumers without intermediaries. These brands are prime examples of a new form of retail, known as direct-to-consumer (DTC).
The global pandemic has only accelerated this trend, with many stores on the street forced to close and continues to drive sales by reaching out to online shoppers directly. Some brands have successfully navigated the transition, like the maker of outdoor pizza ovens Ooni, whose sales are booming during the lockdown, with annual sales growing from £13.7 million ($167 million) in 2019 to £52.7 million in 2020. Shoppers have adjusted as well — about 60% Purchaseed from a direct-to-consumer brand at least once by 2021.
As the pandemic receded, the market changed rapidly. Older, older brands are already adopting the DTC approach — Nike’s direct-to-consumer sales in 2021, for example, grew 30% to $16.5 billion. On the other hand, shares of some of the largest, publicly listed DTC brands—such as Warby Parker and Allbirds—has decreased by 64% by 2022.
There are obvious economic factors behind this inefficiency. The economic rebalancing, with inflation rising and supply chains tightened, is putting pressure on retailers. According to the McKinsey report, rising prices are the number one concern of two-thirds of UK consumers, with around 70 percent say they have recently changed their shopping habits and are more open than ever to buying cheaper brands.
But other factors are playing a role in the recent demise of DTC brands. For instance, in 2021, Apple introduced a new transparency feature that allows users to opt out of apps, making it harder for these brands to attract new customers through paid social media advertising. more and more expensive.
Due to these market forces, by 2023, DTC retail will evolve into a new, more flexible iteration that I call connected to the consumer (CTC). This new approach aims to take multiple avenues to reach customers simultaneously: From social media to Web3, from online shopping to street stores.
To apply it, brands will need to be creative about how they tell their stories and grow their communities across these four different platforms. Consider the example of fitness clothing brand Gymshark, which in July opened a temporary barbershop with a team of barbers trained in mental health to encourage men to open up. about their problems with haircuts. On the other hand, men’s makeup brand War Paint is turning abandoned stores into showrooms for online shoppers.
More experiments with the CTC model are also taking place on social media platforms. For example, Kylie Jenner is using TikTok Shopping—a new feature launching in 2022 in partnership with Shopify that allows users to link their TikTok accounts to their online stores—allowing followers to she purchases directly from Kylie Cosmetics on this platform. According to Shopify, orders taken on social media channels quadrupled in the first quarter of 2022.
This retail opportunity extends to YouTube. For instance, British YouTube influencer Gabriella uses her channel to sell stationery to her nearly 900,000 followers. United Stand, an unofficial Manchester United fan channel with 1.4 million followers, also sells merchandise to its community through YouTube and Shopify.
Web3 is also creating new opportunities for brands to connect with consumers. You can even have tokens or NFTs in your digital wallet to unlock exclusive offers online or a premium street VIP experience. This has gone mainstream, with Starbucks rolling out a Web3-based rewards program to give customers exclusive perks.
The retailers that will win in 2023 are the ones that focus on building authentic connections with their customers through all of these avenues. These businesses will thrive by being channel agnostic: Now with tools to operate stores everywhere, reach hundreds of high street stores to billions on YouTube and TikTok, as well as niche communities in Web3.
