No segment has caught the retail world’s attention like the D2C ecosystem, and with good reason. As the world grappled with a pandemic that shut down the usual ecosystem of wholesalers and retailers, many businesses, across different sectors, realised the potential of the D2C approach in addressing the challenges arising out of severely-impacted delivery channels. 2021 proved to be the pivotal year for D2C startups as the segment raised USD 783.7 mn in just the first seven months, a whopping surge by 251% more than all of 2020. As we saw further consolidation and interest from foreign investors, two more D2C startups joined the growing rank of unicorns in India.
The two factors driving this transition are technology and changing consumer preferences. Businesses leveraged technology to connect with consumers, cutting out the middleman and improving their products/services. In a market crippled by lockdowns and delivery snags, it allowed them to keep functioning and in many cases, further widen their market. The adaptation of technology also met the changing preferences of the new-gen consumer. This digitally native consumer prefers to research and buy products and services online. Increasingly, this consumer is now moving to mobile-only decision making, further changing brand engagement strategies.
Mobile-First to Mobile-Only
As millennials become the prime consumers with Gen-Z close behind, it’s critical that we understand their buying behaviour, from their decision-making process to the final sale. Where the previous generations would rely on a trusted retailer, the modern consumer is more likely to base their decisions on their own research, conducted online, and increasingly, on their mobile. Brands have responded to these changing dynamics by switching to a mobile-first approach. However, as smartphones become the primary mode for commerce and the digital payment ecosystem develops even further, the new-gen consumer is slowly switching to a mobile-only approach.
The rise in m-commerce sales reflects this changing reality in consumer behaviour with global projected sales in 2021 expected to stand at USD3.56 trillion, increasing by 22.3% over the previous year, accounting for almost 80% of total e-commerce sales. The domination of m-commerce shows the success of mobile-based platforms in inverting the previous poor conversion rates on smartphones. While mobiles have long been the preferred device for research and connecting with other customers or the brand, the actual purchase was often confined to the laptop, especially for brands with high value.
In recent years, however, the digital ecosystem has grown by leaps and bounds, allowing the customer to carry out end-to-end purchases, from researching the brand to selecting, buying, and making the payment. The seamless experience carried out on one device and in a matter of minutes, ticks all the boxes for the modern consumer who puts quick and user-friendly experience at a premium. With social media further facilitating brand connection and loyalty, the smartphone has become the chosen device to not just to make purchases, but also to communicate with the sellers. In India, smartphones have also helped brands to expand their reach, bringing Tier 2 and Tier 3 cities within their ambit. The small-town consumer is now as easily reachable as those in metropolitan cities.
How to Transition Your Business to the D2C ecosystem
Today, most businesses, even legacy brands, are striving to move to a D2C ecosystem. However, a digital D2C approach has some significant differences from the traditional retailer channels. It puts the consumer first where the buyer experience often trumps any other factor.
Seamless mobile purchases: As smartphones become the primary mode for shopping, businesses must ensure that they have a user-friendly app or website that offers a seamless buying experience. Priority must be placed on the design, from exploring the inventory to adding selected items to cart and finishing the purchase journey with multiple payment options. The customer should be able to finish this journey with minimal steps.
Stay on top with social commerce: As social media emerges as a key influencer in buyer decisions, it’s important that brands ace their social media game. To begin with, ensure a presence across the top apps, especially where your core demographic is most likely to shop. Since most social media platforms now allow businesses to sell directly to the consumer, they are fast emerging as a powerful tool for boosting conversion rates. The other aspect of social commerce lies in its ability to connect with the end-consumer through highly targeted marketing.
Personalisation: Many D2C brands have successfully carved a niche for themselves, even competing with legacy brands, by personalising their products or services. Digital platforms allow brands to gather a staggering amount of first-party data, from their demographics to their preferences and their purchase journey. This constant feedback loop empowers brands to devise a highly accurate customer profile with micro-segmentation, allowing highly personalised products where a consumer can pick their desired features. From a strategic angle, it can help in demand forecasting, allowing better inventory management.
Content commerce: The most important symbiotic relationship for a D2C brand’s digital presence is between content and commerce. With digital platforms doubling up as storefronts, the consumer is now increasingly looking at these platforms for comprehensive information about the product. From product videos, social-media walkthroughs, to SEO-driven knowledge-based blogs, brands must use their platform to provide the customer with an honest overview.
Immersive experience: With immersive tools like Virtual Reality (VR) and Augmented Reality (AR), brands have a powerful tool for providing their consumer with a realistic demonstration of their product. Increasingly, consumers will also be demanding an immersive experience for a positive engagement.
D2C is here to stay. With direct access to the market, we have the opportunity to enrich the consumer experience through valuable data-driven insights. It also allows businesses to minimise any hiccups in the delivery chain. As e-commerce platforms dominate the market and the smartphone becomes the chosen marketplace, D2C brands must take the opportunity to keep re-inventing their customer engagement strategies.
Article is authored by Priyanka Salot – Co-founder, The Sleep Company.