22nd October 2020
Three ways COVID-19 has changed direct to consumer business forever.
Confined to our couches over lockdown, it’s not surprising to know that e-commerce had a mega boom as most of us headed online to grab our essentials. Empty shelves meant that lots of us had to find alternatives to our second-nature purchases. But uncertainty and lifestyle change also meant that many consumers decided to shake up their usual choices regardless (McKinsey, 2020). From trendy start-ups to big brands attempting to challenge their business models, here are three ways the global pandemic has changed D2C business forever, or maybe just for now.
1. Washing our hands of our health and beauty faves...
Lockdown saw a 26% rise in health and hygiene spending, and personal care subscriptions followed suit. Around 10% of consumers reported they were more open to the idea of subscriptions over lockdown (Kantar, 2020). Dollar Shave Club was a massive benefiter in this, with membership and profits soaring high over lockdown (Retail Week, 2020).The D2C subscription model continues to be an easy choice with a second-wave on the horizon, mainly due to time-saving and convenience. However, brand experience is also playing a massive role in the shift towards D2C.
Although there’s less desire for make-up and fragrance in a WFH world, skincare D2Cs that focus on tech and great customer experience are soaring at the moment. One up and comer leveraging the trend is The Inkey List, with their online regime recipe-builder designed to deliver a personalised experience in lieu of retail sales personnel.
Forecasts have predicted a 7% reduction in retail sales of health and beauty items in a post-COVID world, which doesn’t seem all that bleak for now (Strategy&, 2020). Perhaps because retailers are being just as quick to react to shifting consumer behaviour. Huge department store brand MAC Cosmetics, introduced a try-on AR filter over lockdown which has seen online customer engagement double (Raconteur, 2020). Other high street retailers have put their make-up experts to work generating social media content through live Q&As and tutorials.
Consumers are pliable at the moment, so although many have headed to D2Cs to switch up their favourite products, they might not have changed their minds for good yet. We will have to observe and wait to see how this plays out as the pandemic continues throughout the winter months.
2. Sprinting ahead of the rest in fitness...
You can’t bring up D2C fitness brands without talking about Gymshark. Statistically the biggest D2C success story, Gymshark is now valued at a whopping £1 billion (Retail Week, 2020). We already know during lockdown, brands were heavily investing in interacting with current customers even more and Gymshark didn’t shy away from this either. Renaming their social media channels to “Homeshark” and making them a hub of fitness content despite gym closures, ensured they remained top of their game.
Longstanding fitness titans like Nike followed suit in a similar fashion. Although they remained reactive throughout the pandemic, Nike were already making the shift towards a D2C model anyway. Mainly motivated by an increasing retail downturn but also because of a lack of insight from retailers themselves. Prior to lockdown, Nike had started terminating many of their supplier relations with independent retailers in favour of creating a better brand experience for their customers. Therefore, allowing Nike to create an experience that better reflects them and also grants them the power to generate customer data at a local level (Retail Week, 2020).
Is the pandemic the beginning of the end for retailers? 16% of shoppers said that they planned to continue buying online, even after the pandemic is over (Strategy&, 2020). Taking a leaf out of Nike’s book, integrating D2C models seems to be the way forward as we continue to spend more money (and time) within the home.
3. Sweeping up supermarkets...
As supermarket stockpilers cleared the shelves of everyone’s favourite pasta, frustrated shoppers headed online to try something new. The pandemic awakened the home-makers in all of us (banana bread bakers, I’m looking at you) and from this we saw a huge increase in traditional hobbies like crafting and cooking. Fresh food was a sector with very little digital penetration up until the pandemic swooped in. So, it was no surprise that recipe box Gousto, flourished over lockdown. Achieving a huge 115% increase in customer demand in the first half of the year.
Many other consumer packaged goods (CPGs) are also heading towards a D2C model. Shoppers are unlikely to buy one product directly from a brand’s website instead of nipping to the supermarket, so brands have to be clever about their proposition (Retail Week, 2020). Heinz launched their first D2C website over lockdown and encouraged purchases by offering subscriptions of their most beloved products. Shifting their brand from necessity to novelty is one way of staying ahead throughout the pandemic.
Another D2C brand challenging the supermarket, is laundry detergent brand Smol. Subscription economy reigns supreme for D2Cs and Smol is just that. Offering laundry pods directly through the door, Smol is determined to fly ahead by bypassing the need for retailers. Convenience, cheaper pricing and eco-friendliness are some of the ways they hope to penetrate the laundry sector and compete with retail giants like Unilever. As the idea of a second lockdown looms over us, perhaps subscription laundry pods will be one less thing to stock up on and change the way we buy supermarket essentials for good.
How to win in a changing D2C landscape
D2C power players like Gymshark and smaller start-ups like The Inkey List have seen huge success over lockdown. But even retail giants like Heinz and Nike have tapped into the D2C model in recent times and shown that there is capacity to shift consumer behaviour to get them buying directly.
If you’re a retailer, start providing your brands with useful data. Nike has shown that they want to know more about their consumers and retailers didn’t give them that power before. Providing useful insight to your brands can ensure they stay on your shelves throughout the pandemic and beyond.
If you’re making moves in a D2C landscape, diversify your offering. Consumers are fickle at the moment, dividing their time between running to the shops and buying online as the rules change every day. Align your sales funnel to tap into numerous touchpoints by mixing D2C with traditional retail tactics. Create a unique and personalised brand experience like The Inkey List to give your consumers a reason to choose you.
Uncertain times have meant that consumers have become increasingly promiscuous with their choices, so applying learnings from D2C experts and retailers who are shifting their business models can ensure your survival throughout the pandemic and beyond.
McKinsey, 2020 - Consumer sentiment during the coronavirus crisis.
Raconteur, 2020 - How to prioritise the customer in a crisis.
Strategy&, 2020 – Where next for retail.
Retail Week, 2020 - D2C - How to nail it for brands.
Kantar, 2020 - How COVID-19 is transforming FMCG and retail.
Retail Week, 2020 - Shopping priorities for the next 12 months.
Written by Sia Patel, Digital Marketing Executive.