It’s time to rewrite the retail marketing playbook and think like a DTC

The future of retail looks set to play out online as the coronavirus and its effects on the economy start to decimate the High Street as we know it. And a new breed of purpose-driven, data-informed direct-to-consumer (DTC) brands are reaping the rewards.

The signs were already there - shoppers have increasingly migrated to the internet, but the pandemic has supercharged this particular consumer trend. The UK retail industry hit a milestone in May, when online spending accounted for a third of the total.

Consider that at the start of the year that share stood at a not inconsiderable 19% and it is clear that online as a channel is in the ascendancy.

DTC brands particularly are benefiting. Digitally native, they understand the power of knowing their audiences, reaching them in the moments that matter and the importance of experience, service and convenience for today’s customers.

The pandemic has pushed the agenda forward by perhaps some five years, but this trend was already in the ascendancy. It’s why global corporations are increasingly acquiring DTC brands and/or building their own capabilities.

It’s little wonder the world’s biggest brands built their businesses with the classic marketing pyramid based on reach, frequency and big media saliency. But in this upside-down world, dominated by digital and data, that is no longer enough.

These incumbents have relied heavily on retailers to reach end consumers, but realise that by leaning on a middle-man they lack the tools to create long, direct lifecycle relationships with their customers. They might hold the lion’s share of their markets, but the growth agenda is no longer theirs.

I often speak with big businesses about how they can create and nurture such close customer relationships, and conversely with DTCs about how they can step outside their smaller, loyal audiences to build sustainable growth. So, earlier this year we commissioned a piece of research and hosted a virtual debate to delve deeper into these emerging retail mindsets.

It is clear that each can learn from the other, though ultimately the principles of DTC will win out. We identified ten ‘pillars’ of success that DTC brands stand by and the incumbents should aim to emulate.

Brands including thoughtful gifting company Don’t Buy Her Flowers, snack company Graze (now owned by Unilever), dog food subscription service and luxury linen brand Piglet took part.

We found that the successful challenger brands knew they couldn’t compete on being functional alone - they had to offer purpose, be that being more environmentally friendly, charitable or campaigning.

Being “responsible” was a key concern and sustainability both in terms of product and future growth, were also important.

Digital has given new brands a more affordable and direct way to reach audiences. As a result, most DTCs excel at capturing and optimising data, and knowing their valuable audiences. By layering more audience-focused, mid-funnel channels on top of these banker response channels, many are now looking to add traditional ‘brand’ activity such as TV, radio and out-of-home on top - it’s the traditional marketing pyramid inverted. 

Another key learning was that it isn’t enough to convert a customer, brands need to keep them by delivering exceptional customer service and by tempting them to become unofficial brand ambassadors through reviews and social shout-outs.

Take Gymshark, now the UK’s most successful sportswear brand with a value exceeding £1bn: it focused big on building community, as has for dog lovers. Both make their customers feel invested and involved in the brand, a huge distinguishing factor over their more established rivals.

Many of the DTCs we surveyed reported soaring sales since the start of lockdown in late March: Graze reported double the DTC customers it had anticipated, Don’t Buy Her Flowers’ volume was up 550% year-on-year and Piglet has recorded “exponential growth”.

International expansion is another factor: The Hut Group, Graze and have all successfully replicated their DTC formats in other markets: reaching the same sorts of audiences in new geographies, a formula that offers scale and a concept investors love.

At the moment DTCs hold the trump cards, but expect this to change as the incumbents learn from their successes. The corporations still hold share - and considerable budgetary fire power.

Some of the lessons, such as being purpose-driven and agile, will be harder for an unwieldy heritage brand to pivot to convincingly. With the right investment, other aspects such as integrating performance into the overall marketing piece and being data-driven will prove a boon.

The future of marketing will be fuelled by first-party data, agile thinking and be built on a bedrock of trust. Brands that make their customers feel invested in their brand and stand for more than functionality alone will win.

It’s time to rewrite the retail marketing playbook.