DTC is an Opportunity to Build Lifetime Customer Loyalty
More and more brands are bypassing stores or retail partners for direct-to-consumer (DTC) strategies in an effort to achieve greater profits, stronger customer relationships and improved loyalty. The DTC market is exploding. Eighty-seven percent of brands have plans to launch a DTC channel, with 23 percent aiming to do so within the next 12 months. Nike’s DTC business contributed to 24 percent of the company’s revenue in 2016, up from 17 percent in 2013. The athletic brand has plans to grow its DTC business by 250 percent in the next five years. DTC is also being widely embraced by shoppers, the majority of whom (82 percent) have bought directly from a brand in the last year.
Understandably, a huge number of brands are now following the gold rush to deploy DTC. However, as they do, they must ensure they deliver the shopping experience that consumers expect. The service they offer must be second-to-none, at all points in the customer journey, to avoid falling short of expectations.
What concerns me is that that brands have a tendency to overestimate how well parts of the experience are performing in relation to actual consumer experiences. Bad shopping experiences are commonplace: 61 percent of consumers have experienced an issue related to buying goods online in the last 12 months. Strangely, businesses seem inexplicably happy with the service they’re providing. More than two-thirds of brands think they offer fast and frictionless experiences for their customers, but often this is a misconception. Forty-two percent of shoppers report they have abandoned a purchase in the last year from frustrating online experiences. That shows a huge disconnect between what brands think they’re offering and what they're actually offering.
CX Friction is Holding Back DTC Brands
DTC isn't a passing trend; it's an evolution in the retail industry that puts the customer at the center of business decisions.
Today’s buying experience has many touchpoints that need to be acknowledged, from website, through checkout, to delivery and returns. From the moment buyers commence on a purchase journey, they're making countless choices that may or may not keep them on the path to ultimately purchase and, we hope, to repeat buying.
Becoming a true DTC brand means owning the entire customer experience (CX), from discovery to delivery and beyond. It means brands are responsible for ensuring every "click" along a customer journey is faultless and smooths the path to purchase. Brands must also recognize that, at any moment, they risk losing consumer dollars due to friction points during the buying journey. It’s a scary prospect and underscores the need for retailers to really understand this journey from the customer’s perspective.
Identifying where the customer is experiencing issues, where there are gaps, and where there are struggles is possibly the most critical component for building a successful DTC strategy. However, recent research highlights that retailers are falling short in the eyes of customers. There are many challenges to address, whether from a user experience perspective, technology capabilities, or the ability to offer fulfillment at the speed and convenience that shoppers want and expect.
The biggest gripes for customers who have had negative shopping experiences mostly relate to delivery and returns. In the past year, 60 percent of consumers said they’ve bought goods that haven't arrived when expected, while 40 percent of shoppers have experienced items not arriving at all. A quarter of customers cite items being listed as out of stock after purchase as another major annoyance.
Frustrations also exist for many shoppers before they click the "Buy" button. Brands that charge high shipping costs will lose two-thirds (68 percent) of shoppers, and inconvenient delivery options would deter over two-fifths (43 percent). Over a quarter (28 percent) of shoppers say they wouldn’t purchase from companies that don’t offer free returns, representing a huge missed opportunity.
Each scenario in the buying journey, from pre- to post-purchase, should be recognized as equally important. All of them are linked, and all of them are essential to delivering the fast and frictionless experiences that consumers now demand.
Loyalty is at a Premium
When you’re a DTC brand, shipping, returns and incredible response time are an integral part of your value proposition. If you get it right, you can transform first-time buyers into regular customers and loyal advocates for your brand. Conversely, if one touchpoint fails to impress, you’ve likely lost a customer forever.
CX is a huge driver of brand loyalty. Research shows that more than two-thirds (69 percent) of customers would never shop with the same online store again after a poor experience. In fact, a third of shoppers now readily admit to being less loyal to brands than they were a year ago due to the availability and choice in the market, and the expectations set by leading retailers like Amazon.com. This leads to lower consumer tolerance for those that fail to deliver.
In an environment of enormous product choice and fickle customer loyalty, a brand cannot afford to allow friction throughout its various touchpoints. During the purchase itself, brands risk losing customers if options don’t cater to their preferences, while post-purchase experiences, primarily related to delivery and returns, will influence a customer’s future loyalty to a brand.
Simply put, DTC is more than a channel: it’s an opportunity for brands to make a positive and lasting impression on customers at every step of the purchase journey.
DTC Done Right is the Key to Lifetime Customer Loyalty
Our research shows that the gap between retailers’ perception of CX and what shoppers really think is driving away customers. Buyers want flawless checkout, seamless payment integration, and multidelivery options. For brands to meet the requirements of today’s shoppers for same/next-day delivery, they have to have the right systems in place, such as technology that allows them to automate workflows like order management, inventory and fulfillment, and purchase ordering.
And don’t overlook your post-purchase experience. It’s an opportunity to exceed customer expectations of speed and convenience, and it's the area most in need of improvement. Excellent returns management is essential to ensuring an optimal experience, and failure here will lead to frustrated customers who will take their business elsewhere. Companies need a framework in place that allows returns to be processed quickly, accurately and easily so that products can be placed back into rotation sooner.
It’s clear that direct-to-consumer brands now need to up their game or they could be surpassed by competitors that offer a more seamless buying journey.
The purchasing landscape is riddled with land mines for brands. Technology is the key to closing gaps in the end-to-end experience and perfecting your DTC model. Businesses that do this well will delight buyers and ultimately develop enduring relationships with them — potentially turning fickle first-time customers into long-term brand advocates.
Derek O'Carroll is CEO of Brightpearl, a cloud-based ERP for retailers and wholesalers.
Related story: 4 Ways Big Retailers Can Be as Personal as DTC Brands