The momentum accelerated by the COVID crisis: the big brands are all interested in this D2C model
In this context and in the face of this increased competition, traditional brands have started to explore new D2C distribution models, according to several strategies.
Buybacks and / or equity investments
Several big names in consumer goods first approached D2C through acquisition, with a view to expanding their offer quickly while acquiring new skills .
This is, for example, the strategy adopted by Unilever in 2016 when it bought the Dollar Shave Club (for $ 1 billion), one of the first successful DNVBs (subscription model for razors). This takeover not only allowed Unilever to develop in a new vertical (facing its competitor P&G), but also to integrate the best practices of the digital native brand: Unilever has since launched a D2C offer for the mustard brand. Maille , a true model of its kind. Likewise, Walmart bought Bonobos - a men's clothing brand - in 2018, in order to improve their digital distribution strategy and diversify their offer.
This learning logic was also the source of minority shareholdings by large groups in already existing digital brands: Coca Cola thus invested $ 15m at the end of 2018 in the drinks company Dirty Lemon , known for offering an innovative model of SMS orders and payments.
The creation of services adjacent to existing products
Other brands have preferred to work on building a relationship of a different nature with their consumers , by offering services adjacent to their existing products. This strategy makes it possible to acquire useful data on its customers and therefore to gradually adjust the direct-to-consumer strategy on all of its channels.
Nike thus began to structure its D2C approach by offering personalization services on its e-commerce site, then by gradually expanding the range of services intended for its customers (such as the NikePlus loyalty program or community sports applications). . Under the leadership of a new CEO from the tech world(Paypal, Ebay), the brand has also made several acquisitions of technology companies (such as Invertex, an Israeli data analytics company), in order to acquire in-house the means to improve the management of consumer data and personalization. This improves the performance of online sales sites as well as that of physical stores: Nike customers now receive personalized product recommendations on their phone as soon as they enter a store based on their consultation history. This strategy is paying off: boosted by the COVID crisis, Nike's D2C channels thus generated more than 30% of the group's total revenues in 2020 , 3 years ahead of the initially planned date.
The launch of own initiatives, in particular thanks to the Covid crisis
Many brands have also launched one or more D2C initiatives of their own, with a view to creating new revenue lines or innovating in terms of customer relations . These launches are largely inspired by the successes of DNVBs, such as personalization or digital expertise.
In 2019, L'Oréal launched Color & Co , a personalized hair coloring service, available only online. Customers are invited to a free remote consultation with a colourist to define a specific shade, which is then delivered to their home in a personalized package. L'Oréal is thus experimenting with a new, more personalized customer interaction model and collecting important data on its consumers which will ultimately enable it to fuel product innovation.
The COVID crisis has accelerated this logic among many groups, especially in the agri-food sector. Faced with stores closed during the lockdown, brands have been considering ways to stay in touch with their consumers.
In May 2020, the PepsiCo group launched two D2C sites in less than 30 days: Snacks.com (bringing together the different types of salty and sweet snacks of the group) and Pantryshop.com , offering bundles of drinks and snacks, at the unit or subscription. The group has chosen a value proposition that is radically different from what exists in stores: rather than offering the entire Pepsi range online, the group has chosen to offer only a limited range of products , intended for certain categories of consumers only (by offering, for example, snacks and drinks bundles for athletes or schoolchildren). In the same way, the Heinz group launched the Heinz to Home site thanks to the confinement.in the UK by offering only combinations of its most popular products, as well as Ben & Jerry ice cream .
These own launches took place at different scales, but allowed brands to learn very quickly from their consumers and to experience D2C in optimal conditions. Some brands, for example, have chosen less attractive options, such as Nestlé, which entered into a partnership with Deliveroo in the United Kingdom during the first confinement to allow the delivery of its snacks directly to home, in order to test the possible options very quickly.
In the longer term, the brands that have made it through the D2C turn have often done so by diversifying their profiles and their working methods . In 2017, Birkenstock for example recruited 45 people from the world of e-commerce to launch its D2C site, rather than in the footwear industry. Capitalizing on the lessons learned from successive launches is sometimes even the subject of industrialization by certain groups, such as Procter & Gamble. In 2015, the group launched the internal start-up studio P&G Ventures with the objective of developing the group in new verticals and creating new expertise internally (in terms of brands, technology, or online distribution).
These fundamental trends and the examples of successful launches therefore show how critical it is today for brands to develop their own direct-to-consumer models, in particular in a context of a pandemic which is weakening traditional distribution channels and growth prospects. The company GoPro has announced in April 2020 its repositioning D2C distribution almost exclusively to limit losses and remain available for end customers.
Therefore, it is a question of knowing how to get started. What should we take away from the DNVBs and the D2C initiatives that we have just described? We will list the key success factors of this type of model, before thinking about the strategic questions to ask before any D2C launch.