Fund trends explaining the need for a direct-to-consumer model
The emergence of the D2C model is linked to three main trends at work in the retail world for several years.
The shift from in-store distribution to an online model
First, physical in-store distribution faces increasing competition from online distribution , particularly with the emergence and growth of generalist platforms such as Amazon (or Walmart in the United States). These platforms are gaining market share, including in categories usually reserved for physical stores, such as food, and creating a new distribution standard, thanks to logistics and delivery capacities that are far superior to their traditional competitors. Aiming for growth and the creation of new consumption habits before financial performance, they also create additional pressure on prices, like Amazon, which often offers shipping costs.
Brands thus have less and less leeway in managing their prices and promotions, and are becoming more and more inaudible in the midst of the thousands of references offered by these giant platforms.
We can see that habits are changing : more and more consumers, especially the youngest, are making all of their purchases online. If in 2018, only 5% of Millennials bought food online, more than 70% of consumers will be shopping online in 2024, according to an IMF / Nielsen study carried out before the pandemic.
However, the COVID crisis and the lockdown period have greatly accentuated this transformation : while traditional distributors struggled to fill their shelves during the pandemic, consumers have turned massively to online purchases and social networks, in favor of retailers able to deliver quickly. Brands not offering their products online quickly found themselves penalized by the situation.
Different consumer expectations
The other underlying trend that has contributed to the emergence of D2C models is that of a profound change in the habits and expectations of consumers , especially those of the millennial and Z generations. More concerned about environmental and health issues than their consumers. seniors, they seek to adopt a more responsible mode of consumption (reduction of meat consumption, veganism, interest in sourcing products). They therefore turn massively to brands that highlight their social and ecological utility and are more sensitive to the messages and values they defend than to the promotions offered. It is estimated that more than 73% of consumers will have to change their consumption habits in the coming years in order to preserve the environment.
An alternative shopping experience offered by DNVBs that compete with traditional brands
These two trends therefore explain the proliferation over the last ten years or so of DNVB - digital native vertical brands. These 100% digital brands have developed a new grammar of the brand-consumer relationship, emphasizing the quality of the shopping experience, proximity to the customer and storytelling to create communities of engaged customers.
Without store networks or an established brand, these DNVBs have been able to innovate in all aspects of the product and its distribution, focusing on the expectations of current consumers: fast delivery, friendly and personalized customer service, products and services. limited but of high quality and renewed frequently, while proposing an “impact” / “purpose-driven” vision and ways of doing things compatible with more ecological and humanist requirements.
We can cite the example of The Honest Company , a company created in 2011 by actress Jessica Alba. The company, which sells beauty and baby products, has based part of its success on the notoriety of its founder who speaks daily on Instagram to a community of more than 10 million followers, as well as on the product promise. healthy for the body and the environment, the origin and composition of which are transparently detailed.
These digital native brands have gradually conquered all segments of consumer goods, offering an attractive alternative to traditional brands, often still unavailable online, as shown in the diagram below. We can clearly see to what extent each of the brands of the Procter & Gamble group is today the subject of specific competition from a brand that did not exist a few years ago.