September 6, 2020
Why Brands are Moving Towards Direct to Consumer (DTC)
Today, countries, institutions, and businesses are facing tough choices with unprecedented degrees of uncertainty. Moreover, the volatile shifting of market trends and changes occurring in industries due to the COVID-19 pandemic, brands need to adapt and innovate to stay afloat.
Furthermore, global efforts aiming to contain the outbreak resulted in significant shifts in our daily habits, consumption patterns, and ways of thinking. As a result, the demand for online and non-contact services massively increased — including essential items and entertainment platforms.
Hence, whether by necessity or desire, customers are shifting towards online shopping and eCommerce. Besides, people who never engaged in online shopping before the pandemic may not shop again like they used to.
That said, brands are moving towards direct to consumer (DTC) due to its promising advantages against existing and upcoming challenges in the eCommerce industry.
The New Normal of eCommerce and Consumer Behaviour
Even before the pandemic, eCommerce accounts for 9% of Australia’s total retail sales — that’s equivalent to A$28.6 billion overall eCommerce sales. Study also projects that the Australian eCommerce market value will skyrocket to A$35.2 billion by 2021.
Despite that, the COVID-19 crisis further accelerated the eCommerce growth, resulting in drastic and permanent changes to consumer shopping behaviour and marketing strategies across Australia and the world.
And while many brands expect a short-term spike in product demand, other companies will move towards DTC for good.
Additionally, here are five factors that mostly influence shifts in eCommerce and consumer behaviour:
Convenient Shopping Experience
As of 2019, roughly 81% of Australians shop online and eventually, one out of ten items will be available on eCommerce platforms. Those figures speak one fact: consumers are transitioning into online shopping as a convenient medium.
Moreover, convenience took over price as the driving force of eCommerce. The ability to order essential products such as fresh food, cleaning supplies and groceries in a few clicks make DTC eCommerce stand out from others.
Social Distancing and Contactless Shopping
Concerns about pandemic blowback are rampant all over the world. Hence, social distancing and contactless shopping are highly encouraged by local councils and cities in Australia.
That’s why going direct-to-consumer through eCommerce is a preferable option, as it shifts your brand from an entirely physical store into a digital and contactless platform. The only point where social distancing is least is during product delivery. But you can always ensure consumer and staff safety by implementing secure and contactless delivery routines.
Tighter Competition Online
A competitive niche doesn’t necessarily translate to less revenue. It implies the increasing demand and population of consumers, thereby attracting more companies to hop in the bandwagon.
Moreover, customers are becoming more tech-savvy over the years, especially nowadays, where people are encouraged to stay home. Thus, more consumers will most likely go online, whether for education, shopping, or entertainment.
Consequently, people are always on the lookout for referral discounts and exclusive shopping vouchers. So if you want your eCommerce store to retain and connect with newly acquired consumers, leveraging retention marketing will impact your brand positively.
Improved Distribution and Logistics Capacity
The overwhelming demand for contactless and last-mile package delivery pushed eCommerce platforms to scale up their operations and increase their inventories.
Unlike online retail distribution, you have absolute control over how you pack and deliver your products. Thus, you can ensure that your consumers get the best quality of service they need.
Online Shoppers Come From All Ages
People aged between 35 to 44 dominate the online shopping landscape, covering 24% of online sales, which is highest among all age groups.
Additionally, people 65 years and older account for only about 9% of total online spend. The figures imply that even elderly consumers shop online. Besides, as most of them are in self-isolation or self-imposed quarantine, we expect their online shopping habits during the crisis to continue.
Consumers Prepare to Stay Indoors
Since the breakout of the COVID-19 pandemic, nearly half of Australia’s population has spent time working from home. The sheer amount of people shifting online puts more pressure on Australia’s network, rapidly increasing internet traffic at an unprecedented rate.
The National Broadband Network sees a 70 to 80 per cent increase in data demand during daytime hours, far beyond forecasts calculated at the end of February. This figure only implies that people perform transactions and activities online, as more and more Australians prepare to transition into working from home as seamlessly as possible.
Furthermore, brands that specialise in books and toys record more visits and transactions since the beginning of the pandemic. Aside from that, sports equipment companies experience a substantial increase in purchases and sales.
That’s because consumers make sure their fitness regime is kept in check despite physical distancing and self-isolation measures by making sure they get the right equipment.
DTC Secures Digital and Contactless Payment
The COVID-19 pandemic isn’t only redefining how customers shop but also how they pay for their purchases. Digital and contactless payment methods have become prominent since the beginning of the outbreak, given that people see them as a more secure way to pay for goods.
Moreover, unlike wire transfer and traditional retail payments, moving towards a DTC business model means you will have to use eCommerce platforms that implement secure channels and digital payment methods.
Contactless payment and digital wallets provide more reliable protection against online frauds as they encrypt and secure your data using Secure Socket Layers (SSL). Besides, security is of utmost importance, especially for consumers who are new to digital payment methods.
On the other hand, the total payment volumes in 2020 are declining, primarily due to losses in offline sectors such as in-store and travel. However, marketers expect the economy to resume growth in 2021 as it will benefit from the shift to online shopping and contactless payments.
DTC Prepares Brands Towards an Uncertain Future
As consumers continue living with uncertainty amidst the pandemic, their purchasing behaviour becomes more unpredictable.
To help guide your audience towards the right buying decision, communicating with them directly through your products will convey your message more effectively.
A direct to consumer model also helps pivot your business to accommodate behavioural changes, thus capturing more market share. And since you’re not giving up control over your brand image to retailers, you can establish a sustainable brand image that can last post-pandemic.
It can be as simple as designing a data-driven SEO strategy to drive more traffic to your eCommerce site. More than that, you can rebuild customer experience by engaging with people at a personal level through social channels or other platforms.
In general, moving towards a more reliable business model is a better option than waiting until the pandemic blows over.
Life after the pandemic will be significantly different. That is the universal truth — and the eCommerce industry will dramatically benefit from it. Brands that engage directly with their consumers prepare for the evolving market, changing trends, and the impacts of the COVID-19 pandemic, among others.
Still, the world’s response and actions against the health crisis has a permanent impact on consumer behaviour. With that, eCommerce brands that adapt to the monumental shift will more likely come out as victors in the long run.
Achieving your long term DTC business goals can be possible through a comprehensive objective and a best-in-class eCommerce website. At G Squared, our digital enthusiasts use results-focused and data-driven web solutions to suit all your DTC eCommerce needs.
Ready to bring your business to the next level? Call us at (02) 9339 4500 or submit an enquiry and speak with us today.