Direct-to-consumer has been a popular trend among retailers for a few years. However, the initial fascination around it seems to be waning for several reasons. So, is there any hope for DTC brands? And are there opportunities to maximize brand affinity and sales among today’s customers? Diffusion recently conducted a study to find out.
The trend of direct-to-consumer (DTC or D2C) has been popular among retail businesses for a few years due to several benefits. However, the COVID-19 pandemic accelerated the adoption. According to a studyOpens a new window by Insider Intelligence, D2C sales were expected to touch $175 billion by 2023. It was also predicted that the DTC industry would comprise most retailers.
Now, the fascination with D2C seems to have started to wane. Part of the decline may be due to many retailers quickly pivoting in the D2C boom. Another part is that consumer expectations are changing fast, and the ‘DTC’ label and lines have blurred so much that the differences between digitally-native retailers and traditional brick-and-mortar retailers are virtually indistinguishable.
So, is there any hope for DTC brands? And are there opportunities to maximize sales and brand affinity among consumers, especially the younger generations? Diffusion recently conducted a study to find out, and here are a few findings.
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A Significant Number of Consumers Made Purchases Last Year
The study found that about 63% of consumers made at least one purchase from a DTC company last year. This was compared to all the respondents (100%) who predicted in 2018 that they would make at least one purchase and 70% who made at least one purchase in 2020.Â
Further, when we look ahead, consumer spending projections remain almost stagnant from 2021.Â
Year-on-year percentage of DTC purchases customers plan to make next year
Source: Direct-to-Consumer Purchase Intent Index 2023Opens a new window
Can Aesthetics Save DTC?
According to the study, in 2020, about 26% of D2C consumers said that direct-to-consumer brands were arbiters of what was cool and trendy. Now, as traditional brick-and-mortar retailers had the time to catch up, only 13% of D2C consumers said that direct-to-consumer brands have a cool and trendy aesthetic. This is almost a 50% decrease since 2020.Â
Consumers’ Perceptions of DTC Brands Have Changed
Consumers’ perceptions of D2C brands have changed over the last two years, according to the study. For example, in 2021, 57% of D2C consumers said that if a brand offered guaranteed, free, fast shipping, they would be loyal customers. However, in 2022, only 12% of consumers said they preferred to shop with D2C brands because they offer free, fast shipping.
Further, in 2022, only 26% of consumers said DTC brands are easy to shop online using ecommerce channels, compared to 31% in 2021. Moreover, only 17% of consumers in 2022 said that DTC brands typically have superior customer service compared to 21% in 2020.Â
Traditional Retailers’ Reign Remains Strong
Traditional retailers have been affected by several challenges over the last two years, such as the COVID-19 pandemic and supply chain disruptions. Yet, their reign remains strong as many consumers prefer traditional shopping methods. There are several reasons consumers prefer to shop with traditional retailers, such as more convenience and accessibility compared to DTC brands, existing trust, and stock availability. The following are the top motivations for consumers to purchase from traditional retailers in 2022.Â
Top motivations for consumers considering purchasing from a traditional retailer in 2022
Source: Direct-to-Consumer Purchase Intent Index 2023Opens a new window
Customers Want Better Return Policies and Affordable Pricing
Traditional retailers should implement more opportunities that could move the needle among key demographics. Consumers want more affordable pricing and better return policies when considering buying products they need.
When consumers consider buying from a traditional retailer, 24% say they are more likely to buy from a traditional retailer that offers a price match guarantee with D2C competitors. About 23% were more likely to buy from a retailer offering a 100-day return policy, no questions asked. Further, 15% were more likely to buy from a traditional retailer having more stories and reviews about the product, which would make the buyer stay confident of the quality.
DTC Brands Have an Opportunity To Connect With Younger Audiences
D2C brands have an opportunity to lean into their online popularity and connect with younger audiences more directly. This can be done by leveraging the virality of online marketing, the impact of influencers, and traditional media relations tactics.
About 20% of the consumers who said DTC brands typically had a cool, trendy aesthetic in 2022 were in the age group of 18-34 (compared to 14% of consumers aged 35-54 and 5% of buyers aged 55+). Similarly, about 12% of people who are more likely to purchase from a D2C brand if they saw a lot of media reporting or influencers posting in 2022 were in the age group of 18-34.
See more: D2C Survival Guide in the Post-iOS 14.5 Data Privacy Landscape
Value-based Marketing Will Connect Brands With the Younger Generation
Besides targeting younger consumers through media relations and influencer marketing, the study shows that these generations care for more than aesthetics. While DTC brands should focus on quality and customer service, they will be more likely to connect with younger consumers better if they also focus on value-based marketing and align with brands having shared values.
Among the consumers that said they would rather buy from a B2C brand because they are committed to using organic and eco-friendly ingredients more than traditional brands in 2022, 19% were aged between 18-34.
Looking Ahead
The study shows that while consumers continue to make purchases from DTC brands, the fascination for DTC seems to be waning. And consumer perceptions about DTC have changed. But both DTC brands and retail businesses trying to go in that direction still have opportunities to maximize brand affinity and sales, especially among the younger generation.
Kate RyanOpens a new window , managing director at Diffusion, says:
“Competition has certainly increased dramatically, with legacy retailers catching up and taking back their market share, but there are very clear opportunity windows for digitally native brands. Younger audiences – both Gen Z and Millennial – continue to be influenced by brand ambassadors and tend to shop their values. Making sure these values are front and center in messaging and using product reviews to drive interest and credibility are key purchasing decision factors.â€
By taking the necessary steps to meet consumer expectations, DTC brands can look forward to a successful year ahead.Â
What opportunities do you think exist for DTC brands to maximize brand affinity and sales this year? Let us know on FacebookOpens a new window , TwitterOpens a new window , and LinkedInOpens a new window .
Image source: Shutterstock
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