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Assuming you’ve done your due diligence and decided that your brand is ready to start a DTC e-commerce channel, what specific strategies should you deploy to ensure that it’s a success? Here, we offer an array of suggestions based on strategies already in use by many successful DTC brands in 2021.
Pricing and merchandising for DTC e-commerce
Prices between online and offline can vary if they show a perceivable value
Generally, online prices should be comparable to retail prices in stores. But adding premium benefits like free delivery and returns, exclusive online-only merchandise, or product personalization options can justify higher prices, and will be accepted by most comparison shoppers.
New ways to sell, while learning more about customers
Categories with high repeat-purchase potential have always been a retail favorite, and they offer even more merchandising opportunities for DTC e-commerce. In the most-cited example, Gillette always knew the real money was in selling the blades, not the razors. Now, their razor blades can be sold on a subscription-model DTC platform, promoted with a free unit upfront upon signup. This model also enables Gillette to foster customer loyalty and keep more customer data available for audience segmenting in future promotions.
Practical considerations should be part of the calculation of what product mix to offer in DTC. PepsiCo and Kraft/Heinz launched webshops in 2020 which offer only large items or bundles. Basket sizes for sundry items of all types—from snacks to craft accessories and —need to be large enough to offset shipping costs and help avoid conflicts with other channels. They primarily serve the convenience of certain customers who prefer to buy these items in bulk.
Keeping costs in check
Using assets you already have, like social media channels and contacts from promotions, can save on advertising costs as a portion of total spend,. Always keep a close eye on the ongoing customer acquisition cost (CAC) and the marketing return on investment (MROI).
Shipping and fulfillment
As your brand’s supply chain operations get retooled for DTC, there are some proven e-commerce strategies for keeping costs down while serving the customer’s expectations. Lighter product packaging is often used for the online assortment, along with flexible shipping options.
BOPIS (Buy Online, Pickup In Store) can also help keep shipping and warehousing costs down by using existing stores as fulfillment centers. You can also work with strategic logistics partners. In France, the apparel brands H&M and Decathlon work with a distribution network wherein customers pick up their orders at newsstands and convenience stores.
Maximizing Customer Lifetime Value
Acquiring a new customer can be up to five times as costly as retaining an existing customer. This is why managing customer lifetime value (CLV) is so important in profitability. The main strategy is to maintain relationships with existing customers and then keep engaging them with new offers. Some brands engaged in DTC use an incentive system in which the more personal information a subscriber tenders, the more rewards they receive in return. This lets them send out more targeted product recommendations and offers. In turn, this incentivizes subscribers to buy more, creating a virtuous cycle.
The DTC business model is most viable when the CLV is twice as much as the CAC.
Being customer-centric is essential in DTC e-commerce.
Cost, flexibility, security, support, and compatibility with existing systems all come immediately to mind. But while those concerns are important, the technology decision you really need to factor most is customer experience. Many of the most successful DTC companies co-design their online store with customers and take an iterative approach, testing and refining user interfaces while seeking continuous feedback. Others test with apps such as Hotjar to discover where on a page a user jumps from just before converting, or just before abandoning their cart.
Much of it depends on existing technology and human infrastructure. Building the shopping platform requires some pre-existing technology readiness, in-house IT talent, and more.
A customer service team is one source of insights that help you optimize customer experience. Support agents, for example, can engage people who return products in order to find other ways to satisfy them and generate return business.
DTC is a whole different logistics setup from traditional supply chains for retail stores. When just beginning a DTC channel, brands will often outsource logistics rather than asking their own teams to learn an entirely new sales system all at once. Outsourcing enables them to guarantee quality, speed, and the flexibility to scale operations up or down as needed. Consumer brands that have their own retail network often use their stores as e-commerce fulfillment centers–a strategy that some brands such as Lululemon began during the Pandemic crisis early in 2020.
You don’t need to stop at just one channel.
Multi-channel selling puts you in front of thousands more shoppers. Using a multi-channel approach isn’t as complex as you might imagine. Using a product feed syndication service enables you to use your own source feed as your inventory master while you’re selling in real-time across multiple channels, and even across borders. You’re able to sell on marketplaces, search engine ads, shopping comparison engines, and retargeting platforms using any product mix you select for any channel. Shoppingfeed‘s service lets you control all of your sales channels and order syncing from a single user dashboard.
My mission at Shoppingfeed is explaining how to leverage e-commerce platforms and SaaS technology to e-merchants who just want to run their business and make more money.
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