What battle-tested tactics do successful direct-to-customer brands use? And how do they use them?
You probably know the benefits of DTC:
- Reduce order fulfillment costs
- Lower order fulfillment time
- Boost profit margins
- Scale customer acquisition touchpoints
- Control brand messaging
- Govern customer data better
But you wonder, who is doing DTC well and what are they doing?
Early DTC entrants like Warby Parker and Dollar Shave Club experienced substantial growth connecting with customers directly. Today, several businesses have realized that DTC is here to stay.
But going directly to consumers without real-world proven strategies will expose you to order fulfillment challenges and might even result in losses.
So, we examined the strategies of top-performing DTC brands to see what your business can learn from them.
Let’s get to it.
1. Allbirds: Grew through brand amplification on social media
Lesson 1: Be active on social media and amplify your products on all channels before launch.
Allbirds relies heavily on social media and user-generated content to create awareness about their brand and drive massive followership. Part of their strategy is creating buzz for their products on all social media channels about a month before the launch.
And the reason is not far-fetched.
Nearly 60% of the world’s population is on social media, and they spend over two hours daily on average using social media platforms. Also, 37% of social media users are more likely to buy based on recommendations from other users against 7% that prefer celebrities.
Leveraging social media helps Allbirds reach a more sophisticated and high-reaching audience. The pre-launch marketing amplifies their message, building anticipation that could trigger customers' fear of missing out (FOMO).
The company spent over $400,000 monthly on its pre-launch marketing in 2016. It created a social media buzz that made people talk about their sneakers before selling their first product.
The move was behind Allbird's DTC successes; today, the company's valuation is over $1 billion.
How to apply this:
- Be active on all the social media networks your ideal prospects use.
- Run social media sweepstakes and contests to create buzz.
- Build credibility among the audience with consistency in brand messaging and content across all social media platforms and your website.
- Launch a hashtag and encourage user-generated content.
- Use social ambassadors and content creators to reach new audiences and amplify your message.
Social media can get you started, but it’s not enough. Explore other platforms and channels to reach more people.
2. Brunt: Grew its DTC through customer advocacy and brand ambassadorship
Lesson 2: Make customers your brand ambassadors.
Brunt understands the importance of networks. But, they know they can't do it alone. So, the company builds its DTC strategy on its brand ambassador program.
Before launch, the company devoted much of its time sourcing the right influencers. However, they were not interested in the usual social media influencers. Instead, the online work boot seller uses people who recorded themselves doing grueling work as brand ambassadors.
And this worked for them—using people in the trade as influencers.
Eric Girouard, the company's founder, and CEO believes this made them get the brand name in front of more people. He said less than 99% of the country knew them despite being less than a year old.
How to apply this:
- Build your brand ambassador program around your customers.
- Encourage customers to record themselves using your products.
- Use referral and loyalty programs to grow your customer base.
- Build an active online community of your customers.
- Add a customer testimonial page on your website.
- Ask customers to rate you on TrustPilot, Google My Business, and other popular review sites.
- Share your customer stories regularly on all your social media platforms.
- Feature customers on your weekly or monthly podcasts.
Falsifying customer reviews is skating on thin ice. Most customers can see through the charade.
3. Barkbox: Used personalization to drive D2C growth
Lesson 3: Use data to personalize the customer experience.
Customers are now more unpredictable than ever. Meeting their changing expectations requires leveraging data at a granular level. Barkbox probably understands this, so they collect customers’ data to personalize their experience.
The company built its D2C model on monthly subscriptions. Barkbox mails a box of pet treats, toys and accessories to subscribers monthly and has delivered over two million packages to customers since 2012.
They theme the packages differently each month to make their offering attractive. For example, they offer holiday-themed boxes in December. Also, the pet packaging designs are dog-centric, making them appealing to pet lovers.
Barkbox customized the boxes to the pet’s diet and size using the data they collected from customers while creating their profiles. This hyper-personalization strategy helps them kill two birds with a stone—meet individual customer needs while growing their DTC business.
How to apply this:
- Collect customers' data during signup to understand what they need.
- Use machine learning to drive personalized product recommendations.
- Let customers customize their products or package design.
- Individualize your website content to speak to web visitors directly.
- Use dynamic content to increase relevance and engage customers in real-time.
A long signup form lets you collect more detailed information for a hyper-personalized experience. But unfortunately, it can also increase the bounce rate. So, find a balance.
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4. Crocs: Drives DTC growth through influencer marketing
Lesson 4: Leverage third-party goodwill to give your brand a boost.
Crocs' expansion into online D2C channels has seen the brand garner impressive numbers. The company grew its annual sales from $24,000 to nearly $1.4 billion in less than two decades. And today, the brand continues to ramp up capacity to pursue a digital-led route to the market.
Crocs builds its digitally-led DTC growth strategies around influencers, celebrities, and collaborations with influential brands. This tactic allowed the company to piggyback on people's goodwill, followership, and network to boost their business and generate buzz around the brand.
Crocs’ revenue numbers prove the effectiveness of this move.
The company’s 2021 Q2 digital sales grew by 25.4%, representing more than 36% of Crocs’ total revenue. Also, DTC sales improved by 78.6%, continuing its double-digit DTC channel growth runs.
How to apply this:
- Decide on the goal and message.
- Focus on the social media platforms your customers converge on and expand into other channels as the need arises.
- Find the influencers your ideal customers can listen to.
- Monitor your influencer marketing performance with tracking links or affiliate codes.
- Reach out to authority websites and niche blogs for guest post opportunities.
People love the influencers for a reason. So, allow their personality to shine through. Don’t stage-manage the campaign.
5. Under Armour: Uses improved customer experiences to drive DTC growth
Lesson 5: Improve customers' experience across all the DTC channels.
Customers want a convenient shopping experience. Improving their experience across all your DTC channels—retail outlets and online DTC stores smoothen the conversion process, making buying from you more straightforward.
Anything else might not just cost you their sales, but loyalty too.
Under Armour's focus on improving sales through effective product innovation, enhanced customer connection, and improved presentation and experiences across its branded retail outlets and online stores are behind the company's DTC success stories.
Paul Fipps, the brand’s chief digital officer, said their strategy is putting the consumers at the center of everything they do. Under Armour uses data from sensors embedded in their products to create an immersive experience for shoppers and deliver greater value over their lifetime.
UAA, which started as a wholesale apparel provider, reported a 12% growth in its DTC business in 2019 Q3, reaping the benefits of its direct-to-consumer expansion. The company continues to double down on its DTC business through store expansion and improving its eCommerce stores.
How to apply this:
- Make your online stores intuitive and easily navigable.
- Add product filtering, sorting, and comparison features to streamline product searches.
- Eliminate frictions in the checkout process.
- Make it seamless for buyers to return products.
- Use machine learning to suggest products to shoppers.
- Offer round-the-clock support to provide customers assistance anytime they need it.
What works for others might not work for you. Run surveys to determine what customers want and implement them to the letter.
6. Yeti: Builds Its DTC Strategy on Customer Retention
Lesson 6: Develop a robust customer retention strategy.
Yeti's strong DTC performance is easily traceable to its data-driven customer retention program. Perhaps, the company understands that it's easier to sell to existing customers than to acquire new ones or that over 60% of a company’s business comes from its customer base.
Hence, Yeti builds its omnichannel strategy on customer retention, using data collected over a long period to understand its customer makeup to drive more meaningful engagement.
Yeti's president and CEO, Matthew Reintjes, said the company is also driving strong retention rates in addition to the acquisition side. According to him, Yeti is leveraging the strong retention rates to learn customer buying patterns and their likelihood to buy again.
Reintjes said the experience helps them feed the top of the company’s acquisition funnel.
Yeti reported a 23% net sales growth in the 2021 third quarter, while DTC sales grew by 31%. Also, revenue per customer recorded a double-digit YoY percentage increase.
How to apply this:
- Use data to understand your most active customers.
- Then, adjust your pricing for returning customers.
- Implement a point system or loyalty program to get a customer coming back.
- Create free content that resonates with customers.
- Cross-sell customers regularly via emails and retargeting ads to drive repeat sales.
Customer retention and acquisition are two sides of a coin. None is more important. Give them the same attention.
7. Warby Parker: Ties its D2C strategy to a social course
Lesson 7: Be socially responsible—promote a purpose with your brand messaging.
Warby Parker's mission is to alleviate the problem of impaired vision. Neil Blumenthal, one of the company's founders, said they wanted to build a business that’ll impact the world positively.
Hence, the company gives a pair of glasses to someone in need for every pair of glasses a customer buys. Warby Parker has given away over ten million pairs, meaning they have sold up to that number.
Building its D2C marketing around this strategy makes customers feel like they are helping society by patronizing them. It also portrays the brand as people-centric, and more of a non-profit organization, making customers more comfortable buying from them.
Warby Parker met their first-year sales target within three weeks of launch and sold out its top 15 products after the fourth week. Within a decade, the company hit a $2 billion valuation—an impressive number for a business that started with $120,000.
How to apply this:
- Find social causes that will appeal to your customer base.
- Communicate your social mission clearly on your website and how it benefits society.
- Establish the financial impact of your social cause and the safety margin.
Social responsibility can eat into your profit margin. Ensure it doesn't hurt your bottom line.
8. Ugly Drinks: Adopts unique DTC strategies for each market
Lesson 8: What works in one market might not work in the other.
Ugly Drinks adopts a different marketing strategy for each of its markets. However, it understands that a one-size-fits-all marketing strategy will not hit the marks.
The company started in a London, UK shipping container and launched in the US in 2018, seeking a place in this $8 billion market. Ugly focuses on innovation in the oversaturated US market, aiming to stand out with a market-leading product.
However, in the UK, where its product is new, the company adopts category education to get the customers to understand what sugar-free drinks are and their health benefits.
How to apply this:
- Carry out grassroots sampling to understand what will work in each market.
- Set measurable metrics to track performance in each market.
- Find out what’s already working for your competitors and try to beat them to their game.
Set a benchmark for each market and pivot if the results are not promising.
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9. Away Luggage: Uses multi-channel DTC to drive sales
Lesson 9: Build a multi-channel online presence.
The more networks you can leverage to reach more customers, the better. Away takes its business beyond its traditional DTC channels. The luggage company sells on Amazon and other marketplaces to push its products further.
The omnichannel presence opens multiple touchpoints for customers to reach them on their preferred channels, providing the brand opportunities to scale its business and improve its numbers.
The company generated over $12 million in sales in its first year and grew the number five times a year later. In less than three years, Away generated 4125 million, selling more than half a million suitcases and accessories.
To consolidate its numbers, the luggage retailer raised $50 million in Series C funding to take its DTC expansion beyond online and establish a physical brand presence on the streets, catering to non-online shoppers.
How to apply this:
- Open official stores in all the major marketplace to meet new customers.
- Harmonize your prices across all your sales channels to prevent sales cannibalization.
- Ensure other third-party retailers are not reselling your product on any of the marketplace.
- Offer discounts only on your DTC store to gradually move your marketplace buyers to your primary sales channel.
Expanding into marketplaces could cause channel conflict. Ensure to plan for that.
10. Bonobos: Blends online sales with in-store sales for D2C growth
Lesson 10: Don’t sell only online—also cater to non-online shoppers.
Not every consumer is cut out for the online shopping frenzy. So allow those on the other side of the divide to shop in-store.
Bonobos launched as a digitally native D2C brand in 2007, selling only pants in an era people were hesitant to buy clothes online. Its success inspires other brands to explore D2C channels.
After gaining brand recognition and a loyal following, the company expanded its product line and opened brick-and-mortar guide stores, enabling customers to experience their brand physically.
How to apply this:
- Begin your DTC journey online because of its low overhead and expand to brick-and-mortar shops after growing demand and the brand image.
- Open your retail outlets where most of your ideal prospects live.
Opening physical stores can also lead to channel conflict.
BONUS: 5 Direct-to-Consumer (D2C) Myths Shattered
The pandemic caused an unprecedented disruption that put global commerce and the supply chain at risk. But going direct to the buyer helped several brands maneuver the uncertainties without suffering significant hits.
Yet, DTC myths abound.
We'll explore the five biggest myths and why they don't stand.
Myth 1: DTC may have worked during the pandemic, but things are getting back to normal now
DTC has a place in post-pandemic commerce. Several brands have been relying on the channel to expand their reach and push more products to the customers before the pandemic.
And they have seen success with it.
Apple controlled the personal computer market in the 1990s. The company relied on authorized resellers to get their Mac products to the end-users. However, channel conflict made them dump the wholesalers for DTC sales to regain its market share.
The brand started selling online in 1997 and through company-owned retail stores in 2001.
Today, Apple’s Mac controls about 14.5% of the US personal computer market, up from 10.2% the previous year.
Verdict: DTC has worked for many brands in the past and at the height of the pandemic. It'll also work in the future.
Myth 2: D2C is for digitally native, online-only companies, not for established consumer brands like ours
That DTC works only for online-only companies is a misconception. We have seen non-digitally native brands scale their business with DTC sales. And you can benefit from going direct too.
Braas Monier, an established German roof maker, relies on distributors to sell its products. So expanding into DTC seemed counterintuitive for the type of industry it's into. However, the company launched a new DTC brand (MeinDach), independent of the parent, to reach customers more directly.
But the company’s DTC expansion approach was quite unorthodox. Instead of selling directly to consumers, the new brand connects roofing contractors to homeowners, reducing customers’ wait time.
This approach paid off.
The company boosted sales about five times the annual average for a typical German roofer within 12 months of launch. In addition, its customer acquisition costs dropped from hundreds of Euros per homeowner to about €20.
Also, the number of contractors willing to partner with Braas Monier increased from 12 to 500 within a year.
Verdict: DTC can also work for non-digitally native companies. Established consumer brands relying on distributors can launch a separate direct-to-consumer business to prevent channel conflict with middlemen.
Myth 3: Going D2C will upset our retailers, or worse, cut our relationship
The fear that D2C will create channel conflict with your retailers could be true or false, depending on how you handle it.
Here’s the thing:
Multiple sales channels help you maximize your distribution potential and reach more buyers on their preferred channels. But the channels could bump into each other, leading to sales channel conflicts that could upset your retailers or, worse, cannibalize your sales.
Managing channel conflicts prevent these, enabling you to enjoy DTC expansion benefits.
Apple understood that expanding into DTC could set it on a collision with its resellers. So they prevent this by eliminating discounts. The move ensures that neither Apple nor the resellers can steal sales from others by offering heavy discounts.
However, they can incentivize purchases with product giveaways or gift cards.
Verdict: Going DTC will not upset your retailers or cannibalize your sales. The inability to manage the conflicts will. And our free online resource on managing sales conflict could help.
Myth 4: D2C is just another passing trend that will fall out of style
DTC has come to stay. It’s not going away anytime soon. More consumer brand manufacturers continue to adjust their retail strategies each year to sell directly to their customers, cutting out the middlemen.
Consequently, about 40% of Americans have bought directly from a brand or manufacturer, bypassing retailers and marketplaces like Amazon. eMarketer projected that DTC customers would reach a new high of 103 million by 2022.
Verdict: DTC is not another passing trend. The stats prove that. Also, we believe the sales channel will continue to turn out more impressive numbers as more people embrace online shopping.
Myth 5: My D2C store cannot compete with other marketplaces, so D2C isn't profitable
Going direct means you don't have to share a part of your profit with marketplaces. You're also in charge of your marketing and can retarget to win lost sales without facing marketplaces' inherent limitations.
With DTC, you can collect customer data across all the touchpoints to optimize their conversion journey and improve their shopping experiences. Additionally, it lets you leverage affiliate programs to expand beyond your sphere of influence to reach new customers at lower acquisition costs.
So, your DTC store can be as profitable as established marketplaces.
Nike would rather sell direct to customers than sell on Amazon. But it started selling on the platform in 2017 to recover lost sales from third-party resellers who bought the products wholesale from Nike retail stores to resell on Amazon at lower prices.
Two years later, Nike dumped Amazon for its online DTC store. Today, DTC sales are Nike's best-performing channel.
Verdict: A well-optimized DTC store will outperform marketplaces.
Benefits of Direct-to-Consumer Marketing Strategies
Several consumer goods manufacturers have improved their numbers by eliminating intermediaries. DTC expansion has many promises; but it demands tact and attention.
So what’s in it for you if you decide to go direct to customer?
1. Higher profit margins
Selling directly to customers means you don't have to share your profit with middlemen, putting more money into your coffers. With a bigger war chest, you can take on the competitors, strengthen your marketing and scale more quickly.
Additional cash flow means you can also invest in product innovation, improve customer service and pursue brand differentiation to stand out in the market.
2. Control your brand image better
No one understands your brand and messaging better than you. But unfortunately, allowing middlemen to deal directly with your customers yields them complete control over your product, brand, marketing, and reputation, putting you at their mercy.
Eliminating them puts you in the driver's seat, allowing you to control people's perceptions of your brand.
3. Boost brand loyalty and customer retention
Dealing with customers on a daily basis lets you build bonds and foster relationships that connect buyers emotionally to your brand and nurture them into loyal followers. It also boosts your retention rate, consequently lowering your customer acquisition costs.
Selling through distributors pushes customer loyalty to them instead of to your brand. Also, customers can easily dump you for another vendor when distributors switch to a new brand.
4. Get useful feedback and a shorter feedback loop
Customers want brands to anticipate and exceed their needs. Regular feedback helps you meet this expectation. With DTC, you can talk directly to customers rather than get a filtered version through the retailer.
It also ensures a shorter feedback loop, meaning you can innovate quicker or address customer concerns as soon as possible.
5. Access your customer data more directly
Direct-to-customer marketing lets you access customer data directly across all their touchpoints, providing actionable insights to optimize your marketing. You can also carry out customer surveys and run A/B tests to streamline the customer experience.
Additionally, DTC helps you cross-sell and up-sell customers to increase average order value and customer lifetime value, respectively.
6. Opens up new and valuable business opportunities
An omnichannel sales strategy scales your customer acquisition channels, opening opportunities for people to reach you and interact with your brand. Also, DTC's high scalability means you can scale your direct-to-customer channels at will to meet growing demand.
You can also use affiliate or reward programs to get customers involved in your marketing, leveraging their reach to explore new markets.
Cons of Going DTC
Taking your brand directly to consumers would be nice, but it has a downside. So let's explore them to see what they'll mean for your business.
1. Increased liability
Having people between you and the customers means they can take some hit directed at your business. Eliminating them exposes your company to all the risks previously undertaken by your middlemen. It also makes you vulnerable to cyber-attacks.
2. Every day becomes more complex
Maintaining a DTC channel requires staying on several moving parts. From building a larger team and managing your marketing and customer service to handling logistics, including stressful returns, going direct could make your workflow more complex.
3. Need an expert team to pull it off
DTC expansion is not easy to pull off. So, you might require third-party expertise to get it done without breaking your business. Also, going direct to buyers could require retraining existing staff while hiring more people, which increases your overhead cost.
Thinking of entering D2C? And When is the right time to enter D2C?
Casper made headlines when its unique offering failed in the DTC market. So, it's essential to get your timing right before going direct.
The company launched in the US in 2014, selling mattresses and bedding accessories, and expanded into the UK two years later. Casper reported about $600 million in revenue within three years of launch and secured a deal with Target to stock their mattresses in 1,200 of its stores.
In 2018, the company announced an ambitious plan to open 200 stores across the US to further its brand, barely six months after launching its first retail DTC store in New York. The new store allows customers to try the mattress in an enclosed space; something Target might find challenging offering customers.
But things didn’t work out as planned.
The company lost $67 million on $312 million of revenue through September 30, 2019. The company's growth tanked by 50% over one year and made more than $223 million in losses.
As if that's not enough to worry about, Casper's initial public offering flopped the following year, making it one of the worst performers of the 2020 IPO class.
They were looking at a $19 IPO price, but the pandemic forced them to settle for $12. The following year, Durational Capital Management acquired the company for $6.90 a share—a sad exit for a wannabe DTC brand that failed to live up to its hype.
Casper's sad tale begs the question, “when is the right time to go direct?”
Let’s find out.
Achieved brand loyalty
Going direct without first achieving strong brand loyalty could be catastrophic. Your retail distributors are likely to switch to a new supplier if you cut them off, and since they have a firm grip on your customers, taking them along would be less challenging.
Have a strong retention rate
As you already know, over 60% of sales revenue usually comes from repeat buyers. With a strong product repurchase rate, you can quickly move to DTC without fearing losing your customers. Unfortunately, people typically change their mattresses after about nine to ten years, making DTC unattractive for Casper.
You can switch to DTC if you have sufficient demand to support that growth. It reduces the pressure on your existing channels and allows you to reach your customers directly. However, intermediaries can help slow-moving products gain market recognition and growth.
Start Applying These DTC Market Strategies
You have ten proven ways to grow your DTC brand and as exciting as that might feel, don’t let it overwhelm you. Instead, take one step at a time. Apply one idea, and see how well it works for your brand before you move on to the next idea.
We have seen ten things some leading DTC brands do behind the scenes to drive their omnichannel growth. Applying all the strategies could help you replicate their success stories.
However, ensure you don’t make poor brand growth decisions like Casper. The sleeping brand’s attempt to grow too fast in a short time came back to hurt them.
One key takeaway is to not act on a whim. Instead, take baby steps at the beginning and giant steps only when you’re sure you won’t falter.