Some changes make an everlasting impact.
We all know how COVID-19 pandemic made online selling a priority for businesses of all sizes. In Europe, overall digital adoption rose from 81% to 95% during the pandemic. Instagram, social media and marketplace focussed sellers were looking at short-term opportunities and never looked at the scalability of their business models. But was it sufficient to stick to the short-term gains derived from selling on marketplaces? While large enterprises were well-versed with the granular details of the e-commerce world, small and medium-sized businesses faced numerous challenges, from building a brand to personalizing the platform, to setting up a team with the right skill sets to managing customer experience. The accelerated digitized shift clearly led to one thing – Everywhere, everyone bought everything online. Let’s take a look at the global statistics to understand how the E-commerce world fared in the last two years:
- U.S. e-commerce sales in Q3 2021 were up 45.6% compared to Q3 2019
- E-commerce sales made up nearly 20% of all retail sales in 2021
D2C E-commerce: A Profitable Future
While selling on marketplaces and through social media might be a good starting point, D2C E-commerce empowers brands to ‘own their customers’. By launching own-brand D2C E-commerce, companies can design signature customer experiences and buyer journeys, collate invaluable first-party data, establish direct connections with customers, and ultimately control profits.
Indian market share of D2C is expected to reach $100 billion by 2025 with over 800 brands expected to foray into the D2C world.
The challenging e-commerce world for D2C brands
E-commerce has struck the right chord with enterprises, signaling their digital transformation intent. The closure of physical stores due to COVID regulations, low-cost shipping rates, and relatively easier customer acquisition through cheap Facebook ads had enabled many retailers to drive online sales. However, what businesses didn’t factor in during that time was their ability to look at the scalability of the existing e-com model, 8 to 12 months later. Following is a list of the recent turn of events that have created a stir for businesses:
- The era of cheap Facebook ads drawing to an end: In the past, cheaper Facebook ads led enterprises to sell more by driving product discovery even when the organic traffic was low. Browsers were often turning into purchasers. What was once a boon for retailers to advertise their goods and services, has now become a bane for the community. With the price of Facebook ads having almost tripled in the last two years, brands’ endeavor to build brand recognition and product discovery has become that much more difficult. Customer acquisition cost has increased immensely. Shopify too experienced this jolt as brands who launched their E-commerce storefronts on Shopify relied significantly on Facebook ads to acquire customers. The immediate fallout was Shopify’s growth began to slow and eventually led to its stock price being reduced by 50% over the last 12 months.
- Restricted tracking activity imposed by global tech giants: Apple’s key privacy update a year back in April 2021 clearly established that advertisers need to seek permission to track users’ activity. This further made it harder for D2C brands to measure Facebook ad performance, optimize the digital marketing campaigns and track important metrics of ROAS (Return on Ad Spend).
- Last-mile supply chain management woes: Managing the overall fulfillment infrastructure can be an arduous task. While not all retailers will be gifted with multiple warehouse storage spaces, shrinking delivery times offered by Amazon and the likes have further heightened customer expectations with respect to delivery. Globally, the import costs have been largely impacted by a steep increase in the price to ship a container from China to the US (from $2k to $15k).
- Investors’ focus on profitable ventures: Did you know that only 24% of new businesses launched in the last decade have turned out to be large-scale enterprises? That implies a major chunk of businesses are still waiting to turn a profit for their investors. Investors are showing more inclination towards profitable ventures which implies that medium-size direct-to-consumer entities clearly need to improve their e-commerce game.
- Erratic technology infrastructure: Setting up an e-commerce platform from scratch can be taxing with the plethora of platforms and features available currently, making technology selection a complex and time-consuming task. One wrong choice of tech partner/platform might create an almost irrecoverable dependency later on, forcing brands to invest more time and resources to salvage the situation. With so many technology partners serenading the SaaS market, brands must be clear with their objective first and then choose the technology platform accordingly.
How D2C brands are braving all odds in today’s e-commerce world
D2C businesses must strive to keep themselves future-proof, in order to prevent unforeseen challenges. Here are 5 ways how D2C brands can make the most of their e-commerce sales:
- Leading with word-of-mouth recommendations: 92% people trust recommendations through word-of-mouth and other direct sources. Influencer marketing is also gaining prominence as being a credible resource. Brands can focus more on building the experience organically than focusing solely on paid promotions.
- Focus on customer engagement: Unless there is a comprehensive customer retention and engagement strategy, D2C businesses are bound to stagnate. Customers must thus be engaged beyond their regular purchase transactions with personalization or loyalty programs thereby helping the brand to create an emotional connect with the customers.
- Choosing the Right E-commerce Partner: D2C brands would do well to partner with e-commerce solutions providers who are as invested as they are in building the business. Increasingly D2C brands are turning to full-stack e-commerce solutions providers who manage the entire e-commerce infrastructure, from platform to growth marketing, from order management to customer retention and loyalty. Challenges that might arise at a later date such as scalability are addressed by the full-stack partner, leaving the D2C brand to focus on Growth and Revenues. D2C brands would be well advised to select a full-stack partner with their own proprietary e-commerce platform combining digital commerce, experience management and growth marketing, as customizations and integrations would be quick and seamless.
- Choosing the Right Operating Model: Successful D2C brands are increasingly adopting a revenue-share model with their full-stack e-commerce solutions partners, ensuring minimal upfront or switching costs.
- Investing in brand-building: While most successful D2C brands start off with a great product, it is critical in today’s competitive e-commerce scenario to build a ‘brand’. The significant costs incurred in acquiring a customer is only recovered if the customer stays with the brand for a long-time. Also, investors are increasingly favoring D2C businesses that have demonstrated an ability to differentiate from competitors through intensive brand-building.
India is on the verge of a take-off in the D2C e-commerce space. The success of brands such as Nykaa, Bombay Shaving Company, Sugar Cosmetics, etc. has inspired a whole generation of entrepreneurs and mavericks to start their own D2C businesses. The e-commerce partner ecosystem in India is also maturing; newer engagement and operating models such as full-stack e-commerce are empowering entrepreneurs to dream big and focus on the idea or the product while leaving the heavy-lifting to experts.