Scalefast’s annual DTC Hype Report reveals increasingly blurred lines between direct-to-consumer companies and legacy retailers or branded manufacturers
Scalefast, a Los Angeles-based digital commerce solution that is changing the way modern brands do direct-to-consumer (DTC) eCommerce, released the first half of its annual “2021 DTC Hype Report,” revealing that traditional retailers and branded manufacturers have gained ground compared to DTC companies in the past six months, notably marked by a pandemic that negatively impacted business of all sizes and their respective supply chains.
DTC brands have spent the last decade grooming themselves to become the golden child of the retail industry, using their digitally native DNA to change the way consumers interact with brands and shop for everything from razors and mattresses to house plants.
However, after a year of immense uncertainty, consumers have found comfort with more familiar brands. Traditional retailers and brands were able to shift to an online market on a huge scale – taking over the format with all the power of the industry heavyweights – to the point where nearly one in three (30%) Americans see no difference between buying from a DTC company and a traditional retailer – doubled from that same ask in 2020.
The study, conducted online with the third-party research firm YouGov, uncovered not only changing perceptions that consumers hold around DTC brands, but where branded manufacturers can further compete against the much hyped DTC brands in the marketplace.
DTCs Lagging in Reliability
DTC brands have yet to build up that all-important reliability factor over the past six months, with only seven percent of Americans finding that DTC brands were most reliable over the past six months. Heading into 2021 with the pandemic still raging, online marketplaces, traditional retailers and branded manufacturers have tremendous opportunity to leverage their perceived reliability to their advantage to attract and keep customers:
In the past six months:
• Over half (57%) of Americans found online marketplaces like Amazon and Walmart.com most reliable
• 41 percent found traditional retailers most reliable
• 38 percent found local businesses most reliable
• 15 percent found branded manufacturers (like Apple and Nike) most reliable
“Pre-pandemic, DTC brands were seen as the digitally savvy retail category of the future,” said Olivier Schott, founder and CMO of Scalefast. “What we’re seeing now is that many traditional retailers and branded manufacturers have learned valuable lessons from DTC brands, successfully expanded their own direct-to-consumer channels and are now able to deliver an experience worthy of keeping and bringing back more customers. With supply chains still heavily impacted, customers want what they’ve always wanted – fast shipping, seamless experiences and a decent price point. As DTC brands fight to survive and deliver on these simple promises, experienced branded manufacturers have actually started to catch up and the fight for customer attention has never been fiercer.”
As DTCs have begun employing tactics from traditional brands, branded manufacturers and traditional retailers are doing the same. Many are copying DTC tactics and building their own eCommerce – expanding their DTC strategies and channels, as evidenced by changing consumer perceptions of DTC brands compared to Scalefast’s inaugural study:
• 10 percent of consumers say DTC companies are more likely to be ahead of or on-trend than traditional retailers, down from 19 percent in 2020
• 10 percent of consumers say it's easier to make a purchase from a DTC company than a traditional retailer, down from 18 percent in 2020
• Only 6 percent believe that DTC companies are more technologically forward, down from 14 percent in 2020
• Only 8 percent believe that DTC companies have a better user experience, down from 13 percent in 2020
Building a Robust DTC Channel
As traditional retailers and branded manufacturers continue to steal some of the spotlight back from DTC companies, there is more to learn from these digitally native brands. Areas where consumers are looking to explore more DTC brand categories may signal where manufacturers and retailers should be expanding their own direct-to-consumer channel capabilities. Over the next year, consumers are exploring purchasing from DTC brands that cover food/grocery (25%), apparel (20%), household items (17%), personal electronic brands (16%) and footwear/accessories (16%).
Back to Basics
While brands have spent the last few years trying to prove themselves the most innovative, like their digitally savvy DTC competitors, building creative sales models and influencer endorsements – these strategies may be distracting from the key value that shoppers want from the brands they frequent. A successful DTC sales channel needs to focus on:
Delivery: Make it fast. As shipping delays have plagued the retail industry, consumers turn to brands, retailers and online marketplaces that can promise fast and free shipping as many companies struggle to meet delivery timelines.
• 42% of Americans would purchase directly from a branded manufacturer over a third-party seller if they promised free & fast shipping
• 46% of Americans would be more likely to purchase from a DTC brand specifically if the shipping is free
Promotions: Make it affordable. With so many options available for each purchase shoppers make online, shoppers are searching for the most budget-friendly options, making exclusive sales and promotions a huge incentive.
• 46% of Americans would purchase directly from a branded manufacturer if they received a promotion or discount from the brand
• 41% of Americans would be more likely to purchase from a DTC brand if it is a cheaper option
Convenience: Make it easy. In a high-stress time, each step in the buying process creates an extra hurdle that shoppers are not willing to jump over – in fact almost 1 in 5 (19%) made a purchase based solely on convenience for the first time in the past six months. Brands need to focus on creating a seamless experience from the first point of contact through to customer interactions and even returns.
• 26% of Americans would be motivated to purchase directly from a brand if they could easily reach customer service for help/if there is an issue
• 24% of Americans would be motivated to purchase directly from a brand if they had superior customer service
Moving forward, DTC brands, branded manufacturers and traditional retailers will all have to compete for market share against the monolith that is Amazon. What’s clear is that the once retail darling DTC companies have lost some ground during the pandemic and other retailers are ready to step in and invest in direct-to-consumer channels that are just as reliable.
All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 1223 adults. Fieldwork was undertaken between 22nd - 25th January 2021. The survey was carried out online. The figures have been weighted and are representative of all US adults (aged 18+).