As brands scramble to find new retail partners in a quickly changing landscape, many are contemplating converting to direct-to-consumer (DTC) models. In 2019, PSFK Research released a major report describing the various strategies to employ, which we recently reviewed to share these tenets from the heavily downloaded survey.
Alongside each point, we've highlighted best-in-class examples of retailers representing how to adapt and implement the strategy. Overall, these tactics will help brands in any category own their infrastructure, experience, and customer relationships to survive and thrive in the face of major disruption.
Own The Infrastructure
This tenet is about building vertical integration to deliver on consumer expectations for speed and convenience (and now safety), as well as collect valuable data in order to improve products and operations. It includes the following trends:
- Automated Efficiencies: Use automation to outsource repetitive and time-consuming tasks. Walmart has notably done so with plans to increase its robotic store fleet for managing inventory throughout this year—read the PSFK case study.
- Multi-Tier Distribution: Apply sophisticated and flexible distribution strategies to allow consumer to choose the most convenient channel. Best Buy has swiftly pivoted its business model to allow sales to continue through curbside pickup or doorstep delivery only, as well as offered virtual consults to stand in for at-home repair or installation services.
- Responsive Operations: Use data to quickly adapt or even anticipate shifts to be first to market with new products and/or better serve the needs of customers. Fanatics, an online sports merch platform, created jerseys in a matter of hours following the news break of basketball star Lebron James' new team.
Own The Experience
This second pillar is about embodying your brand in order to control the customer experience at every stage of their journey, ensuring your brand becomes an integral part of their daily lives—something DTCers typically excel at.
- Offer Expertise At Every Stage: Position the brand as a category expert through service initiatives designed to boost confidence throughout the shopper journey. U.K. high-end department store retailer Harvey Nichols does so with its AskHN platform, which connects in-store stylists with online customers to chat and provide them with personalized guidance live-streamed from the store floor.
- Shift Stores From Sales To Service: Post-lockdown, changed behaviors and new needs will shift the focus of retail stores from volume-based sales to personal added-value services. Nordstrom is ahead of this game with its Local concept—merchandise-free locations that instead function as a service & support hub, providing styling, pickups & returns, gift wrapping and more.
- Curate A Broader Lifestyle: Develop complementary offerings and resources that speak to the broader needs and passions of customers. LG Electronics has done so by teaming up with media company Buzzfeed's Tasty food network, designing subscription box sets that provide recipients with everything they need to make cookies—including pre-measured ingredients, tools, and even aprons!
Own The Relationship:
This final pillar is about developing and maintaining a two-sided, ongoing relationship with consumers—a foundational strategy for DTCers. They not only use data to send personalized communications to consumers, but also actively solicit input from them. Inviting them to contribute to the research and development process gives consumers ownership over their favorite brands.
- Power One-To-One Relationships: Using AI-enabled systems to interpret personal data to power one-to-one communications and make every shopper feel like a VIP. Chinese ecommere giant Alibaba teamed up with Guess apparel for the debut of its Fashion AI concept store, where customers could check in via QR code or with their face, then browse RFID-enabled merchandise that automatically appeared in a smart mirror for additional suggestions as they chose items.
- Give Customers Ownership: Invite trusted members and loyal fans into the research and development process to share their expertise and feedback on products and services. Target's Studio Connect program did so by allowing fans to contribute to final product designs, connecting participants with Target designers directly through an app experience.
- Deliver Meaningful Value: Offer connected services and rewards that add ongoing value and convenience to help customers meet their various needs and lifestyle goals. ShopRite supermarket actually moved in-store personalized dietitian consultations for customers online, maintaining their accessibility even during low-contact times.
Many of these tactics for owning the retail lifecycle were emerging prior to the crisis, but typically were implemented by strategic DTC brands. As questions about the future POS, distribution channels, and, of course, the physical store remain unanswered, we hope that these powerful tenets can provide direction, inspiration, and empowerment across categories.