Let's be clear: E-commerce is NOT Direct-to-Consumer
The Direct 60 Matters Now More Than Ever
Over the past four years, The Lead has been tracking challenger brands. They’ve been called D2C, DNVB, digital-native, digital-first, consumer start-ups, and more. But if there’s one thing we agree on it’s this: these venture-backed brands reinvented the direct-to-consumer business model—defining its many parts, conditioning shopper behaviors, and creating new expectations for customers. Since 2018, The Foremost 50 List, Ones to Watch, and The Foremost 50 Insights Report have tracked these companies and trends.
Let’s get clear on what direct-to-consumer is. It is not merely about selling more from a brand’s eCommerce website. It represents a fundamental change in the way brands design, manufacture, and sell products to the end consumer. It starts with defining who the core customer is and what value the brand wants to deliver to them. It’s about aligning the brand ethos with those of its customers and reorienting the business model to deliver on that value proposition. And finally, it’s about creating a seamless brand experience across all owned channels—the website, physical stores, and social.
Prior to the pandemic, brands that traditionally sold through wholesale channels were cautiously looking to increase their direct-to-consumer sales in order to 1) improve on margins, 2) get access to customer data to inform design / merchandising decisions, and 3) build loyalty. They had witnessed numerous digital-first brands who were successfully challenging the wholesale-first, go-to-market strategy as they moved online over the last decade. These legacy brands, however, were mostly playing on the fringes of the D2C opportunity, so as not to disturb the status quo.
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When stores closed and wholesale partners canceled orders in 2020, brands were forced to invest in their digitally-direct channels to stay alive. The pandemic brought customers to brands’ sites—customers that had not bought directly from them before. With retailers no longer aggregating demand for brands, the dynamics of the brand-retailer relationship changed.
Legacy brands are now wanting to seize on this opportunity to seriously diversify their business and control their own destiny. But they realize the high degree of transformation it requires to compete successfully in the new D2C world. They’re cutting silos, shedding tech debt, rethinking decades-old business practices, and hiring digitally savvy talent.
To illustrate the learning curve, let’s zoom in on one aspect of the value chain: customer acquisition. Legacy brands have had to pivot their marketing efforts and focus heavily on digital marketing channels to drive traffic to their site. Recently, we interviewed Wunderkind, a leading performance marketing engine used by brands like Uniqlo, Sonos, and HelloFresh, to get a better picture of how legacy brands are evolving in this critical area.
According to Wunderkind, brands quickly discovered that different digital channels often produced wildly different results. While PPC and display can be high-performing, they’re also bid-based. As a result, CPAs and CPCs spike, especially as more and more brands move online. Brands like rag & bone (a Wunderkind client) have had to quickly get smarter about using owned channels like email and text to reach a larger audience amidst this increased competition. Using Wunderkind’s platform of Triggered Texts and Emails, rag & bone is now driving over 20% of their total digital revenue through those channels alone.
The D2C business model is a powerful tool for all brands but building this D2C muscle is difficult. At The Lead, we want to spotlight the emerging innovators by identifying those individuals forging new paths behind the scenes. By examining the executives transforming legacy brands you will quickly learn what works, what doesn’t, and how to apply these learnings.
Wunderkind is a leading performance marketing engine that delivers tailored experiences at scale. Digital businesses use Wunderkind to remember who users are better than ever before, allowing them to deliver high-performing, one-to-one messages on websites, through emails and texts, and in ads at a scale that’s not otherwise possible. Wunderkind drives $2.8 billion dollars annually in directly attributable revenue for top eCommerce brands, often ranking as a top-3 revenue channel in their own analytics. Wunderkind is maniacally obsessed with ROI and aims to be the infrastructural interface between individuals and brands in a world where consumers choose what they want, from whom, and when. Learn more at Wunderkind.co