Direct-to-consumer brands do not kowtow to Covid-19.
While other retailers furlough staff, defer investments and declare bankruptcy, agile DTC and digitally native brands respond by fast-tracking customer engagement initiatives already under way prior to the pandemic. As a result, only 22% of DTC brands surveyed by Totem Media reported sales declines, far fewer than the 80% of larger, traditional retailers that suffered sales dips since onset of the global health crisis.
Research findings released late today by social media agency Totem spotlight how direct-to-consumer brands in the U.S. and Europe are responding to the coronavirus pandemic. Conducted in mid June, the survey of 89 DTC brands across home, fashion, beauty, electronics, food and other verticals reveals a shift from defensive tactics early on to offensive strategies. Among them:
- retain and redeploy store-based workers to new digital roles rather than release them;
- increase digital ad spend;
- amp up customer service; and
- fortify digital capabilities
Direct-to-consumer brands’ ability to capture sales while other retailers are losing ground is credited in large part to their strong digital infrastructure. While traditional retailers scrambled to manage store closures and rebalance inventory, DTCs kept selling online with more than half of survey respondents (52%) experiencing surges in demand. DTCs were not immune to supply chain disruption, however, and keeping sufficient inventory in stock remains a challenge for many, the survey found.
A focus on customer support, being responsive answering questions in timely fashion and building trust amidst all the uncertainty served DTCs well during the first half of 2020. Those respondents with flat or falling sales frequently cited trust issues as the culprit, something to work on.
“DTCs also demonstrated the willingness to ‘double down’ on key digital channels during times of stress,” said Chris Baker, founder of Totem Media. “A good example of this can be found with DTCs that increased Facebook spending during the depths of the pandemic, while many traditional brands were pulling back from digital spend.”
The vast majority (85%) of respondents said they will invest further in Facebook during the second half of 2020. Other digital channels such as Instagram, Amazon
Unlike traditional retailers, DTC companies resist cost-cutting and are less frequently hobbled by decision-making paralysis, the survey found. In response to Covid, most DTC brands surveyed said they enhanced customer service via phone, email and online chat. Others took it further with video chat and livestreaming, with some redeploying store-based staff to new digital roles in marketing and customer service.
“Brands like Exotic Athletica, Icelandic bike company Lauf and M.M.Lafleur have taken the retail consultants who would have been in retail stores and brought them online—through video—to support customer needs and sell,” Baker said. “They are recreating the in-store experience, helping customers make good decisions, and in doing so, they are bringing sales and customer service functions closer together.”
DTC companies forced to close physical stores like New York’s furniture brand Burrow and Los Angeles’ home essentials brand Parachute, began offering consultations with design experts by phone, text and online for shoppers.
“It’s important to find ways to build relationships with our customers and community when we can’t connect IRL,” said Ariel Kaye, CEO and founder of Parachute, which launched in 2014 as an online-only DTC brand and operated seven brick-and-mortar stores prior to the pandemic.
“This program has been successful since we first started testing, and given our temporary retail closure, we’ve expanded our offerings to include video styling and increased the amount of appointments available for our customers,” Kaye said.
Parachute is currently booking about 45 appointments per week and 40% of those customer interactions convert to immediate sales that are double or three times the average order size, a company spokesman told me yesterday. Stores have since reopened with limited capacity and two additional brick-and-mortar stores are due to open in August, according to Parachute’s website.
While a handful of DTC brands surveyed say their business has not been disrupted or already has returned to normal, the largest group of respondents (38%) believe a “return to normal” won’t happen until the second quarter of 2021, or later.