eCommerce has jumped from 16% to 27% of total US retail sales in just the past 8 weeks. The coronavirus pandemic accelerated retail eCommerce and direct to consumer growth, and set the stage for a digital gold rush. eCommerce has in fact become the primary shopping channel in the U.S. according to The New York Times.
Last week AcuityAds hosted a virtual panel with seasoned experts to share their insights & experience building successful direct to consumer (DTC) and eCommerce businesses. You can find the video replay and presentation materials right here.
Meet The Direct to Consumer Experts
Joining the panel was Beverly Stotz and Allan Peretz who bring a combined 40+ years of experience developing digital presence for global brands. Beverly is the former CMO of 20 years at illycaffè, a global direct to consumer coffee brand. Allan is currently the president of Bold Strategies Inc. with experience launching direct to consumer eCommerce channels for global consumer brands at P&G. The panel was moderated by our Chief of Strategy, Seraj Bharwani. Below you will find a summary of key learnings from the discussion.
Let The Panel Begin!
Beverly, what inspired you most about illycaffè? And, what prompted your team to focus on the DTC eCommerce channel almost two decades ago?
Illycaffè is an Italian, omnichannel brand that is sold globally. I love premium brands and focused much of my career working with them including Häagen-Dazs and L’Oreal. Consumers become familiar with the product and experience you have to offer. The illycaffè premium shopping experience had to be translated online because people wanted to have our products in their home. Consumers were looking for an upscale coffee experience and we were able to offer that by selling coffee and machines directly. The stakes are high when pursuing online leadership but if you succeed in creating a strong online following, retailers are more likely to work with you, so it’s a win-win!
Allan what motivated you to found Bold Strategies?
Over time I realized how difficult it is to go through the process of creating a direct to consumer eCommerce platform. Usually, you work with 5-6 suppliers to bring the strategy to life including web developers, acquisition marketers, conversion specialists, and much more. I noticed a consistent lack of accountability – we weren’t sure what worked and what didn’t. I saw an opportunity to bring eCommerce under one roof and the need for a cohesive team of specialists that can serve as a one-stop-shop for the CPG marketers.
Why do some established brands struggle to figure out direct to consumer?
Over the past 50 years, consumer packaged goods (CPG) companies have been learning how to sell to retailers like Walmart and Target. They never sold to individuals before. Going DTC affects accounting, taxes, supply chain and the relationship you have with consumers. Historically, CPGs would essentially outsource all of that to retailers, but now they have a chance to take that back. Leveraging DTC allows you to control the experience, distribution, price and messaging unlike before.
What are some things to consider when choosing direct to consumer?
When entering the CPG or food/beverage environment, we didn’t know much about direct marketing. We asked ourselves, what can we do in order to differentiate? How will customer service be affected? Can we offer online training for our espresso machines? A harmonized approach to pricing, promotion and customer service is critical. We believed in marketing to provide unique merchandise offerings and utilize retail spaces for promotion.
Most often, leveraging DTC is the best experience you can provide to your consumers. In contrast, marketplaces like Amazon struggle to bring the same level of richness to the user journey. Even though DTC tends to be an easier starting point, there are on-platform options to create custom content, brand stores, and a tailored experience for each additional site.
Can you point to key actions or triggers that helped you grow Illycaffe’s DTC eCommerce channel?
At illycaffè we focused on the subscription model to support recurring revenue, which makes more sense for consumables. We saw marketing efforts and brand loyalty translate to success across other platforms such as Amazon which now supports “subscribe and save” programs as well. This allowed us to capitalize on subscriptions from both our own DTC Website and the marketplace. Viewing each channel holistically is extremely important to achieving brand success. Adapting to technology with a superb user experience is very critical. Consumers want to be able to modify their subscription, skip a shipment, or adjust frequency from anywhere. A great UI is key to this experience.
How did you jumpstart the DTC platform? What strategies/tactics helped you drive customer acquisition?
Initially we used print advertising within verticals that made sense for our brand e.g. lifestyle publications and media properties like food/drink, travel, arts/culture. These worked but results were not consistent. We have since been experimenting a lot with a variety of new channels. It’s crucial to work towards fine tuning your digital media mix (i.e. search, social, programmatic, premium partnerships, etc.) to see what works across different channels. We keep testing and optimizing.
What are the interdependencies between DTC (brand’s own Website) and the Marketplaces (e.g. Amazon, Walmart, Target)?
Overall, DTC is where you control the user experience and offer the broadest selection, but the cost of acquisition may be high in the beginning. A Marketplace has already done the work for you by aggregating the consumer traffic. Retailer marketplaces are about scaling the acquisition with greater efficiency using established tools and systems that are already integral to the marketplace platform. Profit margins, on the other hand, would be higher on your DTC site than on the marketplaces where competition and crowding require greater promotional intensity to drive sales volume.
Not all product SKUs have to be present at both the DTC and the eCommerce marketplaces. Online marketplaces have greater reach and scale relative to that of a brand’s own website. Products with greater mass appeal are better to promote on marketplaces. Entry level items or bundles/packages are more appealing to the “quick” shopper.
How do you make the most of the brand’s DTC presence?
Exposure through promotional purchase on the marketplaces could be one of the market entry points for brands. You then have to find ways to engage with the consumers in places you control like a website, email, advertisements. Simply put, find a way to build a deeper relationship with the customer with greater access to their profiles – something you cannot get from the marketplaces.
Media is another element. How does the media fit into this landscape?
There are two pillars of media – retail media (on-platform) and off-platform media which is the Open Web of premium publishers and the broader search and social space. Amazon actually rewards you with higher organic search results if you bring more traffic to your listing through off-platform media. This is no different than brand adverting from a supplier/vendor like P&G that drives in-store traffic for Walmart. You have to find ways to get people who aren’t already on amazon to your listing. The benefits are numerous: sales from increased traffic, will in turn improve your brand/product ranking on organic keyword search. Within Amazon in particular, the game is all about pay to play. You can build a brand on Amazon using their reach, promotional tools and technology. A good listing will convert on average 10% of the visitors on your page.
What is the best way for a brand to manage the expanding array of marketplace and DTC opportunities?
Brands traditionally have separate teams to manage the presence and the relationships with marketplace and their captive DTC channels (Website & brand channels) which not efficient because of inherent redundancies and overlaps. This leads to inconsistent experiences for the end-users. In our experience, there are tremendous opportunities to centralize and bring consistency across all touchpoints. We spend a lot of time figuring out what can and should be centralized up front such as your brand creative or campaign strategy. Each marketplace should look similar, there are a lot of shoppers in common across the marketplaces.
Direct to Consumer in a Nutshell
Almost every brand is faced with a crowded online Market with multiple competitors and an army of resellers – figure out your brand voice, and how it will be heard relative to other comparable offerings online. Where do you sit in the market? Are you a leader or a challenger? Premium or Value brand? The DTC eCommerce space is quite saturated; it is critical to differentiate clearly and think through your USP.
Merchandising, which includes pricing, bundling, packaging, accommodate both bulk purchases and efficient delivery. Almost every aspect of ecommerce is measurable but that doesn’t necessarily mean brand equity isn’t important even through it may be hard to measure for direct impact on immediate sales.
Media is crucial for balancing between performance and ensuring a critical mass of brand awareness. Focusing on the consumer journey with an eye toward long-term loyalty is a key measure of success in building a profitable DTC franchise.
The final ingredient is of course solid Management. It’s important to nurture a culture of continuous testing and optimization to ensure you can adapt quickly as technology and algorithms shift consumer behavior. In the world of DTC eCommerce, speed is important and there is no end to improvement.