Direct-To-Consumer Surges As Physical Stores Languish
Direct-to-consumer (D2C) selling has taken wing with the ascendance of eCommerce to retail’s throne. What was once a small but meaningful constituency — online shoppers — suddenly seem to be holding all the cards. How consumer packaged goods (CPG) brands and subscription-based businesses respond to this important trend will be make-or-break for many.
“The use of online direct-to-consumer (D2C) channels to purchase consumer-packaged goods (CPG) has grown by 50.1 percent since the pandemic began, surpassing the growth of online marketplace use in key product categories like food and clothing,” PYMNTS recently reported. “This means consumers who flocked online due to the pandemic were in certain instances more likely to use D2C channels than marketplaces like Amazon.”
For context, findings from the PYMNTS study D2C And The New Brand Loyalty Opportunity, a collaboration with sticky.io, indicate that “…CPG brands face a unique opportunity to capture customer loyalty and drive engagement. The current shift’s durability will depend on brands’ abilities to deliver product availability, offer seamless eCommerce experiences and leverage digital tools to forge long-term personalized relationships with customers.”
The D2C And The New Brand Loyalty Opportunity study contains telling statistics on the growth of D2C, and only a few are needed to show the trend. Among these is finding that nearly 55 percent of consumers have used D2C channels to purchase CPG products “or nonperishable items that are used on a regular basis” in the past year.
“Physical and digital marketplaces remain more prevalent, however,” that study also found, “as 80.2 percent of consumers have bought CPG through these channel.”
‘Pandenomics’ And D2C Commerce
As pandemic fears eventually subside there will be a reckoning of physical and digital retail over the D2C issue, which is old as commerce itself. Brands have often gained exposure and loyal followings via established retailers, only to bypass those partners when D2C becomes feasible.
For the moment, merchants and brands have been forced accelerate digital upgrade plans literally by years in a matter of months, as ongoing PYMNTS research on the coronavirus pandemic’s effects continue to find consumer fear of contagion in physical settings like stores.
The latest in the series, Pandenomics: Main Street’s Six-Month Checkpoint, found that for small and medium-sized businesses (SMBs), “Another shutdown could bring them to the brink of closure. This scenario is looking increasingly likely as the number of COVID-19 infection rates continue to increase and some local economies are forced to revert or slow their reopening plans.”
A confluence of COVID effects have driven home the convenience and efficiency of online marketplaces, making digital storefronts more important than physical during 2020.
The very air abounds in examples these days, few better than Shopify. As PYMNTS reported in late July at the time of its Q2 earnings report, “By the numbers, [Shopify] total revenue came in at $714.3 million, a 97 percent increase from 2019. Gross merchandise volume (GMV) also grew 119 percent, accelerating in April and May and decelerating in June and July.”
More to the point, Shopify said that “… stores created on the platform grew 71 percent [in Q2 2020], driven by the overall digital shift as well as the expansion of the free trial period on its standard plans from 14 days to 90 days.” That trial offer ended May 3, and Shopify has loaded its platform with additional capabilities enabling physical retailers to go digital more easily.
There are over 1 million brands currently on the platform. Many of those that flocked to Shopify run the gamut from youth-focused cosmetics labels like colourpop to well-established apparel names including Bombas, Steve Madden and UNTUCKit, among many others.
Getting Creative With D2C
Recurring billing and subscription commerce fuel many marketplaces, and the consensus is that there has never been a better time to become an online seller due to such innovations.
“They have to be creative. They have to optimize every touchpoint that the customer has with their brand.”
And so, they are. “We believe the COVID pandemic has permanently accelerated the growth of online commerce, changing the retail landscape forever,” Shopify Chief Financial Officer Amy Shapero said on the company’s most recent earnings call.
“At Shopify, our task is to help our merchants adapt and succeed in the world that emerges by investing in and building a global commerce operating system that evolves with their journey as the macro environment, technology and consumer behaviors change,” Shapero said.