In 2020 direct-to-consumer (DTC) brands boomed, eCommerce saw 10 years’ growth in 3 months, and brick-and-mortar retail remembered the internet was a thing.
All this accelerated what we already knew - that the future of commerce is online. It also teed up the mother of all digital royal rumbles in 2021, as vendors of all varieties compete for online elbow room and ultimately, wallet share.
“This moment in modern retail history is unprecedented, and there is no playbook for dealing with this level of turbulence.”
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How can DTC brands - many of whom won big in 2020 - meet the new challenge of record online competition this year? What specific strategies can they action in the next 12 months to build audiences, win new business, and retain revenue?
To find out we spoke to Nik Sharma of Sharma Brands, who makes his living investing, advising and operating some of the smartest brands in the DTC ecosystem.
How to build an online audience in 2021
The equation is a simple one - no audience = no revenue. “There’s no possible way you can sell a product in today’s day and age without having an audience that’s prebuilt”, argues Nik.
DTC brands looking to build audience online will use three main channels - website, email and social.
Which is great - only issue is everybody else is using them too.
With the competition and cost of digital advertising at record levels, driven by expanding eCommerce initiatives of retail giants like Walmart, direct brands now require more than just noisy owned channels to cut through online.
To build audience, DTC players must actively seek out consumer problems and position their products as the solutions to them. To do that they need to hang out in the places on the internet people go to ask questions.
These places are free to access, easy to use, and widely known. But common knowledge doesn't equal common practice, and few brands overcome the effort barrier preventing the effective use of the following five platforms to build an audience:
Product Hunt 🔭
This is where 5 million highly engaged technophiles discuss problem solving products and startups. Posting on Product Hunt is essentially “mass distribution for free”, but pre-launch outreach to individuals verified on the platform is key for rankings. Searching for 500 early adopters to champion your new product? This is where you’ll find them.
Twitter 🐦
The source of all bitterness in the world, Twitter is awash with problems to solve. You already use it, of course, but too few brands actively go to search.twitter.com and identify groups talking about the issues their product might fix.
If you’re a pillow brand, for example, you should be engaging with posts by people asking sleep related questions:
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Reddit 🤓
The front page of the internet boasts 130,000 interest-based communities and 2.2 million subreddits - every one of them awash with questions generated by its 430 million active monthly users.
Shameless plugging is a big no no here, but content led community engagement in response to legitimate consumer queries can win big traction for brands. For a food merchant say, the ‘Healthy_Recipes’ subreddit is a goldmine of queries and conversations you can freely engage with to get in front of the right audience:
Quora❓
This literally exists as a question-and-answer platform. Quora has a user base of 300 million, 65% of whom are higher income millennials with college degrees - the ideal buyer profile for many DTC brands.
63% of site traffic arrives through googled queries - if you’re providing valuable answers within your niche it’s your brand they’ll see as the solution. Numerous questions on how best to exercise at home are potentially free advertising for a merchant in the fitness space:
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Strong SEO🕵️
Not a platform as such, and certainly not new, but the time investment required to leverage SEO effectively means most brands don’t fully exploit it to address issues people are googling. If you’re a sustainable coffee brand say, there’s 15-20 queries consumers might have about that topic.
Creating detailed SEO optimized content that ranks high in Google’s SERP, positions your product as the answer to the questions already being searched for online.
How to acquire customers in 2021
Digital acquisition has never been easy, but after 2020’s scramble for contactless means of commerce, it’s now more competitive than ever online.
To win business in 2021, direct brands must leverage high-value brand partnerships and sell to Gen Z (& their parents) by being authentically entertaining.
High-value brand partnerships
All businesses partner with others, but this year DTC players must do more than posting shared giveaways and following each other on Instagram.
It’s about merchants coming up with tangible, co-created products that are relevant to both customer bases, then leveraging their joint audiences to sell.
You don’t need a mega brand like Apple x Nike, Red Bull x GoPro or Kanye x Adidas to turn partnerships into cash. Amongst the direct merchants already getting it right are:
Judy x Poo-pourri 💩
This mashup between emergency kit vendor Judy and toilet spray provider Poo-pourri proves effective brand partnerships don’t have to come from within the same niche.
The pair’s joint bathroom emergency kit instead plays on their aligned values - both create products that provide customers peace of mind. This keeps the co-branded offering relevant for their respective audiences, and widens acquisition funnels for the two brands.
Dripkit x Verve ☕️
This ready to brew, ground coffee pourer is a classic example of the little brand-big brand partnership model. Challenger brand Dripkit won new business and gained huge social proof by piggybacking on market incumbent Verve Coffee Roasters. In turn the larger player leveraged the disruptive innovation and niche audience of the smaller start-up.
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Rapha x Outdoor Voices 🚴
This co-branded clothing range came from two potentially competitive merchants in the sportswear space - Rapha and Outdoor Voices. Both benefited from splitting hefty development times and production costs, and of course, the partnership enabled direct access to each other’s customer base.
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Entertain to win Gen Z (& their parents)
The hyperconnected youth are hitting their early-mid 20s and now account for 40% of US consumers. Born between 1996 and 2010, Gen Z spend nearly three hours a day on social media and make 32% of their transactions via mobile.
Whilst their preferences should feed into your digital propositions, brands don’t need to reinvent the marketing wheel to win them.
60% of TikTok’s 1 billion users are under 25 - it’s also where memes start these days. That makes analyzing the format of the top comments made on the platform and reflecting that style in your ad copy a smart tactic. So too taking inspiration from memes shared on Instagram and putting them into brand colors.
But ultimately, arbitrary divisions between generations shouldn’t hide the fact that all consumers just want to be entertained. In 2021 that means figuring out how to take an ad from being a billboard on a digital platform and turning it into something that captivates.
In good news for creatives - entertaining content can be almost anything - from slickly produced omnichannel story-telling, to raw-looking UCG video, to the authentic use of influencers and beyond. If the content is compelling enough - people will buy from a brand.
Scottish brewery BrewDog built their ‘punk’ beer empire doing exactly that. Whether it’s serving pints from a squirrel corpse, getting their own beer banned or brewing up in the Alaskan wilderness, the $2 billion brand is aggressively entertaining across a wide range of marketing platforms.
How to retain customers in 2021
DTC often does retention badly. Most merchants either don’t really bother with it, or they think about it wrong.
And that’s a problem, because although many won big last year, 2020 won’t happen again. Which makes hanging onto as many of those new customers as possible in 2021 critical.
Keep your brand top of mind
Good retention is about coming up with plays that keep your product in the top 15-20 things in a person's head at any one time.
Consumers respond to things that make their lives easier, less boring and more entertaining. Brand's retention should tap into those desires, and include levers like:
At all times, merchants must cater for what people really care about - which is almost never a brand or founder story - but something relevant to their needs.
Get it right and when consumers encounter a problem relevant to your niche, they’ll think of your brand. If you sell clothes, people considering a change of look should remember you. If you sell detergent, and those with dirty kitchen worktops immediately think of your brand - that’s a sign of good retention.
Actionable strategies to retain customers in 2021
Those building in a category that took off last year - like homeware, personal care, beauty and pet care - should rapidly launch new products to capitalise on that growth. This is particularly key for brands not selling repeat purchase items. Cookware vendor Caraway did this effectively late last year by bringing out a limited edition, marigold colored product set.
If breakneck product development isn’t an option, go hard on content, collaborations and partnerships to keep yourself top of mind for those that did buy.
For brands with a subscription capability, double down on that by ensuring your offering is fine tuned, optimized and in line with what your customers really want.
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Key takeaways
Online is more congested than ever
Explosive growth in online shopping presents both opportunities and challenges for DTC brands. Feverish competition for audiences on digital platforms will drive innovation and heighten customer expectations. In this context, positioning your brand as the answer to consumer’s questions is a low-cost way to cut through.
Partnership means more than just liking each other’s Instagram posts
Co-branded product launches are the way to go for partnership plays. Benefits include widening your conversion funnel, earning social proof, as well as splitting time and production costs. Successful mashups don’t necessarily have to come from players within the same niche either.
If you’re not entertaining you’re not selling
The average consumer encounters around 6,000 marketing messages per day - most are ignored. People of all ages have busy lives and just want to be entertained - reflect that in your advertising and you’ll win business.
2020 won’t happen again
Last year’s unprecedented shot in the arm for online merchants won’t be repeated. That makes retaining those newly won customers a key strategic lever in 2021. Keeping yourself top of mind with new products, compelling content and optimised subscriptions is the way to do it.
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