Commentary

How direct to consumer can ignite loyalty from fickle customers

Brightpearl CEO Derek O'Carroll explains why direct-to-consumer brands need to up their game, or they could be eaten for breakfast by competitors who offer a more seamless buying journey.

Photo by iStock.com

February 18, 2019

By Derek O'Carroll, CEO, Brightpearl

More and more brands are bypassing stores or retail partners through direct-to-consumer strategies in an effort to achieve greater profits, build strong customer relationships, and improve loyalty.

The direct-to-consumer (DTC) market is exploding. Eighty seven percent of brands have plans to launch a DTC channel, with 23 percent aiming to do so within the next 12 months. Nike's DTC business contributed to 24 percent of the company's revenue in 2016, up from 17 percent in 2013. It has plans to grow its DTC business by 250 percent in the next five years. DTC is also being widely embraced by shoppers — the majority (82 percent) of whom have bought directly from a brand in the last year.

Understandably, a huge number of brands are now following the gold rush to deploy DTC but, as they do so, they must ensure they deliver the shopping experience that buyers expect. The service they offer must be second-to-none, at all points in the customer journey, to avoid falling short of expectations.

What concerns me is that that brands have a tendency to overestimate how well parts of the experience are performing in relation to actual consumer experiences. Bad shopping experiences are commonplace: 61 percent of consumers have experienced an issue related to buying goods online in the last 12 months.

Strangely, businesses seem inexplicably happy with the service they're providing. More than two-thirds of brands think they offer fast and frictionless experiences for their customers, but often this is a misconception; 42 percent of shoppers report they have abandoned a purchase in the last year from frustrating online experiences. That shows a huge disconnect between what brands think they're offering — and what they actually are offering.

Friction is holding back DTC brands

Direct-to-consumer is not a passing trend — it is an evolution in the retail industry that puts the customer at the center of business decisions.

Today's buying experience has many touch points that need to be acknowledged: from website, through checkout, to delivery and returns. From the moment buyers commence on a purchase journey, they are making countless choices that may or may not keep them on the path to ultimately purchase and, we hope, to repeat buying.

Becoming a true DTC brand means owning the entire customer experience, from discovery to delivery and beyond. It means brands are responsible for ensuring every ‘click' along a customer journey is faultless and smooths the path to purchase. Brands must also recognize that, at any moment, they risk losing consumer dollars due to friction points during the buying journey. It's a scary prospect and underscores the need for retailers to really understand this journey from the customer's perspective.

Identifying where the customer is experiencing issues, where there are gaps, and where there are struggles, is possibly the most critical component for building a successful DTC strategy. However, recent research highlights that retailers are falling short in the eyes of customers. There are many challenges to address, whether from a user experience perspective, technology capabilities, or the ability to offer fulfillment at the speed and convenience that shoppers want and expect.

The biggest gripes for buyers who've had negative shopping experiences mostly relate to delivery and returns. In the past year, 60 percent of consumers said they've bought goods that have not arrived when expected, whilst 40 percent of shoppers have experienced items not arriving at all. A quarter of customers cite items being listed as out of stock after purchase as another major annoyance.

Frustrations also exist for many shoppers before they click the checkout button. Brands that charge high shipping charges will lose two-thirds (68 percent) of shoppers, and inconvenient delivery options would deter over two-fifths (43 percent). Over a quarter (28 percent) of shoppers say they wouldn't order from companies that don't offer free returns — representing a huge missed opportunity.

Each scenario in the buying journey, from pre- to post-purchase, should be recognized as equally important. All of them are linked, and all of them are essential to delivering the fast and frictionless experiences that consumers now demand.

Loyalty is at a premium

When you're a DTC brand, shipping, returns and incredible response time are an integral part of your value proposition. If you get it right, you can transform first-time buyers into regular customers and loyal advocates for your brand. Conversely, if one touchpoint fails to impress, you've likely lost a customer forever.

Customer experience is a huge driver of brand loyalty. Research shows that more than two-thirds (69 percent) of customers would never shop with the same online store again after a poor experience. In fact, a third of shoppers now readily admit to being less loyal to brands than they were a year ago, due to the availability and choice on the market, and the expectations set by leading retailers like Amazon and ASOS. This leads to lower consumer tolerance for those that fail to deliver.

In an environment of enormous product choice and fickle customer loyalty, a brand cannot afford to allow friction throughout its various touch points. During the purchase itself, brands risk losing customers if options don't cater to their preferences, while post-purchase experiences, primarily related to delivery and returns, will influence a customer's future loyalty to a brand.

Simply put, DTC is more than a channel: it's an opportunity for brands to make a positive and lasting brand impression for customers at every step of the way.

DTC done right is the key to lifetime customer loyalty

Our research shows that the gap between retailers' perception of CX, and what shoppers really think, is driving away customers. Buyers want flawless checkout, seamless payment integration, and multi-delivery options. For brands to meet the requirements of today's shoppers for same/next-day delivery, they have to have the right systems in place, such as technology that allows them to automate workflows like order management, inventory and fulfillment, and purchase ordering.

And don't overlook your post-purchase experience. It's an opportunity to exceed customer expectations of speed and convenience — and it's the area most in need of improvement. Excellent returns management is essential to ensuring an optimal experience, and failure here will lead to frustrated customers who will take their business elsewhere. Businesses need a framework in place that allows returns to be processed quickly, accurately and easily, so that products can be placed back into rotation sooner.

It's clear that direct-to-consumer brands now need to up their game, or they could be eaten for breakfast by competitors who offer a more seamless buying journey.

The purchasing landscape is riddled with landmines for brands. Technology is the key to closing gaps in the end-to-end experience and perfecting your DTC model. Businesses that do this well will delight buyers and ultimately develop enduring relationships with them — potentially turning fickle first-time customers into long-term advocates for the brand.