Every few decades, retail brands discover a new way to connect with consumers. The early 2000s saw the beginning of an online media push that brought standardized content from one brand to many consumers. Mobile-targeted direct-to-consumer brands (D2C) brands reigned from 2010 to 2021, ushering in new ways to get in touch with their customers directly. This allowed brands to have a one-on-one relationship with consumers while also providing them with data and insights to better understand marketing impact in ways that had never before been possible.
As D2C evolved so did consumers, as many sought various ways to shop for their favorite brands other than solely through vertical sites. Customers today know what they want as their decision-making happens online, but more than 85% of purchases are still predominantly made through wholesalers like Target, Walmart and more. This has challenged the D2C model, since obtaining data and insights for in-store purchases is next to impossible.
Now, new developments in data technology have sparked a new approach for brands called Direct-to-Retail (D2R). This allows brands to measure marketing impact and how it’s driving in-store wholesale sales while maintaining a one-to-one relationship with their customers no matter where they shop.
So how does it all work? And why haven’t brands done this before?
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We’ll explore this new approach in depth, what it means for brands and consumers, and how it will affect marketers and those working with them.
D2R vs. D2C
D2R is an evolution of D2C, which is defined as the act of driving users from digital content directly to retail stores to shop for a specific brand. It bridges the gap between online decision-making and in-retail shopping, which many shoppers prefer, whereas D2C focuses solely on driving people to purchase through their brand’s website. D2R manages to maintain the direct relationships with customers that has been the value of a D2C model while still allowing consumers to shop where and when they want.
When brands learn who their consumers are, they can communicate with them more personally and tailor messaging to the exact consumer. The pandemic changed the retail space drastically and people weren’t shopping in stores for a while. Now, post-pandemic, customers are returning to in-store shopping in droves and are looking for the best deals and prices on their favorite brands. Simply put, customers want the in-store shopping experience to be as dynamic and convenient as their online one.
Why Brands Need to Focus on D2R
Currently, about 72% of marketing budgets are spent on digital content, yet 85% of customers predominantly purchase in-store. D2R allows brands to scale and track the money they spent on digital marketing in a way that hasn’t been available before.
Having a direct line with consumers via D2R provides brands with first-party retail data in a whole new way. This includes looking into individual shopping behaviors and it can be used to meet customers’ exact desires and needs within their channel, further incentivizing customers to return to stores. The way brands work with influencers will change (more on influencers later), but brands will be able to pinpoint the influencer campaigns that are taking off and home in on them to get maximum results.
Let’s look at a D2R case study in action and go over what they were able to achieve. A leading beverage brand that focuses on canned water wanted to establish an unparalleled connection with its consumer base.
By optimizing content and leveraging valuable first-party data, it was able to streamline its ad strategy from 30 content units to three top-performing ad units in the first six weeks. Building upon its success, the brand expanded this winning strategy across its field marketing initiatives while also implementing QR codes on packaging for repeat purchases and increased connectivity.
At the end of the campaign, the brand saw:
- More than $8 revenue per phone number on initial redemption;
- Return on ad spend around 100% on best-performing creative;
- Highest sign-up rate of 40% on best performing creative, leading to a sub-$5 cost per signup
- Highest Redemption rate of 33% on best performing creative, leading to a sub-$30 cost per receipt;
- Found the top two to four scalable ads from its top 50+ video creatives, based on performance data with the highest conversion to a retail store purchase and showing the value of data-driven decisions and properly spending marketing budgets;
- One out of every 10 clicks from digital channels converted into a retail sales;
- When the referral program is used as an addition to the rebate campaigns, there was a 7.4% increase in total receipts submitted;
- The most common days for purchases are Saturday and Sunday afternoons; and
- Insight on their top locations.
Marketers and Influencers
Marketers and influencers will see the most change from D2R. For marketers, it presents an incredible opportunity. For the first time, marketers have direct insight into retail consumer shopping behaviors, and it’s answering questions that have plagued marketers for ages:
- Which digital content is driving sales?
- What events are pushing people into stores?
- How can we better optimize marketing budgets?
- How can we establish a direct line to the demographics we want to talk to?
For influencers, D2R holds them more accountable for creating content that drives in-store sales and provides them with more proof points of their influence and ROI. In the past, it was almost impossible to correlate a piece of influencer content with an actual sale in-store. Influencers will either see this as an opportunity to better understand the results of their content, or they will feel threatened by the need to drive results stronger than impressions and engagement.
These kinds of metrics are extremely important when it comes to top-of-funnel activations, but for brands looking to drive sales with influencer content, the D2R data will ensure influencers are influencing.
Marketers also can initiate the D2R approach by prioritizing direct consumer communication. This is an opportunity to activate new channels and make sure their messages are being seen by customers through different mediums. Email and SMS are both effective channels, but texts may be preferable as they are short and easy to digest, while emails risk going into spam. To remain effective, however, it is essential to be aware of how often brands communicate and keep content timely and relevant. If they don’t, brands run the risk of being marked as spam, the data flow will cease and your customer will feel dissatisfied.
Conclusion
The D2R ecosystem is here and applicable to everyone in the retail industry. It’s only a matter of getting ahead of the curve or getting left behind. While D2C can initiate relationships with consumers, it’s still very limiting for business growth and your customers’ daily life. For CPG brands, this is a prime opportunity to prioritize their consumer communications and use data from these interactions to home in on their most effective marketing strategies.
The roles of marketers and influencers are about to see some dramatic changes as well. Marketers will see smooth sailing, with access to customer data and communication channels they previously couldn’t gather. Influencers will face some turbulence, as they will see more pressure to showcase the impact of the content they produce and the influence they claim to hold.
The future of retail is always evolving, and bringing more data and measurement to in-store sales is an exciting step forward for the industry. If D2C changed the retail game for the last decade, I am excited to see what D2R will do for the next one.
Benoit Vatere is a serial entrepreneur, angel investor and Founder/CEO of Mammoth, a first-of-its-kind direct-to-retail technology that builds a bridge between social media advertisements and physical retail sales. Previously he was the Entrepreneur-in-Residence at the startup incubator and venture capital firm Science Inc. He worked across several portfolio businesses with a focus on user acquisition and revenue optimization. Vatere was also previously the CEO of Playhaven, the mobile gaming platform with over 250 million monthly active users. Vatere led it to its successful nine-figure exit.
