Covid-19 does not kowtow to direct-to-consumer products. While other retailers lay off employees, postpone acquisitions, and declare bankruptcy, agile DTC and digitally native brands react by speeding up consumer engagement programs already in the works before the pandemic. As a result, only 22% of DTC brands surveyed by Totem Media announced sales declines, compared to 80% of more extensive, conventional retailers that experienced sales declines since the global health crisis began.
Totem, a social media agency, published research results late today that show how direct-to-consumer brands in the United States and Europe react to the coronavirus pandemic. The survey of 89 DTC brands across home, fashion, beauty, electronics, food, and other verticals was conducted in mid-June and revealed a change from defensive tactics to offensive strategies early on.
Role of digital technology
Direct-to-consumer brands' ability to gain revenue while other retailers lose ground can be attributed in part to their robust digital infrastructure. As traditional retailers struggled to handle store closures and rebalance inventory, DTCs continued to sell online, with more than half of survey respondents (52%) reporting demand spikes. However, according to the survey, DTCs are not resistant to supply chain disruptions, and maintaining enough inventory on hand remains a problem for many. During the first half of 2020, DTCs did well by focusing on customer service, being attentive to questions promptly, and building confidence despite the uncertainty. Those with stagnant or declining sales often cited confidence issues as the cause, which needs to be addressed.
During times of stress, DTCs also showed a willingness to 'double down' on leading digital platforms. DTCs that boosted Facebook spending at the height of the pandemic, when many conventional brands were cutting back on digital spending, are a clear example of this. The survey found that, unlike traditional retailers, DTC businesses avoid cost-cutting and are less likely to be stymied by decision-making paralysis. Most DTC brands surveyed said they improved customer service through phone, email, and online chat in response to Covid. Others went even further with video chat and live streaming, and some even repurposed store employees for new digital marketing and customer support positions. The overwhelming majority of respondents (85%) said they would increase their Facebook investment in the second half of 2020. Among the direct-to-consumer brands polled, other digital platforms such as Instagram, Amazon, and TikTok also rank high for new spending.
Exotic Athletica, Lauf, an Icelandic bike business, and M.M. Lafleur have taken retail consultants who would typically work in stores and bring them online to sell to customers through video. They're re-creating the in-store experience, assisting consumers in making informed choices, and putting sales and customer service closer together.
DTC companies that were forced to close physical stores, such as New York's furniture brand Burrow and Los Angeles' home essentials brand Parachute, started offering shoppers phone, text, and online consultations with design experts. When we can't communicate in person, it's essential to find other ways to establish connections with our customers and culture.