June 3, 2019 Press reports

Direct-To-Consumer Brands Make Smart Use of Social Media

Hamburg – Direct-to-consumer brands (D2C) like Ace & Tate, Kapten & Son and Daniel Wellington have enjoyed notable success in recent years and become highly recognizable to online shoppers. They sell their products directly to consumers without any middlemen. But how does this successful model actually work? And how are D2C brands managing to grow so quickly in the slipstream of Amazon and its ilk? To get to the bottom of these and other questions, the eCommerce Competence Center (eCC) of Arvato Supply Chain Solutions took a close look at 52 of these brands and analyzed their successful strategies in the recent study “Direct-to-Consumer Brands Decoded”.

Since there has so far been little evidence of the D2C trend in the German market, Arvato Supply Chain Solutions compared and analyzed mostly American brands (83 percent). The study found that the D2C brands can be divided into four types according to their different value propositions: “The Design Lovers” (29 percent) include brands like watchmaker Daniel Wellington. “The Innovators” (21 percent) are companies that improve existing products, like the lingerie maker ThirdLove. “The Socially Engaged” (31 percent) like Rothy’s attach great importance to sustainability and transparency. And then there are “The Optimizers” (19 percent) like the Dollar Shave Club, whose razor blade subscription succeeded in improving the ordering process enough to take market share from the behemoth Proctor & Gamble.

This illustrates that D2C brands enter the market with not just a concrete idea of their product but also of their USP and their target group. As a result, they come across as authentic and credible to their customers, and this perception is reinforced by the good value for money they offer. “The strategies of the D2C brands could inspire the traditional retailers to revamp their marketing strategies,” says Franziska Stallmann, Digital Commerce Consultant at Arvato Supply Chain Solutions and coauthor of the study. “Authenticity is what customers of Generation Y and Z are looking for.”

A direct line to the consumer

Considering their limited financial resources, D2C brands must use their marketing budgets as efficiently as possible. They therefore put a strong emphasis on social media channels, especially Facebook, Instagram and YouTube, in order to reach their target groups without middlemen. In contrast to traditional brands for whom social media is responsible for about 9 percent of the visits to online shops, more than 26 percent of the traffic to D2C brands comes from social media. The emotionally charged storytelling helps to win buyers over and inspires them to recommend the brand to others. “Furthermore, the data and analysis driven direct marketing ensures that D2C brands often know their customers better than the traditional suppliers do,” says Stallmann. This is why these companies collect and carefully analyze large quantities of data. Although the defining characteristic of the D2C brands is their direct online sales to consumers, 60 percent of them possess their own retail businesses. A similar number of companies enter into distribution partnerships. Amazon, however, plays only a modest role here (28 percent).

The future of D2C brands

“D2C can be a very successful model for growing rapidly,” confirms Michael Peters, Head of Business Development at Arvato Supply Chain Solutions. “But it’s important that companies don’t lose sight of their actual USP – knowing their target group well and being able to reach out to it with precision.” In addition, the brands have to expand the range of products or services they offer in a purposeful way in order to increase opportunities for repeat purchases and be successful over the long term. It’s also important to continue perfecting the storytelling on Instagram and similar platforms, since spontaneous purchases are increasingly being initiated via social media, with Amazon increasingly servicing the “need” purchases.

Read about how D2C brands are winning the e-commerce game in the study “Direct-to-Consumer Brands Decoded,” which can be downloaded here https://arva.to/whitepaper-d2c-brands.

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Sonja Groß

Marketing & Communications

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Sonja Groß

Marketing & Communications