By Clement Tang

Clement Tang, Vietnam Managing Director & APAC Regional Director of 91APP, explains why brands need to prioritize their Directto-Consumer commerce strategy, despite recent setbacks in the sector.

Retail is one of the world’s oldest and most important industries in a country, and it is getting a refresh from the industry that is driving the most new-found solutions for our time.

Over the last few years, brands have faced a rollercoaster of challenges. The pandemic and inflation rates have caused great uncertainty in the industry. While many experts predicted that online shopping would boom, brick-and-mortar stores saw a resurgence in customers. Direct-to-consumer (D2C or DTC) companies were hit particularly hard, with many going out of business. However, despite these difficulties, the D2C trend in e-commerce continues to gain popularity among shoppers.

The D2C model has revolutionized how brands interact with customers by enabling them to sell their products directly to end consumers without relying on intermediaries like wholesalers or retailers. This approach has transformed how manufacturers and brands communicate with their customers and allows the brand to maintain complete control over the customer experience, from marketing and sales to order fulfillment and customer support, providing them with a game-changing advantage. D2C’s popularity has surged significantly, primarily due to the shift in consumer behavior during the pandemic, where online shopping became the norm. Consequently, D2C e-commerce sales are expected to reach $161.22 billion in the US by 2024, according to Statista’s recent report.

What is Direct-to-Consumer? 

Let’s first understand the difference between D2C and traditional retail before we dive into D2C. The wholesale model involves manufacturers or producers selling products in large quantities to retailers with the support of wholesalers and distributors, and the retailers then market and sell to consumers. This traditional model has been prevalent for a long time, but the increasing popularity of D2C has posed a challenge to its dominance.

The D2C model aims to increase profits by cutting out sales commissions from the mediators and the display space costs at retail stores. This allows brands to keep a larger share of the profits from each sale and invest in loyalty programs and personalized marketing strategies.

Advantages of the D2C.

Model Although D2C may pose challenges requiring significant investment in technologies and marketing, it often provides more benefits than drawbacks. This is especially true for brands seeking to create an online presence and engage directly with their customers for the following reasons:

– Cost-Efficiency: Eliminating the middleman often results in lower operational costs, enabling competitive pricing and higher profit margins.

– Greater Control Over Brand Image: Brands gain complete control over their image and can strengthen consumer loyalty through consistent branding.

– Data-Driven Decisions: With direct access to customer data, D2C brands can make more informed decisions about product development, pricing, and marketing strategies.

– Agility: The D2C model is inherently more flexible, allowing brands to quickly adapt to market trends and consumer preferences, such as testing the market with fewer inventories or customized product options.

– Improvement from Customer Feedback: Brands can obtain meaningful insights into the customer journey by gathering valuable first-party data on customer preferences and behavior through D2C. This allows them to enhance and refine their products and marketing strategies faster.

– Personalized Customer Experience: D2C brands can provide customized experiences, offering product recommendations based on past purchases or special discounts based on membership levels.

D2C and Retail

Some brands opt for D2C sales, while others consider balancing D2C and traditional retail strategies. Nike is a prime example, boosting its D2C revenue from 15% of total income in 2010 to 35% by 2020. This blend of strategy is particularly evident where Online-Merge-Offline (OMO) operations have led to the growth rate of omnichannel sales, gradually surpassing that of pure e-commerce.

However, achieving this equilibrium can be complex. Brands must tactfully manage relationships with retail partners while expanding their D2C footprint, and it often requires a careful balancing act of amplifying the brand’s D2C reach without severing ties with established retailers.

D2C in Vietnam 

Although C2C and B2B2C marketplaces such as Shopee and Lazada still dominate the e-commerce landscape in Vietnam, the D2C model is gaining popularity. This is due to the growing middle class and optimistic consumers in the country. A report by McKinsey shows that the consumers in Vietnam are confident about the economy and are willing to invest in high-quality products that offer better value. According to a joint report by Google, Temasek, and Bain & Company, Vietnam’s digital economy is expected to reach $49 billion by 2025, providing fertile ground for D2C brands to thrive. The report also highlights a surge in local D2C brands across various fashion, beauty, and lifestyle sectors, indicating a shift towards localized production and consumption. Vietnamese consumers, valuing quality over price, are drawn to D2C brands offering premium products. 

Their shopping experience, heavily influenced by social media and online reviews, benefits from an integrated multi-channel approach blending online and offline interactions. However, their loyalty is tested by a penchant for better deals, urging D2C brands to innovate. Moreover, the rising demand for healthier and sustainable products opens a pathway for D2C brands to meet these evolving preferences, offering a competitive edge in retaining customer loyalty and engagement.

Getting Started with D2C

Before launching a D2C strategy, brands should consider several factors:

– Reputation: Brands must guarantee that they can provide a superior customer experience, encompassing the product’s quality and the shopping experience across all sales channels.

– Logistics: Brands must have a robust logistics system to ensure timely and efficient delivery of products. This includes everything from warehousing and inventory management to shipping and delivery.

– Marketing: To compete with marketplaces and retailers, brands selling directly to consumers must invest heavily in digital channels. A robust marketing strategy that includes social media, email campaigns, and search engine optimization is essential to attract and retain customers.

– Data Management: Brands must be able to collect, analyze, and leverage customer data to inform decision-making and improve their offerings. This includes everything from tracking customer behavior on their sales channel to analyzing sales data.

Technological Springboards for D2C

Investing in technology such as e-commerce and Mar-Tech tools can significantly expedite product development and marketing efforts in establishing a D2C business. These tools offer ready-made solutions that eliminate the need to build systems from scratch, saving crucial time and resources. Furthermore, they often come with integrated analytics and marketing functionalities, enabling businesses to analyze market trends and execute marketing strategies swiftly.

Utilizing vendor-supplied technology can streamline operations, reduce time-to-market, and allow companies to focus on refining their product offerings and enhancing customer engagement. The time and resources saved can then be channeled towards strategic initiatives to bolster the brand’s position in the D2C landscape, ultimately accelerating the pace towards achieving business goals.

Conclusion 

As we have discussed, the D2C model is not just a retail industry trend but a global phenomenon. With its young and tech-savvy population and growing middle class, Vietnam is an ideal market for brands to go D2C. Brands must remain flexible and responsive as consumer behaviors continue to evolve, driven by global trends and local cultural nuances. The future of retail in Vietnam is undoubtedly exciting, and D2C strategy will play a crucial role in shaping it.