This ecommerce strategy article is an excerpt from our new book, The Ultimate Ecommerce Email & SMS Playbook. We’re diving into our ecommerce strategy chapter focused on the 7 Reasons Why Ecommerce Customers Leave Your Brand.
We first dived into Amazon and then dived into the technologies that try to replicate the Amazon experience. Now, I’ll dive into the other perspective: removing the reliance on Amazon and apps and entering the direct-to-consumer space (D2C).
From a business fundamentals level, direct-to-consumer (D2C) brands are inherently digitally native and, therefore, attract digital-savvy customers. Looking at the circle visualization above, digitally-native vertical brands (DNVBs) position themselves in the midst of a legacy brand customer base, segments that were often overlooked yet show massive value due to the customer lifetime value potential.
A good example of this is Bonobos, the men’s apparel brand that carved out a solid business by delivering 10x the value in men’s apparel – better fit, custom style, easy fulfillment, and direct-to-consumer savings – to an underserved customer base that typically was ok with 1x value from legacy brands like Gap, Express or Banana Republic.
Talk about disruptive: Bonobos wowed and over-delivered for an underserved population that the big brands assumed were ok with the status quo.
Most of us know D2C as simply brands that cut out the middleman retailer (which makes sense from the previous reason we just discussed: remove the middleman). Instead of selling through retailers or Amazon, go straight to the customer and deliver better products, lower prices, and digitally-native experiences.
According to Harvard Business Review, however, D2C goes deeper than just cutting out the middleman. D2C brands are the epitome of customer-first and data-driven, and that’s what steers their business.
The competitive advantage of D2C is the following: 1) they have a deep knowledge of their customer base, and 2) they have control over their customer file. Overall, D2C brands know exactly who their customer is, what makes them buy, what drives their loyalty, what makes them churn, and what makes them passionate. The D2C mindset goes far beyond just cutting out the middleman.
But most brands are not truly digitally native from the ground up. And because the majority of brands don’t have a truly inherent D2C mindset from the ground up, as shown by the above visualization, they lose customers to the best D2C brands in their niche.
According to McKinsey, the top e-commerce brands – the $1M to $25M and $25M to $100M, which only make up less than 10% of the total e-commerce US landscape – are increasingly digitally native, which helped them scale. Makes sense: 86% of customers crave better shopping experiences, and digitally-native brands are positioned to deliver on that promise.
So, how should the smaller e-commerce brand compete with a digitally-native D2C brand? It’s nearly impossible without a top-down philosophical change (see that HBR visualization again). That’s why D2C brands are growing 3x faster than normal e-commerce brands like you. In fact, 90% of the brands in that graph struggle to break free from $1M+ a year simply due to a lack of being truly digitally native. In other words, most brands talk the D2C talk but aren’t walking the walk.
Let’s go a little bit deeper into that point. As mentioned before, Harvard Business Review says digital-first and customer-centric are really synonymous. And the reason for that is that they focus everything they do on the customer: from customer insights to customer data to customer-centric training for their entire staff.
Because D2C is customer-centric and digitally native, savvy customers gravitate to them… leaving you as part of the 90% remaining. This customer-centric philosophy is why the best of D2C – Brooklinen, Casper, Glossier, Warby Parker, and on – have grown into billion-dollar unicorns in a few short years.
D2C brands are better positioned than you are to attract the modern digital-savvy customer. They were born into a digital world, and they capture the online customers you once had.
To quote the movie It’s a Good Day to Die Hard (I’m a big Bruce Willis fan!), most brands – 90% of them – are a Timex watch in a digital world, and that’s why time is not on your side for keeping customers loyal.
D2C is positioned to capture your customers with their top-down digitally native mindset, and that’s reason number six for why customers will leave you. But the news gets even worse with the next and final reason.
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