In the year of the pandemic in 2020, e-commerce grew by 25% globally, according to Statista. And even though this high growth is expected to slow down, the market shares between physical and online retail are drawing closer.
Consumers in every age group shifted their purchases online due to global lockdowns.
And it seems like people got accustomed to these shopping behaviors. Pre-pandemic e-commerce shares in the US and UK combined were at 16% on average, reached a 26% retail share at the height of the crisis, and have now settled at 21%.
The shift to online shopping has facilitated the growth of new e-commerce and retail trends, including the direct-to-consumer (D2C) model. However, we already saw the first D2C brands such as Barkbox, Casper and Warby Parker being established at the beginning of 2010’s.
As a new age of D2C companies are being launched, let’s have a look at what we can learn from the most successful direct to consumer companies so far.
E-commerce platforms like Shopify have unlocked D2C growth
With e-commerce platforms such as Shopify and Bigcommerce, setting up your own D2C store has never been easier. Hosted e-commerce platforms provide solutions for day-to-day tasks like inventory management, payment processing, shipping, customer service, marketing and finance all in one place.
For example, here you can find an ultimate guide to top Shopify stores and the apps they use to unlock growth. After all, a good strategy is excellent, but to actualize it takes time as well. This is where hosted solutions can help to simplify the business management processes.
Best D2C examples can teach us a thing or two
However, even though setting up the web shop is easy, there are several aspects that come into play in order to succeed in the direct-to-consumer business.
The direct-to-consumer trend has been accelerated by the online growth, and despite the heightened competition, provides a lot of opportunities.
After research into several most successful D2C companies, there definitely seems to be a pattern to a winning formula, but we will get to that later.
First, let’s have a look at the best D2C examples and what we can learn from them.
Find a product niche and focus on simplicity
Even though Amazon dominates the e-commerce market with its best-selling items and not just them, there are still endless opportunities within the e-commerce industry for niche products or for entirely new products and product categories.
Differentiate, there is no point to compete with Amazon – they can almost always win in terms of better prices or delivery conditions if you are selling the same products.
Product simplicity is key. With an oversaturated market and online shoppers overwhelmed with choice, selling fewer products in larger volumes has proven to be a successful strategy, and not only within e-commerce. Disruptions by the Covid-19 pandemic made retailers rethink their assortment and cut down on their product long-tail as well.
Example #1: Casper
- Launched only one product design
- With affordable prices
- Available to be ordered online
- Delivered directly to your doorstep
Direct-to-consumer start-up Casper launched in 2014 – selling mattresses. I know, what’s so special about selling mattresses, right?
Well, they observed some crucial aspects about the mattress industry: the price points were high, it was hard to buy good mattresses online and too many different options were confusing.
Their niche was that they simplified the purchasing process for mattresses.
Casper has now launched a wider assortment of products and included wholesale, but is keeping true to their promises by keeping it simple. Their business is going strong, they have achieved 37.7% revenue growth in Q2 2021, according to the Retail Dive.
Example #2: Dollar Shave Club
- Only one model, no-frills razors
- With affordable prices
- Delivered to your door monthly (subscription-based)
- Went viral with their marketing video
Dollar Shave Club was launched in 2011 by Michael Dubin. They realized that the razor market is heavily dominated by Gillette, owned by the multinational corporation Procter & Gamble.
They realized that razors were overpriced and seemingly overcomplicated with too many options. What came out of their analysis was a simple strategy – one product at affordable prices. The real success came when they launched their $4000 marketing video that went viral in 2012, another crucial aspect for success.
And their strategy worked – after achieving $240 million in revenue in 2016, up from $4 million in 2012, they were acquired by the FMCG giant Unilever in July 2016 and are still going strong.
Example #3: Warby Parker
- First to sell eyeglasses online
- With affordable prices
- Several pairs of eyeglasses to try on at home
Eyeglasses direct-to-consumer online retailer Warby Parker was founded in 2010 by Neil Blumenthal and Dave Gilboa. Just like DSC, they identified a gap in the market. Conglomerate Luxottica was holding a 20% market share in the US and 14% globally.
They wondered, how come the $800 price tag for some metal and glass makes sense? What is more, they tried to sell eyeglasses online, which was never heard of before then.
Warby Parker cut out the middleman and beat the odds of failing, as frames were typically purchased in physical stores. They experienced crazy success through innovative solutions to solve customers’ pain-points.
Create an innovative marketing and brand positioning strategy
Marketing, out of the box thinking and page optimization are crucial aspects of any D2C business model, in order to stand out from the competition. Optimizing your page to stand out in the Google rankings is only getting harder, as the online e-commerce market is getting oversaturated.
But don’t get disheartened, with the right marketing plan, everything is possible. You just need to get innovative. Which is exactly what these D2C stores did, so let’s have a look at what they did to stand out.
Example #1 and #2: The Honest Company and Glossier
- Celebrity or influencer founders
- Leveraged the existing audience (their social media followers) and their status
- Product came second, audience came first
Although we aren’t all celebrities or influencers, one could still leverage a similar strategy to The Honest Company and Glossier. The honest company positioned themselves through celebrity founder Jessica Alba. Glossier, on the other hand, was born out of a beauty blog by Emily Weiss.
Meaning, both of these direct-to-consumer brands already had a following and a defined target market before launching their business.
This contributed to their success – there was no need to spend as much money on marketing. Of course, we can’t all spend millions on celebrities or celebrity influencers, so content marketing strategies like using micro-influencers or brand ambassadors are gaining popularity, and are accessible also for tighter start-up budgets.
Example #3: Gymshark
- Defined their target audience – Gen-Z
- Product customized to that exact audience
- Acquired a community of followers through the “influence of influencers”
- Created the feel of product scarcity
Fitness and apparel brand Gymshark was founded by Ben Francis in 2012. Gymshark’s big shot of fame came soon after, when they attended the BodyPower expo in Birmingham.
Ben Francis has said there was a lot of luck involved in what happened after, however, I believe that their excellent marketing and brand positioning strategy had something to do with it.
Aimed at young people, mostly Gen-Z, who are into the fitness culture and everything that goes with it, they discovered a gap in the market. Discovering that sportswear wasn’t always flattering or trendy, they focused on apparel made to fit their audience’s body types and preferences. Then, Gymshark leveraged the “influence of influencers”, gathering a large community of loyal followers.
The above strategy led to stock-outs within the first 30 minutes into the trade show. Through this, generating more traffic and sales they had had in the previous year and creating product scarcity and exclusivity.
Example #4: Dirty Lemon
- Put all marketing budget into paid Instagram ads
- Establishing a market presence
- Selling exclusively through SMS – creating the feel of luxury and scarcity
- Adapting to the market changes – staffless retail stores
Soft beverages brand Dirty Lemon was founded in 2015 by Zak Normandin, selling flavored water at around $10 per bottle. The water has enthralling ingredients from charcoal and collagen to retinol and claims to reduce wrinkles, improve digestion and give energy.
Not an easy product nor price group to launch, to an already saturated market?
But Dirty Lemon had it down. They poured all of their marketing budget (at times up to $30.000 a day, according to some online sources) on paid Instagram ads to establish themselves in the market.
And it paid off – soon they had achieved widespread recognition. But instead of selling on every possible channel, they sold products only through SMS messages, creating product scarcity and exclusivity.
Dirty Lemon’s SMS marketing strategy is definitely one-of-a-kind, providing instant two way communication: customer service, product and delivery updates, sales updates and promotions and offers, all through text messages.
And they sell products exclusively through SMS to this day.
One thing they have changed is cut down on paid social media ads. As paid ads have become so oversaturated, as well as expensive, they have shifted focus to other channels, like the creation of staffless retail stores – another innovative marketing concept by Dirty Lemon.
Example #5: Barkbox
- Used humour and social media
- Marketing through funny memes and videos
- Instead of spending large amounts on paid ads
Online subscriptions-based retailer Barkbox sends monthly boxes full of dog treats and products to its customers. Barkbox was founded in 2011 by Matt Meeker, Carly Strife, and Henrik Werdelin.
Their subscription service SEO strategy is heavily based on social media. Because besides paid ads, social media can offer several other ways to market your business.
And the one from Barkbox is quite an innovative one.
Instead of spending their marketing dollars on customer acquisition through paid ads, they went down a different route. Barkbox’s digital marketing team consists of content strategists who create hilarious dog content, including memes generated with a memes generator to viral videos.
Barkbox doesn’t seem to be the traditional online retail company, they really have combined marketing directly with sales, used humour and personalized relationships to drive traffic to their page and earn money through more subscriptions.
As Stacie Grissom, Director of Content at Barkbox, “If you took out social media, Bark and Co. wouldn’t be a company.”
Example #6: White Claw
- Defined their target audience – Millennials
- Found a gap in the market
- Launched their product exactly the right time
- Worked around legislation to operate as a D2C business
- Leveraged social media in their marketing strategy
Alcoholic beverages company White Claw was founded in 2016, selling Hard Seltzer, a drink that contains carbonated water, alcohol and slight fruit flavoring and is low in calorie and sugar content.
First-to-market White Claw has been one-of-a-kind with their products, and despite the growing competition in the Flavored Malt Beverage (FMB) industry, is holding a leading 40% market share, followed by Boston Beer with 20%, according to Nogood.
A contributing factor to White Claw’s huge success?
Aimed at Millennials, they identified a gap in the market and managed to enter just at the right time. With rising fitness and health trends, and Millennials prioritizing experiences over possessions, a low-calorie alcoholic beverage alternative to beer was exactly what was missing.
In order to launch as a D2C company, they have had to use quite a bit of innovation and work around the corners, as the US legislation prohibits alcohol sales directly from the manufacturer.
A product locator enabled them an owned product journey and access to customer and product data. Launching the tool just as the pandemic hit in March 2020, they achieved a 45% growth in online orders.
Their biggest marketing breakthrough came from a phrase “Ain’t no laws when you are drinking claws” in their video marketing campaign in 2019, creating a buzz around the brand positioning them as a party drink.
And the formula for success in D2C is?
Wouldn’t it be just excellent if there was one.
Unfortunately, as with most things, there is no perfect formula for success. If there was, wouldn’t we all run successful businesses? However, what we can do is derive some insights by looking at how successful D2C stores reached their goals.
The main aspects seem to be: defined target market, social media, virality, simple product, niche product and a compelling brand story, combined with innovative marketing and sales strategies and ultimate customer focus from the start.
As for a winning formula, let’s take White Claw as an example:
- Find a niche gap in the market: wellness, fitness and health trend.
- Define your target: Millennials who prioritize experiences over possessions.
- Create a simple product: White Claw has one drink with several flavours.
- Be customer centric from the start: D2C model to provide best customer experience.
- Create a compelling brand story: White Claw brand reflects experiences such as surfing and boating – in a fizzy drink.
- Use social media and go viral: ok going viral is easier said than done, but White Claw’s 360° approach to marketing has paid off, including their viral video 3 years after the launch.
- Innovate: adapt to changing consumer tastes – White Claw ongoingly adapted their marketing strategy to reach their target audience.
Creating just a good product is probably not going to cut it anymore, launching a successful direct-to-consumer company needs a truly innovative strategy and takes out-of-the-box thinking to come up with (a good) one.
