Even before COVID-19 emerged, the Direct to Consumer (DTC) trend was on the rise, forecasted to grow 24.3% this year, and since the pandemic, many DTC brands have far exceeded these expectations. Chewy’s for example, grew first quarter net sales 46% year over year, Casper’s rose 26% and Wayfair increased 20%. The number of active customers also grew by approximately 30%.
Many questions are now arising on whether this growth is sustainable, whether the brands will be able to connect with consumers and whether they will be able to create long lasting, loyal customer relationships. These are important factors for manufacturers to consider as COVID has added a whole new dimension to this equation.
With many supply chain disruptions, customers went for whatever brand they could find on the shelf; with massive unemployment came the need for more affordability; with a prioritization on health came renewed awareness for ingredients and products that would boost immunity. DTC also raises questions for brands on new sources of competition, increased customer acquisition costs and ensuring customer retention. The winners will all have one thing in common: well-developed situational awareness.
Paradigm Shift to DTC Requires New Data, Well-Developed Situational Awareness and Market Intelligence Making
Well-developed situational awareness means knowledge of what has happened in the past, what is currently happening and what potentially might happen. It’s a term with roots in the military, where it is linked to making effective decisions in the tactical environment. Winning in combat involves observing an adversary’s current moves, predicting what will happen next and being able to react before it occurs. Situational awareness is also a necessity in business; the more data that comes in, and the more connected and contextual that data is, the better situational awareness the business leader will have.
Data is more readily available than ever, but it comes from disparate sources and in various formats, more than 80% of it unstructured and therefore up until now, mostly unused. Without connecting the different sources, it is difficult to see the big picture and having a single, common view of market conditions in real-time makes the difference for a DTC brand, or any business for that matter, to be able to react and adjust to the various pressure-points that are coming from the new market dynamic. Achieving true situational awareness means being able to filter through the noise with timely, relevant market intelligence that drives strategic and tactical decision-making and context-sensitive decisions.
Advanced Analytics Enables the Future of Market Intelligence
What are these different data sources? How can technology help to ingest and connect them? New advances in AI and Natural Language Processing (NLP) have made it possible to ingest and connect data from any source and at scale. Just like sales data alone will not tell the story, relying only on social listening or competitive market research will also only provide a partial picture. True market intelligence and strong situational awareness comes from connected data and a holistic understanding of where the market is, and where it is going. Going deep into product reviews, patent filings, sales data, social listening, key opinion leaders, blogs, forums, and more will give DTC brands the insight they need to react to all the market changes.
Advanced analytics will automatically collect all this data and prepare it for analysis, identifying and removing incomplete, inaccurate or irrelevant components and parsing out key structural elements that make it possible to extract meaning and context (i.e., specific benefit or feature, ingredient or sentiment). The accuracy of the output and the reliability of the market intelligence gleaned from the process is highly dependent on the sophistication of the NLP and the requisite taxonomies and models that are used to surface insights, trends and predictions from the data.
Advanced Analytics Helps DTC Brands Connect with Consumers and Capture New Opportunities
According to e-Marketer.com, DTC brands’ future growth will depend on both new buyers coming online, migrating from traditional retail AND increase in spending per buyer. They estimate 87.3M people this year will make a purchase on a DTC platform, up 10.3% from last year, and spending will grow 12.7%. They expect the number of DTC buyers to reach 103.4M in two years.
To capture the biggest piece of this pie, business leaders and marketers need to move from measuring brand engagement and brand affinity to growth. It starts with understanding the customer, having a strong pulse on consumer sentiment, what is driving them and who the real competition is. (Side note: 90% of big brands lost market share in the last few years to upstarts, who were born in the DTC world and then made their way to retail). Brands that can meet their customers where they are emotionally and literally at the point of purchase will serve them better and delight them more. And this is how they will win.
*This blog post originally appeared on Signals-Analytics.com. Skai acquired Signals-Analytics in December 2020. Read the press release.