The highest inflation in 40 years has caused consumer confidence to fall to a three-month low, forcing many to forgo buying new homes, appliances and cars, according to the Conference Board. Despite these headwinds, retail as a category is forecast to continue to grow, albeit at a slower pace than we’ve seen in the past two years. master card
While digital-native direct-to-consumer (DTC) brands stood out during the pandemic due to a number of factors, including lower real estate exposure, cheap customer acquisition costs, and an increase in online shopping, today they require a different strategy for success. The past eighteen months have seen a sea change in performance marketing success due to the release of iOS 14. Coupled with ongoing supply chain shortages, recruiting challenges, and now, declining consumer confidence, brands of beauty and luxury digital native DTCs need to consider new avenues for growth:
Explore new retail formats: Identifying smart ways to optimize all consumer touch points is another key to success, and controlled distribution continues to be an important success factor for most of DTC’s luxury brands. So much so, in fact, that Chanel Beauty recently told her fashion business which in the coming years will move to a more DTC format by reducing its dependence on wholesale partners. The article reports that the luxury beauty giant’s e-commerce sales jumped 32% last year, and it also opened 50 independent Chanel Beauty boutiques. Conversely, identifying the right retail partner or emerging location can help digital native DTC brands acquire new consumers. Pangaia, the sustainable digital native DTC materials science brand that creates sports wardrobes made from its sustainable fabrics, is selectively opening pop-ups around the world so consumers can interact and experience its products in real life before they shop online. line.
Try new digital platforms: While the luxury shopping market in the metaverse is still in its infancy, brands like Balenciaga, Louis Vuitton and Burberry are experimenting with different formats to understand who the customer is in this new virtual world. Many brands feel that the once-in-a-lifetime opportunity to be a Web 3.0 pioneer is a compelling proposition for new customer acquisition. Other non-traditional platforms can be just as rewarding. Digitally native fragrance, skincare and cosmetics brand Charlotte Tilbury has delved into the world of e-gaming by offering masterclasses and other digital events on the gamer streaming platform Twitch. Testing new platforms before they become oversaturated and overpriced allows DTC’s brands to engage with consumers globally in an organic and authentic way.
grow internationally: E-commerce enables borderless shopping, which is especially appealing to younger Generation Z and Millennial consumers. Enabling cross-border e-commerce is one of the most cost-effective and effective ways brands can scale their business. However, the key to success is “glocalization”. Fluency in the local language, pricing in local currency, promotions timed to a local calendar, offering global access with local expertise, and eliminating hidden surprises by offering shipping options that include local fees and taxes are critical to the success. Accepting cultural differences is another key success factor. Digitally native CTZN Cosmetics has mastered glocalization since its inception. Founded by three American sisters of Pakistani descent who grew up in Dubai and live in London, CTZN’s “nudiverse” colors match all skin tones, have been popularized by celebrities and TikTok influencers, and are shipped to consumers in the USA, Europe and the Middle East.
act sustainably: Pangaia is just one example of a DTC brand that has embraced sustainability that has allowed them to cultivate a loyal consumer audience while setting themselves apart from their competition. Another is Vegamour, the plant-based hair wellness brand that just got an investment from Nicole Kidman. Vegamour products address the growth of hair, eyelashes and eyebrows. He started selling his products on Amazon
Brands that are prepared to take risks when the world changes around them often prosper more exponentially than they would have under more favorable and predictable business conditions. DTC brands that are willing to embrace change and seize the opportunity presented by the current economic environment will emerge much stronger and more resilient.