After facing the economic disruptions brought on by the COVID-19 pandemic, direct-to-consumer companies are witnessing a shift in consumer behavior. While many were kept to the confines of their homes and forced to do much of their shopping online, demand for products and services from DTC brands surged.
But now, as COVID-19 is on its way out, many DTC brands have been left with an uncertain future. Disrupted supply chains, waves of redundancies, increasing labor shortages, and rises in inflation are just a few of the most recent difficulties plaguing these companies.
As DTC businesses look to draw up growth strategies for 2023, they must keep adaptability and agility in mind. Navigating these challenges will be no easy feat, but with the right tools and processes in place, DTC brands can capitalize on new opportunities and plan for success.
Modifying the DTC Playbook
Today, DTC has become more than just a retail buzzword. While the business model is increasingly popular for hundreds of companies looking to grow, it has also become a much more crowded space, forcing the weaker DTC brands out. However, while some experts have pronounced DTC dead, the direct-to-consumer retail space is simply changing, not ceasing to exist.
Consumers are becoming more invested in the companies they buy products from. Building loyalty and establishing a strong relationship between the company and the customer has become paramount for DTC brands. And one of the biggest things customers look for in a reputable DTC brand is sustainable operating methods.
Whether it’s contributing to a fund for environmental good or purchasing a product that also gets donated to charity, consumers are looking for companies that make sustainability a priority.
Another big trend for DTC owners is establishing a brick-and-mortar presence. Recently, popular DTC companies like Glossier, Harry’s, Everlane, and Untuckit have expanded their online stores to physical locations. This strategy serves to benefit companies who are looking to include an additional marketing channel to acquire and retain customers.
Other DTC businesses have found greater success in wholesale partnerships, which put their products on a more accessible shelf for customers — a trick to effectively meet face-to-face with high-attention customers and achieve greater brand awareness.
Opening up into these other channels or modifying your operation methods to make them more sustainable serves as evidence that DTC isn’t dying, it’s just changing the rules. Now, companies must adapt and take on a larger role if they expect to survive.
Targeting the Right Market
As we approach this new era of DTC, companies must take a closer look at their consumers and the changes in social groups brought on by the pandemic. By understanding how consumer behavior has changed in the post-COVID period, DTC owners can adapt their strategies to ensure they’re targeting the right market.
This starts with gathering data and conducting market research. For example, if your DTC brand specializes in selling women’s clothing, gather information on the demographic and psychographics of your target market, looking out for key details like age, income, occupation, and lifestyle habits.
Taking the example a step further, let’s say you discover that most of your target market is teenage girls that value sustainable materials and production methods, you can adjust your targeting to reflect these results, creating eco-friendly collections and designs that cater specifically to this age demographic.
Then, once you’ve completed your research, compare your new findings with your original opinion of your target market to identify any significant changes in consumer behavior.
Ensuring Financial Preparedness
If there’s one thing COVID-19 taught the DTC space, it’s that ensuring financial preparedness never hurts. As challenges will continue to inevitably pop up throughout 2025, DTC brands should safeguard its finances by reviewing balance sheets, strengthening cash positions, and maintaining strong liquidity.
Keeping track of these finances can also help you spot any areas of concern as they come up. Using data on your past sales, expenses, and cash flow, you can build projections and forecasts. With this information, you can begin preparing for various scenarios and phases of growth, such as slow-growth, stagnant, and high-growth phases.
It’s also wise to monitor historical sales data, market analysis, and industry trends to generate sales estimates. Then, if you spot an area where there’s been a decrease in sales, you can identify which products are most sensitive to economic disruption and adjust their sales projections accordingly.
Additionally, diversifying your revenue streams can also ensure your cash flow never gets too tight. By creating multiple sources of income to sustain your DTC brand, you can ensure your business stays afloat during turbulent times.
Introducing the New Era of DTC
As consumers become more mindful of their buying habits and behavior, adapting your DTC brand for agility becomes all the more crucial. Consumers are seeking to get more value out of the products they purchase, so it’s your job as the owner to make sure you’re following through.
Now, DTC brands can’t afford to play it safe. By ignoring the clear signals of change in the direct-to-consumer space, many companies will likely struggle to reach probability, or be forced to close their doors.
To ensure survival, you must implement new tactics to strengthen consumer relationships, focus on your target market, and finically prepare for future industry and market shifts. By taking these learning to heart and executing them accordingly, you can better prepare your DTC brand for the economic uncertainty of 2025 and come out all the more successful for it.