2021 was a critical year for the direct-to-consumer (DTC) space. With consumers’ rapid shift to ecommerce channels, DTC players had to navigate surges in demand and effectively compete against a broader landscape that included their startup peers but also omnichannel behemoths. At the same time, they’ve had to navigate consumers’ increased desire to buy from brands that align with their social and environmental beliefs.
In its Nine by Nine report, Future Commerce explored the “inflection point” that the DTC world is facing: “ A plenitude of brands, with very little to sell, eager to continue to tell their stories and engage their communities, but unable to do so purely through commerce,” the report stated. “If a brand has nothing to sell, do they have anything to say?”
The prior DTC era was fueled by venture capital, “allowing brands to be purpose-driven and philanthropic, even if it wasn’t a profitable venture for them,” said Phillip Jackson, Co-founder of Future Commerce. “We then weathered a deluge of brands with a similar aesthetic and ecommerce-centric business model, [but] without the burden of philanthropy. And that gave way to stellar branding, and lackluster products, creating a bubble in customer acquisition channels.”
That is why in this new era of DTC, the big question is whether consumers will continue to spend their dollars on brands that have an ideology but lack a superior product and experience to back it up. “If the product isn’t great, the customer has multitudinous choices online from which to shop, regardless of their ideological alignment to another cause,” said Jackson.
The Nine by Nine report spotlights the nine themes Future Commerce believes are creating new and exciting opportunities as well as the brands that are differentiating in these areas. The themes include:
- Evolving from digital retailer to omnichannel business;
- Providing greater access to customers of all sizes and income levels;
- Putting the customer at the center of the experience;
- Appealing to niches by providing curated marketplaces;
- Evolving low-cost private label products into sought-after brands;
- Innovating in new and exciting ways in “The Metaverse”;
- Speaking directly to the “can’t afford real life yet” (C.A.R.L.Y.) psychographic;
- Engaging in performance art and absurdism to attract a new audience; and
- Promoting the well-being of their customers.
Jackson reflected on the report’s findings and what they really mean for the DTC community.
Retail TouchPoints (RTP): Which of the trends identified in the report do you believe have the most long-term potential for brands and retailers?
Phillip Jackson: We’re firm believers that the free market decides what it wants, at least when it comes to physical goods and services. It’s not very often that the capitalists can create a market demand, though the metaverse seems to be heading that way. Zuckerberg’s pivot to Meta, Dorsey and Musk’s backing of Bitcoin and numerous other venture firms backing crypto and web3 projects might create enough opportunities for a pervasive metaverse that it might just win over the consumer. But the consumer ultimately holds the power as to who wins and who loses.
RTP: Can you expand more on the role you think the metaverse may play in the future of experience?
Jackson: The metaverse is the wild west, to be sure. Back in January 2021, it meant speculative trading card investments. Today, it can be anything from a digital Costco card to an immersive VR experience. In the era of remote work, VR very well could be the bridge between employee experience (EX) and customer experience (CX). If that takes place, we’ll see VR become commerce-capable. As with any communication medium that becomes commerce-capable, we’ll see mass adoption. Until then, Future Commerce is tepid on the consumer desire for more immersive virtual reality experiences that replace real-world experiences.
RTP: The report indicated that CX is challenging to optimize because it encompasses so many different things. Do you believe this will change, or most importantly, simplify, in 2022?
Jackson: We predict that the Chief Experience Officer (CXO) will be an emergent role in the enterprise that will effectively replace the Chief Strategy Officer position. The future, it seems, is centered on brand experience. Understanding how customers perceive your brand, and how you can continue to wow them, is going to be a differentiating factor in the coming years.
RTP: There are so many new digital commerce opportunities emerging, but the report’s introduction noted that we’ve “returned to our defaults,” or “the store of yore.” Why do you think this is? Is it because we’re truly experiencing something exceptional or are we simply creatures of habit looking for some sense of normalcy?
Jackson: Retail foot traffic was up markedly in 2021 when compared to the prior year — mid-pandemic and pre-vaccine. Future Commerce forecasts this trend will continue through 2022. We’re creatures of habit, of course, so even though we shifted to digital during lockdowns, most consumers by and large continued to shop with the same retailers — like Costco, Walmart, Target and Home Depot — they just did so from the couch. As the world reopened, our defaults reinforced our behaviors.
Let’s think ahead though. We’re slowly being retrained to expect instant gratification and fulfillment, even online. Impulse purchases are now a “thing” on the web. Amazon has broadly deployed same-day delivery in most major markets, and two-hour delivery in major metros. Delivery startups like Jokr and Fridge No More have even closed that gap to 15 minutes. If the customer is slowly being trained to have instant gratification in their online purchases, and the options are 15-minute delivery or three days, the next-best thing will be to get off the couch and go to the store.
RTP: How do trends like diversity and inclusion play into omnichannel strategy?
Jackson: Diversity in particular is getting more attention in physical retail today than in prior years. Target’s supplier diversity program is a strong example; the industry moving away from gendered toy aisles toward branded curated sections is another. More and more retailers are finding ways to make products accessible and discoverable outside of their cordoned-off ethnic or gendered sections.
RTP: How can brands best determine their priorities and investments when all of these trends are seem to be rising to the top simultaneously?
Jackson: The early stages of developing a brand involve more than skill — it takes a good bit of luck in timing. For example, being omnichannel 10 months ago meant solving physical retail distribution. Now, given issues with supply chain, being omnichannel also means having a digital goods strategy. For enterprise businesses, it makes sense to chase every channel. For startups, it makes sense to focus all of your efforts on just one or two channels. I don’t envy mid-market brands today that have to solve all of the above.
RTP: What are your predictions for what 2022 will bring for the retail industry?
Jackson: If 2021 was the year of the IPO, I think 2022 will be the year of inorganic growth. Meaning, we’ll see a slew of mergers and acquisitions in the DTC space. Retailers will acquire analytics and last-mile delivery outfits. If our readership and on-site analytics are any leading indication, the brands on Future Commerce’s 2021 Nine by Nine are a great place to start when looking at M+A targets.