Retailers can’t afford to ignore the rising ubiquity of direct-to-consumer (DTC) options — 81% of American shoppers will make at least one purchase from a DTC brand in the next five years, according to the 2018 Direct-To-Consumer Purchase Intent Index from Diffusion PR. Additionally, 33% of all shoppers will make 40% of their purchases directly from brands during this period.
However, the threat posed to retailers by manufacturers going the DTC route may be overstated, according to Erik Rosenstrauch, CEO of FUEL Partnerships. Even though brands are have multiple new options that let them sell to shoppers directly, retailers still retain a number of natural advantages.
Traditional retailers already have an edge when it comes to consumer perception, according to Diffusion PR. While shoppers may buy directly from brands for reasons of convenience, most have positive feelings about the capabilities of more traditional channels:
- Only 18% of shoppers perceive the quality of DTC products as higher than brands that sell through retailers;
- Just 9% feel the customer service of DTC brands is superior; and
- Only about 11% feel DTC brands offer more personalization or assistance in the buying process than traditional rivals.
Brick-And-Mortar Has Strengths DTC Can’t Match
Retailers’ strongest weapon is their ability to provide instant gratification, which on its own will drive a sizable portion of sales. Shoppers typically have to wait hours or days to receive their packages from brands or pure-play e-Commerce companies, but a pharmacy or hardware store can offer a solution immediately.
“Say something is broken and I need it fixed now,” said Rosenstrauch in an interview with Retail TouchPoints. “Or I am sick and I need immediate relief. These are direct, immediate needs, and online will not solve them — it takes too long. You have to go to a retailer if you’re in one of those situations to immediately solve your problem.”
Even brands with a physical presence are far from unstoppable juggernauts: Apple is a formidable retailer in its own right, but that doesn’t mean other companies that sell its products can’t gain the upper hand, according to Rosenstrauch. Even if a retailer lacks wiggle room on price, incentives such as gift cards can create a better value for deal-focused shoppers and draw them into brick-and-mortar stores. Best Buy used this strategy to sell Apple products during the holidays.
“[Best Buy] can’t discount the price — they’re not allowed,” said Rosenstrauch. “Apple doesn’t discount the price either, but Best Buy was offering a larger Best Buy gift card as a ‘gift with purchase’ and an extended warranty. They were providing for the shopper as well. The value of buying an iPad at Best Buy actually beat Apple, even though Best Buy was making less margin than Apple. This is a great example of how Best Buy beat Apple at their own game. The retailer can still win, and Best Buy won without lowering the price.”
Data Sharing Can Turn Competition Into Cooperation
Retailers and DTC brands don’t have to be enemies. Brands and retailers can utilize each other’s sales data to improve their overall understanding of the market. In fact, 46% of brands already share real-time data on sales trends, according to NuOrder. Additionally, 54% of brands will help their retail partners by incentivizing buyers with discounts, performance rewards and other benefits.
By working with their trusted brand partners and leveraging their unique strengths, retailers can flourish even in a world of rising DTC offerings. Combined with the convenience of options like buy online, pick up in-store, retailers can thrive even as the marketplace expands to accommodate the growing number of DTC sales.
“Retailers will always own two of the three ways that shoppers spend money and buy: duress and impulse,” said Rosenstrauch. “As long as retailers are thinking about how they can close the gap on planned purchases, so shoppers can make a purchase with an instant gratification pickup, retailers can win that as well. I personally contend that retail is still the best position for how we shop and behave.”