LOS ANGELES, CA / ACCESSWIRE / June 27, 2020 / Direct to consumer (DTC) e-commerce has grown substantially in the past year, accelerating a trend that has been underway for several years. Part of this rise, in the earlier part of the last decade, was due to Silicon Valley entrepreneurs' obsessive idea to cut out the "middleman" by selling directly to customers through an online storefront. Previous business models such as distribution to retail stores may get products in front of customers, but each of these requires selling to a "middleman" at lower product prices or wholesale rates.
More recently, e-commerce growth has accelerated due to shifting customer buying patterns. People are spending more time online, enjoy the convenience of having products shipped directly to their doorstep and are spending more time (for a lot of different reasons) at home - where those e-commerce sites consistently deliver.
When done right, direct to consumer models can deliver great sales results with higher profit margins. Merchants can also access billions of potential customers at their fingertips (literally) through advertising platforms like Google and Instagram. But many companies continue to struggle in growing e-commerce models as increasing competition, rising costs, shorter attention spans and the need for quality digital strategies make acquiring new customers harder now more than ever.
According to Lucas DiPietrantonio and Jackson Corey, co-founders of Darkroom, a big part of the problem is that many e-commerce brands don't understand what will truly drive lasting, long-term competitive advantage and customer lifetime value (LTV). This innovative growth marketing agency based out of Los Angeles believes that what often goes overlooked or undervalued is brand.
Chasing the Wrong Differentiators
"In the marketing world, we're always looking for ways to differentiate our businesses from our competitors," explains Darkroom co-founder and Chief Creative Officer Jackson Corey. "The problem is that many brands place too heavy an emphasis on the wrong differentiators that don't pay off at scale." Instead, the founders argue, brand building initiatives must be intensively deliberate and observant.
Corey continues, "Brand does pay off against rising customer acquisition costs, and permeates literally every facet of the customer journey, becoming more effective as brands increase awareness and scale sales." Apple's AirPods are a great example of this principle. In 2019, Apple sold 60 million AirPods, grabbing 71 percent of the wireless headphone market. Yet many other companies had similar - or even better - features. What made the difference wasn't the technical specs, it was one of the most powerful brands in the world.
"Focusing too much on technical differentiators or new product categories and not on brand ultimately leaves e-commerce companies relying on other sorts of middle men - just not the ones you might think," DiPietrantonio adds.
"In a digital environment, the middle men are advertising costs, marketing hires, PR, conversion optimization costs and so on. For a long time, this wasn't really an issue because you could run ads and still achieve great returns through digital channels. However, as the cost to digitally acquire customers increases as platforms become more saturated, brands need to focus on what truly matters."
The true best way to ensure a strong future for your business, DiPietrantonio argues, is focusing on brand itself and being deliberate in using channels that effectively market that brand.
Why Brand Matters
"When you are building a direct to consumer business on a native storefront, you can't think of it as building an e-commerce company," DiPietrantonio says. "Instead, you have to look at it as building a brand with e-commerce as the core method of distribution. This helps you build the brand with care and intention, which will get stronger long-term results."
"Many DTC companies focus on things like ad spend, Adwords, or other advertising channels," Corey explains. "These are simply another type of middleman. You have to prioritize the brand to make certain digital channels sustainable. Your brand represents who you are and can convey feelings or associations to your customer quite immediately. When put into an advertising perspective, a good brand has the ability to make campaigns. When you put brand first, you can gradually diminish these new middleman costs as your metrics go up."
Many of the most successful e-commerce companies derive their results from a powerful brand. Allbirds, Warby Parker, and Harry's are just a few examples of companies that have built much of their success from their brand. While products and services have certainly played a role, their lasting power largely stems from relentless execution and diligence on each campaign, product release, and communication delivered to its customers. This has culminated to a point where each of these companies have brands that are incredible sources of defensibility.
DiPietrantonio's philosophy is that brand identity should embody what your business represents and what you provide to your customers on an emotional level. "We focus intensely on high growth customer acquisition campaigns for our e-commerce clients, and measure metrics like customer acquisition costs, return on ad spend and return on investment. With a good brand, all of these metrics improve."
A powerful brand builds customer loyalty and impacts advertising campaigns in positive, yet unquantifiable ways. It also lessens the reliance on digital (or traditional) marketing middle men because it allows for scale.
According to research from Yotpo, 36.5 percent of online shoppers spend more with brands they are loyal to. 59.3 percent will refer the brand to friends and family. The result is powerful, middle man-free growth for your e-commerce store.
E-commerce entrepreneurs should take time to carefully consider all facets of their branded communications. Brand identity will influence the products the company designs, as well as the advertising channels and messages it uses to reach its customers.
Ensuring Lasting Growth
"At the end of the day, the reason we fall in love with a particular brand is because of how it makes us feel," DiPietrantonio says. "Whether we're fully aware of that or not, it's this emotional element that makes us loyal customers to one brand while completely ignoring another. E-commerce brands need to learn that while they can reach billions of people online now, they must be twice as conscious about making an impact with each and every communication."
In an increasingly crowded market, differentiation is key. When investing in advertising campaigns or marketing strategies, a positive brand can make all the difference, increase ROI, and convert new customers. When combined with high growth strategies, e-commerce brands can truly cut out the middleman.
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