In my experience not every brand will benefit from a direct-to-consumer strategy. In some cases there are a number of direct to consumer challenges that can impede the rollout of a D2C marketing strategy.
I’ve outlined a few that I’ve seen and personally dealt with over my career. This is particularly true with the explosion of ad spend on social media networks. Remember when social media didn’t have any ads? Well, those days are long gone and the flurry of companies that dove into D2C realized that it’s not always as easy as it seems. Here are some of the top 10 challenges I’ve seen companies face in implementing direct-to-consumer marketing strategies and ways to mitigate these challenges.
Table of Contents
- Spending Money on Facebook
- There is No Other Way to Make Money
- No Diversity in Making Money
- Bigger Effect of Advertising if In-Store Too
- Many People Discover New Brands In-Store
- Digital Sales Increase Each Year
- Many Products are Still Purchased in Stores
- Have to Spend a Ton of Money on Marketing
- If Marketing and Advertising Stops, Traffic Also Stops
- Brands are Essentially Buying Traffic
One of the biggest direct-to-consumer challenges that face brands today is that to gain any traction with traffic and visibility, they must spend money through Facebook advertisements. Facebook is one of the most popular social media websites and the advertising algorithms make it very easy to target specific customers in specific areas. Businesses are able to create campaigns that will specifically target people in different age groups, locations, and can even target them based on their previous likes and activity on the app. Targeted ads work much better than displaying your advertisement to everyone, as data is able to show that certain people will be more inclined to purchase that item, so it’s more beneficial to advertise to them.
The information that consumers provide through their profile and actions on the site can be a great way to target people who, based on past purchases, might be more likely to purchase similar products. This is a great way to gain customers and get your product out there, but it can also be pricy.
According to WebFX, plan to spend between $200 and $2500 a month in additional costs. In addition to spending money on direct Facebook advertising, it is common that many people will interact with advertisements when scrolling through their newsfeed. In this case, your brand might want to consider investing in a way to take advantage of this and speak directly with customers who might be interested in your brand.
This can go a long way but will take additional funds to pay someone to interact with people through social media. Though spending money can be a challenge, especially for brands that are very new or just starting up, it is necessary to get your product in front of those who are likely to purchase it.
Another unfortunate direct-to-consumer challenge is that the only way to sell your product is to get it in front of the consumer. Most people don’t seek out items they need, but rather, companies and brands convince the consumer that they need to purchase their products.
This is an important fact to remember if you are selling something that is especially common. Get your product in front of the consumer and convince them through advertising that they need to purchase a product from your brand. This direct-to-consumer challenge can be remedied through advertising. The only way to make money is to sell a product, and the only way to sell the product is to convince the consumer they will be missing out if they decided to pass up your product. Focus on what makes your brand and products unique, while selling the lifestyle your brand has to offer.
Your product comes second to the lifestyle behind your branding. When focused on this, your ads will start to reflect more of your branding as a whole rather than the specific product you are advertising. Again, the main goal is sales in the situation and there is no other way to make money in direct-to-consumer brands.
With direct-to-consumer brands, there is simply no other way to make money besides selling products. While other companies can diversify a bit more, it is very cut and dry with these types of businesses. A follow-on Instagram, a click on a webpage or blog, nothing is making direct-to-consumer company money except for selling a product.
Yes – social media, blogs, web pages, articles – these are all things that must be prioritized. Not because they are earning any money directly, but because all of these methods are used as a form of advertising to try and get an interested customer converted.
Many brands have a large social media presence, but the follower count doesn’t directly correlate to sales numbers. This direct-to-consumer challenge means revenue streams are limited and direct-to-consumer brands are very focused on their one goal: sales.
Many direct-to-consumer brands are working with stores that align with their products and brand identity to get their products in front of more people. The goal is to put the products on the shelves so that more people see the items while out shopping. This is basically built-in advertising. Walking by a physical product is a great way to get someone interested in the brand or even get a sale on the spot. This is where colors, logos, and packaging are very important.
Just like online, typically people don’t seek out specific products, rather, they are pulled in by what the brand has to offer. This is done by creating attractive and enticing packaging so that someone walking by might stop and have a look. This might lead to a simple Internet search and maybe even a follow-on social media. The more any direct-to-consumer product is placed in front of a potential customer, advertising takes place. The more this happens, the bigger effect it has on the branding altogether.
Getting products into stores is a challenge among itself, but the return is worth it. Over the next five years, many direct-to-consumer brands plan on opening up brick-and-mortar stores, around 850 total. It is predicted that these brands will jump significantly in popularity as the physical stores open alongside the eCommerce store. This is a great way to combat this direct-to-consumer challenge.
Shopping is a social activity. Friends and families often make a day out of going to the stores and shopping, even without the intention of purchasing anything specific. Through browsing, we are able to discover new brands at any given moment. This a great thing for large companies, but direct-to-consumer brands do not have this luxury. Getting your product into a store is a great goal to have but achieving that is a feat in and of itself.
Yes, window shopping can indeed be compared to browsing the internet or online shopping, but consumers still need to find your product, and the only way to gain traffic and customers is through advertising on the Internet and social media. Whereas it is common for people to stumble upon a new store when out and about, it is quite rare for people to just stumble upon a new direct-to-consumer brand.
Digital purchases and eCommerce sales have been steadily increasing for the past few years. Based on the current trends, the numbers will only go up. From 2019 to 2020, eCommerce sales jumped almost 6% – the biggest one-year jump ever. This might sound like a good thing for many small, direct-to-consumer brands. However, this also means there is more competition online as well. If many similar products are popping up online, customers will not only prefer to purchase a well-designed product, but other desires will come into effect.
Many consumers prioritize things like low or free shipping costs, exemplary customer service, and quick response times through social media or email inquiries. If people decide to purchase from an online retailer, they want their experience to be as smooth as possible. It is very easy for a customer to simply move on and decide they didn’t need the product anyway, or perhaps that found another company that responded to their questions more quickly. All these things accumulate and make it more difficult for these types of brands to succeed.
Every aspect of the brand as a whole must be top-notch or the potential to lose possible customers becomes quite high. On the contrary, a good experience with your brand is a great way to earn a repeat customer.
As much as we all love online shopping, almost nothing provides us humans with more joy than falling in love with a product in a store and taking it home that very same day. In the 21st century, we are all used to instant gratification, from scrolling through pictures on Instagram to swiping on dating apps, we want things now, or else we’ll get bored.
Our brains have been accustomed to instant gratification, and this creates a direct-to-consumer challenge in many different ways. Even though almost 15% of global retails sales were purchased through eCommerce websites in 2019, there is still something to say about walking into a store, feeling different fabrics, trying on a piece of clothing, and seeing how you look in it before having to commit to a purchase. With retail specifically, shipping costs and inconsistent sizing is a reason more people are still opting to shop in-store for clothing.
Retail stores are not going anywhere any time soon, and direct-to-consumer brands will have to keep in mind that they will always be competition simply based on the fact that you can’t beat tempting people by using their sense of touch, smell, and sight while shopping for new clothing and accessories.
Although marketing and advertising can be confused with one another, the two are very different. Where an advertisement is simply using paid means to get your product in front of a potential consumer, marketing is more of the research behind the brand. Marketing consists of researching who is buying your product, where they are from, what exactly is converting customers, and much more.
Marketing allows for a more specific advertising strategy, once the company hones in on what exactly is and is not working. Marketing is essential for any direct-to-consumer business and is super helpful in the long run. The downside is that marketing is very expensive. The more money a business spends in marketing, the more they are able to discover what exactly they should be doing to increase their sales overall.
Many think that small businesses should allot between 7% and 8% of their gross revenue to marketing. This number seems small, but for some, it is a significant amount of money to spend, especially when many struggle to make any sort of profit, especially at first.
Another direct-to-consumer challenge is that they must constantly be funneling money into marketing and advertising to stay relevant and gain new customers. If at any point marketing and advertising stop, it’s guaranteed that almost all website and eCommerce traffic will stop as well. Companies need to constantly be advertising and marking to stay relevant in their niche. This includes social media marketing, advertising through influencers, SMS marketing, and of course email lists.
Continuously drawing new customers and old customers back to your online storefront is essential in growing and maintaining any direct-to-consumer brand. In the age of social media, consumers need to be constantly reminded that your brand exists and that they need your product. With so many options for many different products, it’s so easy to get distracted and forget about somethings we’ve already seen.
This is detrimental for small businesses because they must constantly be putting money into marking and advertising, even if no profit is being made. It can be hard to pull from profits especially at first, but it is especially necessary to grow these types of businesses.
Even if a certain consumer is only slightly interested in what your brand has to offer, it cost money to even get that person on your site at all. Traffic in general can do great things for your brand as a whole. In most search engines, websites with larger amounts and more consistent traffic are shown higher up on the search results.
This is also true for searches done on many social media websites. Getting someone to visit a website or eCommerce store is better than them not visiting at all, even if they do not intend to purchase. Every visit, from any source, increases the amount of traffic on any given day, and traffic essentially turns into conversions. The more traffic a web store receives, the more sales it can generate in the long run. Essentially, direct-to-consumer brands are spending money on traffic. All of this encompasses this direct-to-consumer challenge.
When realized this way, it can be difficult to grasp, but traffic is essential in any business. This helps smaller brands grow and maintain an audience, even if many people are unsure or not willing to purchase the product at this time.
About the Author
For over 25 years, Jay Sung has been a passionate leader in driving sustainable growth through direct-to-consumer, e-commerce, and customer acquisition strategies. Mr. Sung oversees corporate branding and growth initiatives utilizing a continuously evolving toolkit of digital marketing strategies and technologies to drive innovative direct marketing programs for portfolio companies – from startups to Fortune 500 organizations.
Previously, Mr. Sung served as the Chief Marketing Officer for Guthy-Renker, a $1.3 billion industry leader in the direct-to-consumer health and beauty market. He is best known for developing consumer acquisition and marketing strategies for leading brands such as Meaningful Beauty® with Cindy Crawford, Wen® Haircare by Chaz Dean, IT Cosmetics™, and many others. In addition, he served as the CEO of such well-known brands as The Proactiv Company and Lot18.
Mr. Sung lives in Los Angeles, enjoying all Southern California has to offer. You’ll frequently find him reading the latest business journal, cooking, or practicing the piano to relax. Mr. Sung earned his Bachelor of Science degree in economics with a double concentration in marketing and accounting from the Wharton School at the University of Pennsylvania.