Many brands that traditionally operated through third party retailers are now moving to a direct to customer model, which can include opening bricks and mortar shops – will they be the ones to reap the benefits of bigger profits and a better customer experience?
Despite high-profile brand collapses, the rise of the internet, declining footfall and, of course, losses incurred during the pandemic, no one ever truly believed that consumers were ready to call time on high street shopping.
Online shopping is, of course, going nowhere. But there are few signs it will replace the in-person option fully. Buying over the internet lets you shop from the comfort of your phone – but all you are touching is a screen, you can’t try out or sample anything. Deliveries come conveniently straight to your door – but you do have to wait, and weather the possibilities of delays, items getting lost in transit, or your package being left on the doorstep for anyone to take. There is no instant gratification, beyond a ‘your order was successful’ screen.
More and more brands are starting to embrace the direct to customer (DTC) model. This can mean eschewing online retailers and running their own websites, creating and delivering their own customer journeys and without the need for a middleman.
But it can also mean establishing bricks-and-mortar shops.
Brands that started out as digitally native are now moving towards having a physical presence. This has been noticeable in several consumer sectors, such as sportswear, with Reebok, Nike and Under Armour deciding that they want doors and windows and a logo above them.
With regards to consumer electronics, the model is still predominantly sales through third party electrical retailers, with notable exceptions such as Apple and Samsung who have led the way in creating unique spaces to promote brand engagement through their experience centres typically situated on premium real-estate. Meanwhile, there are other recent arrivals to the high-street such as Miele, and whilst they may not be able to replicate the type of experiences on offer from the high-tech brands, at least they’re providing their customers an opportunity to experience their products in ways they never could in the virtual world of online shopping.
Selling through traditional retail stores means that the brands do not have control of the experience that their customers receive, and that their profit margins are lower. But going DTC represents an opportunity to increase these margins, take back control over the customer experience and gather information about the customers’ purchase preferences that can help inform future sale strategies and even product design.
Physical stores serve as venues for customers to try products out and engage more deeply with the brand. Some customers will not make their purchase in store, preferring to go home to think about it and then buy online – but this is an outcome directly related from them having been given a chance to see the product in person first. Physical stores also serve as an added channel for marketing and advertisement. Advertising exclusively online is expensive, but a brand’s logo being prominently displayed outside and within a location that gets heavy footfall helps to put it firmly in shoppers’ minds.
Of course, there are challenges with DTC. Those third parties are traditionally employed for a reason, since they have expertise in logistics and will handle elements such as deliveries, product returns, and customer service. A brand that decides to do all this themselves will get control back, sure, but they must also be prepared with the right skills and resources in order to handle these new demands. Added to this, physical stores are expensive to open and maintain, so may only be a realistic move for those on the larger side.
Many other consumer electronics brands are already pivoting to sell DTC in an industry that has in the past relied predominantly on traditional retailers. Will the cost-of-living crisis accelerate this trend and provide the manufacturers with more control over margins and customer experience – who will be the winners and losers, and will the customer actually get a better experience? In an increasingly unpredictable climate, brands that are prepared to handle the challenges of going DTC could be the ones who find the kind of stability that is sorely needed right now.
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