Challenges D2C brands need to overcome to operate in an efficient and robust way

While D2C companies continue to grow in popularity, particular challenges/gaps still need to be addressed to execute an efficient and robust D2C strategy.
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The COVID-19 pandemic has undeniably changed the dynamics of nearly every aspect of the world. From the business standpoint, brands across verticals have undergone significant transformations as the crisis pushed them to rethink their strategies and realign their operations. One of the most significant shifts is the transition from offline to online channels and the rise of the D2C market.

With speed and convenience now influencing most online transactions, alongside the cut-throat competition in the D2C space, consumers are presented with an abundance of choices. Today, India has over 600 D2C brands, and the number is rising quickly.

This poses a threat to brand loyalty, meaning that consumers may quickly shift to another brand if one of them doesn’t provide them with the efficiency, convenience, and seamlessness they expect. Fast-changing consumer expectations are one of the many reasons the D2C model is gaining traction.

While D2C companies continue to grow in popularity, particular challenges/gaps still need to be addressed to execute an efficient and robust D2C strategy. That said, let’s take a look at the challenges and how they can be addressed.

Growing revenue and making D2C channel profitable

While setting up a D2C business is pretty simple in today's tech-driven world, the true challenge lies in scaling it and ensuring sustained growth, given the growing competition. Finding growth drivers and executing them at scale is an uphill battle for many.

Often, even after receiving a large amount of traffic, the website does not generate the expected sales because the brands are unable to decode user behaviours and separate them into cohorts.

This leads to ineffective marketing campaigns and poor ROI. This sector can leverage machine learning and artificial intelligence very well. It's time for D2C brands to start adopting technology to find opportunities and act on them.

Keeping acquisition costs as low as possible

Without customers, a brand will simply cease to exist, and customer acquisition is one of the most important aspects that ensure a brand’s growth and survival in the market. However, customer acquisition often comes with high costs if brands do not strategise and implement them correctly.

And as media spending and website traffic grows, keeping customer acquisition cost (CAC) in control is difficult for many brands. The rising cost of acquiring consumers (CAC) shows that we're approaching saturation, and many firms will soon discover that social media alone isn't enough.

Digital marketing is the most effective strategy for D2C businesses to acquire and retain customers. To do this, they offer loyalty programmes, rewards, host social media contests for freebies, and engage with their customers regularly to drive customer retention and keep their business afloat.

However, as competition has grown, the cost of advertising on social media platforms has skyrocketed.

So, instead of focusing their marketing efforts solely on one platform, D2C businesses should consider omnichannel and diversified marketing approaches.

Allowing automation and Machine Learning to power marketing technology can free up sales and marketing teams to focus on creating unique customer experiences that will help them sustain a long-term customer base while remaining cost-effective.

Leveraging data to make business decisions

Today, the volume of data generated by various digital channels is undoubtedly vast. However, because data is not shared uniformly across platforms, analysing it to make key decisions becomes daunting for internal teams and marketing agencies.

It requires a highly specialised skill set and cutting-edge technology to gauge insights and aid quick, efficient decision-making. Amidst the rising competition in the D2C market, data-driven decision-making is the key to D2C success. This data can translate into actionable insights that businesses can indeed utilise.

Additionally, the days when customers accepted the “one size fits all” approach are long gone. Customers nowadays prefer a personalised experience when interacting with a brand. The brand can better grasp its customer base and target them more effectively by using internal data to learn about their preferences and purchasing activity.

So, brands should focus on enriching their existing data and collaborating with platforms that have robust first-party data as it not only helps with insights but leads to creating marketing campaigns tailored to consumers' intent.

Human resources with the right skill sets

Data pours in from various sources, and it requires specific skill sets to be able to process this data and find meaningful actions to drive growth. This skill set is short in supply and often hard to train and retain. If your company lacks the necessary digital marketing and data analyst skills, it may miss opportunities to capitalise on data and target new consumers through innovative digital techniques.

Data woven into decision-making will eventually lead to growth; however, employees might not have the domain knowledge or expertise to do in-depth data analysis.

Brands look to hire bigger teams, but not all can afford that. Seasoned data analysts are expensive resources, and for SMB's and startups, it isn't easy to hire and retain them.

As a result, firms can make use of tools that help to analyse data and provide insights in real-time or seek out an ecommerce solution that meets their desired level of flexibility and in-house development capabilities.

Bottom line

D2C eCommerce is becoming an increasingly important growth channel for brands across the globe. The channel reduces your dependency on marketplaces and allows you to gain valuable insights into your customers and their preferences.

Brands now need to bring about a cultural change within their teams and make data-driven decision making a must. Addressing the aforementioned challenges will help brands leverage the many growth opportunities that this channel offers.

Edited by Saheli Sen Gupta

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)