The long-term impacts of the pandemic on retail are only now becoming apparent. Consumer purchasing behaviour changed during the pandemic as physical stores shuttered, customers were “forced” into digital channels, and supply chains encountered issues. The decision-making process altered—permanently, in our view. 

The pandemic was a catalyst for the growth of D2C channels. D2C, or Direct-to-Consumer, refers to a business model where a company sells its products directly to consumers without wholesalers or retailers. This model has gained popularity with the advancement of digital commerce, as online stores and social media channels have offered companies the means to reach consumers directly.

Accurate information about the size of the Finnish D2C market is hard to come by, as the D2C model encompasses various products and industries and is not categorised in a unified manner. However, the model's proliferation can be seen in the emergence of new domestic D2C brands across different sectors such as apparel, cosmetics, food, and home products. Simultaneously, many foreign D2C brands are expanding their operations into Finland.

Why choose D2C?

D2C is a means for manufacturers and service providers to increase sales and accelerate market entry. Other benefits of D2C for companies include:

• Direct customer relationship: A deep relationship with customers enables better customer service and loyalty-building. Direct customer feedback on the product, service, or brand is invaluable.

• Better profitability: Selling without intermediaries can increase margins.

• More insights: Information collected on customer purchasing behaviour and preferences aids in product development and targeted marketing.

• Brand control: It is easier for the company to directly influence the brand perception formed by consumers through communication and marketing means.

For consumers, D2C can offer more convenient transactions and more efficient returns processes, among other benefits. Other direct selling advantages for customers include:

• Better response to needs: Through direct selling, companies can offer more personalised services and tailored products.

• A wider product selection: Consumers can gain access to an entire product range or exclusive products not available through other means. Additionally, more detailed and higher-quality product information can be provided through the company's own channels.

• Direct communication: Customers can provide feedback and development requests directly to the company regarding customer service or products.

Monitoring and enhancing D2C business figures

A company's D2C market may be relatively narrow, leading to growth limitations, especially in Finland, due to market size. Therefore, customer loyalty must be at the core of D2C business. For instance, through various loyalty programmes, customer purchase history and preferences can be tracked, which in turn aids in offering personalised services and marketing.

In D2C business (and digital business in general), analytics and metrics are key to cost-effective operations. The most important D2C metrics are CLV (Customer Lifetime Value) and CAC (Customer Acquisition Cost) – essentially, how much a customer generates over the long term and how much the company spends to acquire new customers.

Factors that improve CLV include:

• Enhancing customer satisfaction and loyalty: Offer high-quality products and services, and good customer service. Retaining existing customers is easier and cheaper than acquiring new ones.

• Cross-selling and up-selling: Offer complementary products and services (cross-selling) or more expensive options (up-selling). This is surprisingly infrequent in online commerce.

• Maintained customer relationships: Provide services or products that require continuous purchases or subscriptions, creating recurring revenue and longer customer relationships.

• Personalisation and tailored offers: Use customer data and analytics to create personalised marketing. When offers are engaging, customers are more likely to commit and make more purchases.

• Customer communication and engagement: Regularly engage with customers through newsletters, social media, or personal messages.

Conversely, reducing CAC can be achieved through methods such as:

• Targeted marketing: Use analytics and customer data to precisely target marketing to those customers who are most likely to make purchases or show interest in specific products or services. Targeted product marketing and information increases customer satisfaction.

• Social media presence: Utilise social media channels and content marketing to organically build customer relationships.
  Recommendations: Encourage current customers to recommend your company and products to their friends and networks. Leverage customer reviews in your communication.

• Partnerships: Seek strategic partners and collaborate with companies that can help reach new customers. Share the costs.

• Optimize user experience: Ensure that your website and online store provide a high-level user experience and that the sites are appealing.

• Test and learn: Conduct continuous A/B testing, monitor the performance of marketing campaigns, and analyse the results.

D2C – as easy as pie?

A centralised trading service solution and D2C need not be mutually exclusive options. New doors can be opened cautiously and closed if necessary. It is unwise to assume that the world won't change or that change won't affect one's own business.

At Crasman, we like to develop digital business step by step. This means that not everything has to be 100 percent ready by tomorrow. We believe that developing an online store is a process, not a project—it evolves continuously with changes in legislation and user needs.

What does this mean for solutions? It means that things can initially be tried through agile pilots and lightweight solutions. With technology, you can genuinely test what works and what doesn’t.

Testing D2C trading can be easily done, for example, by setting up a pop-up store and an exhibition cashier system at a trade fair. Would you like to know how D2C could be tested for your company? Contact us, and we will provide more information and set up a demo store if necessary.