The long-term effects of the coronavirus pandemic on retail are only now becoming apparent. Consumer purchasing behaviour changed during the pandemic when physical stores closed down, customers were 'forced' into digital channels, and supply chains experienced disruption. The decision-making process transformed - in our view, permanently. 

The pandemic was the trigger 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. The model has gained popularity with the advancement of digital commerce, as online stores and social media channels have enabled companies to reach consumers directly.

Obtaining precise information about the size of the Finnish D2C market is challenging because the D2C model encompasses a wide range of products and sectors and is not recorded as a uniform classification. However, the proliferation of the model can be seen in the emergence of new domestic D2C brands across various sectors, such as fashion, cosmetics, food, and home products. At the same time, many foreign D2C brands are expanding their operations to Finland.

Why is D2C worthwhile?

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 allows for better customer service and loyalty building. Direct feedback on products, services, or brands is invaluable.

• Better profitability: Selling without intermediaries can increase margin.

• More information: Data collected about customers' purchasing behaviour and preferences aids in product development and targeted marketing.

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

For consumers, D2C can offer convenience and more efficient return processes. Other advantages of direct selling for customers include:

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

• Broader product range: Consumers may gain access to the entire product range or exclusive products not available through other channels. Additionally, companies can provide higher-quality and more detailed product information through their own channels.

• Direct communication: Feedback and development requests regarding customer service or products can be directed straight to the company.

Tracking and improving figures in D2C business

A company's D2C market may be relatively narrow, limiting growth especially in Finland at some point due to the market size. Thus, customer loyalty must be at the heart of D2C business. For instance, various loyalty programs can track customer purchase history and preferences, which in turn help in offering personalised service and marketing.

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

Factors that increase CLV include:

• Improving customer satisfaction and loyalty: Offer high-quality products and services along with good customer service. It's easier and cheaper to retain existing customers than acquire new ones.

• Cross-selling and up-selling: Offer complementary products and services to customers' purchases (cross-selling) or more expensive alternatives (up-selling). This practice is still surprisingly uncommon in online commerce.

• Ongoing customer relationships: Offer services or products that require repeated purchases or subscriptions. This creates recurring revenue and longer customer relationships.

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

• Customer communication and engagement: Regularly keep in touch with customers through, for instance, newsletters, social media, or personalised messages.

Ways to reduce CAC include:

• Targeted marketing: Use analytics and customer data to precisely target marketing to those customers most likely to make purchases or who are only interested in certain products or services. Targeted product marketing and information enhance 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 network. Leverage customer reviews in your own communications.

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

• Optimise user experience: Ensure that the user experience of your website and online store is at a high level and that sites are appealing.

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

D2C – as easy as pie?

A central business solution and D2C do not need to be mutually exclusive options. New doors can be opened cautiously and closed if necessary. The only foolish thing is to assume that the world will not change or that the change will not affect one's business.

At Crasman, we like to develop digital business gradually. This means that not everything needs to be 100% ready by tomorrow. We believe that the development of e-commerce is a process, not a project – it continuously evolves with legislation and user needs.

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

Testing D2C selling can be done lightly by setting up a pop-up shop and trade fair cash register system at exhibitions. Would you like to know how D2C could be tested in your company? Contact us, and we'll tell you more and set up a demo shop if necessary.