It is very expensive to acquire customers. Anytime. For a while, the Direct-to- Consumer (DTC) manufacturers used social media to attract new customers. Facebook, Instagram and, more recently, Tik Tok gave most DTC retailers an adequate number of new customers.
Things have changed.
Many of those social media platforms no longer produce a sufficient number of new customers in this post-pandemic period. Ms. Polly Wong, CEO of the DTC marketing agency Belardi Wong, told me that customers now often prefer to walk into stores again to shop. Their attitude has changed about selecting merchandise on-line. This is prompting many DTC businesses to change their attitudes as well. Here are a few examples of the changes she sees at the present.
1. Allbirds recently announced that its sneakers are now available in 14 Nordstrom
2. Caraway cookware is now available on Amazon
3. We also discussed Warby Parker; its eyeglasses that are now sold in over 160 stores in the US. The company started in 2010 as a DTC retailer but has added stores since customers liked its personal service. Maybe Warby Parker will add hearing aids to their assortment by hiring audiologists. It would again increase traffic and likely add to business.
Direct mail has always been a mainstay of DTC companies. Of late, direct mail has had to compete with election solicitations and does not get the full attention it should get, or that DTC retailers hoped it would get. However, many feel that there will be a renewed interest in direct mail as a marketing tool as social platforms crowd each other out.
Many consumers have noticed that some of their favorite DTC brands are now increasingly found outside their company’s website and, according to Polly Wong, on-line business has decreased sharply. Consumer behavior has shifted, and a new trend has been established. Companies have lost ground after enjoying gains during the pandemic. As a result, the development of new channels for the acquisition of customers is important.
Customer acquisition and the new sales they can generate will be tougher to capture as we face a likely recession later this year. Consumers are likely to cut-back on their spending in order to stay within their budgets. While the government is trying to stem a recession, most retailers talk about preparing for such an event. It is likely to cover the first two quarters of 2023 and temporarily disrupt consumer shopping habits again.
POSTSCRIPT: Many retailers are preparing for a difficult Christmas selling season by planning special sale events for their customers. I believe we can expect promotional activity starting in October. Much of the merchandise that will be on sale was bought knowing these promotions would take place. As many of these planned purchases were decided upon early in 2022, they should not affect profit margins.