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There have been lots of direct-to-consumer plays in the last year, most of them out of big consumer packaged goods (CPG) companies: Mars, Pepsi, Coca-Cola, Kraft Heinz Co., the list goes on and on. But the biggest win of the year came from the biggest move by the biggest player — Nike. As of the year 2020, Nike reported that a full 35 percent of its sales came from direct-to-consumer sales, a figure that they expect will grow to 50 percent within the next five years.
It can look a bit like overnight success. But as cloud-based eCommerce solution Scalefast’s CEO Nicolas Stehle said in a recent On The Agenda conversation with Karen Webster, the reality indicates otherwise. Nike, through a variety of strategies and tactics, has been hard at work on its very successful direct to consumer press for the better part of 15 years. They made the former head of eBay their CEO — Stehle said that would have gotten one laughed out of the room had they predicted it 20 years ago. Second, he said, they leaned in and did the hard work of developing a direct-to-consumer channel when it would have been much easier and still quite lucrative to sit back and continue distributing through Walmart and shoe stores.
“What they saw early on was the direct-to-consumer channel is the channel with the most added value for the consumer. You have a rewards program, you have specific products, you have unique events. It’s where you can really create the relationship to the brand,” Stehle said.
And third, Nike built that D2C channel to work in cooperation with its other channels, instead of in conflict with them, he said. The products place on other platforms like Amazon functioned as an entry point which didn’t compete with Nike’s D2C site, he said, so much as it tended to draw them to it.
Every brand can’t be Nike, Stehle said. Some parts of their success are understandable only in the context of what they sell. A brand like Coca-Cola, for example, is unlikely to get to 50 percent of its sales through D2C given the unwieldiness of the product from a shipping point of view and the baked-in habituation around buying the core product at the grocery store. And Nike, being Nike, also had the funds it needed to invest in making this massive D2C step forward in a planned and phased push carried out over the course of a decade and a half. That is, notably, a fairly rarified ability.
But even if every brand can’t be Nike, he said, they can certainly learn to be more like Nike when it comes to going D2C — like when it comes to building the right experience — and then delivering on it properly.
Exclusivity Is The Spice Of The Consumer Relationship
Consumers, Webster and Stehle agreed, like the feeling of exclusivity that comes with certain retail experiences and the sensations of getting a good or service that only they can have. Luxury brands, he said, do this by creating a very limited amount of innovative product available for purchase. Brands like Supreme, he said, aren’t even using products to create that feeling of uniqueness but are instead building entirely around branding.
“Supreme is selling very standard products; there is nothing new,” Stehle said. “I’m a little afraid that the fans of this brand will want to kill me for saying that right now, but it’s true. How they did that is by partnering with other brands to create even cooler versions of their products that nobody else was capable of providing such that it became exclusive content. And that is now worth $2 billion a year — selling Supreme versions of older products.”
And the D2C experience, he said, gives brands an opportunity to experiment with the exclusivity concept by creating a particular interactive space for themselves and their customers. It might be to specific products, he said, but it could also be geared around events. Giving certain customers time-linked access to a certain closed-off exclusive section of the shop that they can share with five of their closest friends with a specific code, he said, is an example. Or hosting flash sales with access to specialized content only available while the flash sale itself is on.
When we think about direct to consumer, Stehle said, we should more appropriately be talking about building a consumer-centric experience — because at heart, what D2C is about is finding new ways to “put the consumer back in the center of their relationship with the brand,” he said.
Brands that are thinking like Nike, he said, are finding ways to leverage that consumer-centric channel into being an access point for exclusive and tangible value. That, he said, is the great promise of D2C. But brands have to more than embrace the promise, he said, they have to deliver on it as well — a taller order, and that’s where Scalefast enters the equation.
Doing D2C Properly
Getting it wrong is usually the biggest risk in a new venture, but for firms just setting on out their D2C journeys, Stehle told Webster, getting it right too fast can pan out to be the bigger problem. There’s a reason brands head off to Amazon and stay there, he said. The logistics that underpin a D2C business done right are incredibly hard to get down — and the price of getting them wrong are quite high.
“You want to go direct — you have the whole project that entails. So say you have something unique. You sell it and it’s a success, then you will have hundreds of thousands of people flooding into your stores. Your site will crash,” Stehle said.
In fact, he told Webster, they’ve had clients successfully crash eBay, which is generally going to be an inevitable result for firms that jump in feet first with D2C and try to do it all on their own. The reason Scalefast was created, he said, was to help brands take on this problem, because big or small, what they have seen over and over again is brands hit the rocks trying to do D2C carelessly. And, he said, getting it wrong has real costs — since the entire point of the exercise is to build a consumer experience that is delightful and centers their needs.
“If there’s an issue somewhere, then you will hurt your brand massively because you will hurt the specific connection you are creating with your consumer.”
