The news is full of sad stories about UK high streets falling into disrepair as shoppers turn their backs on the traditional retail experience. It’s fair to say that millennials aren’t going to be schlepping up and down their local high streets in the rain this Christmas. Instead, many of them will be looking for online suppliers who can offer them great service, fast and free delivery and a high quality product.
The impact of social media
The rise of social media has changed the face of retail entirely. When millennials are looking for something special they will spend their cash with niche brands that market themselves well online. Instagram enables brands to share beautiful, inspiring images of their products with links to shop directly from the post. Twitter, Instagram and Facebook help brands to reach massive audiences and attract the attention of influencers who can vouch for their products and generate a buzz.
According to analysts, the global trend for direct-to-consumer retailing is resulting in giants such as Walmart and Nike directing more attention to this model. Walmart is currently buying up smaller niche brands and incorporating them into their own offering to bolster their position in the marketplace.
Why direct-to-consumer?
As well as the influence of social media, there are other reasons why direct-to-consumer brands are growing in strength. Consumers are now demanding a better retail experience. As an increasing number of consumers purchase items directly from the manufacturer, the manufacturers can manage the consumer experience more closely and this is resulting in better service. Removing the middleman means the entire ‘customer journey’ can be monitored in detail to ensure everything, from taking payment to delivering the items, goes off without a hitch.
As well as being able to oversee the entire sales process from start to finish, businesses that embrace direct-to-consumer models can also build relationships with customers and glean knowledge about who their customers are and why they are buying from them. The feedback is invaluable for ongoing product and service development.
US retail giant Walmart has purchased between 40 and 50 ‘digitally native retailers’. It is Walmart’s job to ensure that the retail experience is maintained for consumers who are already loyal to these brands, or they risk losing the market these brands have built over the years.
However, if Walmart does it right, the acquisitions will help it to compete against the likes of Amazon and future-proof itself against changing retail habits.
The craft booze effect...
Here in the UK, small, niche brands are also proving popular with both consumers and investors. Take the recent growth in the popularity of craft breweries and distilleries, who often sell their products directly to consumers online or in tap rooms, as an example. A report from accountancy firm UHY Hacker Young explained that the number of distilleries in the UK increased by 30 per cent between 2016 and 2017, from 131 to 170. It added that larger companies have now started to buy up these independent brands, attracted by their premium prices and high sales growth. Both of which have been possible due to consumer demand for smaller, less corporate manufacturers offering a personal service and a quality product.
Some examples….
BI Wines and Spirits, a drinks wholesaler, purchased a 25 per cent stake in Westmorland Spirits, which makes Gin brand Gilpin’s, while Halewood Wine and Spirit bought Cornwall-based craft rum maker Dead Man’s Fingers. Meanwhile, Diego Zamora, a Spain-based alcohol giant invested in a 45 per cent stake in Martin Miller’s Gin maker the Reformed Spirit Company. These deals all illustrate the appetite for small independent craft distilleries and the high profile businesses that are willing to part with their cash for a taste of the Next Big Thing.
Although the drinks market is an area where these kinds of deals are common, big businesses are buying niche, direct-to-consumer brands operating in almost every marketplace. Take Nestle’s recent purchase of Tails.com as another example. The consumer products giant has invested in this niche UK business, which specialises in providing tailor-made healthy food for dogs based on their specific individual requirements.
Won’t the industry eat itself?
This is the question that only those making the acquisitions can answer. If millennial consumers are increasingly looking for authentic, independent brands when they want to make a purchase, what happens when their favourite brand is no longer independent, and no longer considered authentic?
It goes without saying that, should you purchase a niche, direct to consumer brand, you take on the enormously challenging job of ensuring standards are not just met, but built upon. Retaining existing customers and adding more can only be achieved by micro-management of the sales process and entire customer experience. If customers are used to receiving almost instant replies to their social media messages to your brand, are you able to maintain this? If customers usually receive goods within three days of an order being placed, can continue to you offer this? How simple is your returns policy? These are the kinds of service levels expected in the direct-to-consumer marketplace.
In conclusion, there’s never been a better time to consider a move into the direct-to-consumer marketplace. This retail model is here to stay and sales are booming for the niche brands that do everything right. But doing everything right really is the key to success here.
Letting standards slip is a major mistake, as it takes no time at all for your brand’s reputation to fall flat on its face. However, if you have the motivation, the time and the cash to give an existing successful niche brand the attention it deserves, buying a direct-to-consumer business will bolster your retail business in a marketplace where buying online really is the only option worth considering.
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