The model has inherent benefits. Selling directly to customers means brands have first-party data for every person who uses their products. The passion consumers feel toward these brands can ensure lifetime loyalty.
That loyalty isn’t accidental. These entrepreneurs are scary good at creating authentic content and distributing it in social channels, and making their customers feel like the brand “gets” them.
It’s no surprise that retail incumbents are alarmed. Digital-first brands are chipping away at their markets, and CPG companies, which have always relied on other retailers to sell their products, need to catch up.
But how exactly can a brand build a community if it has no first-party data or relationship consumers? This is a daunting task. One way is to buy a successful D2C brand, as Unilever did when it acquired Dollar Shave Club. Of course, at a $1 billion + acquisition price, this option isn’t viable for all incumbents.
What Exactly is a
Wikipedia says a community is “a feeling of fellowship with others, as a result of sharing common attitudes, interests and goals.”
In other words, community goes beyond physical proximity and speaks more toward a set of shared values, which is precisely where brands need to focus their community-building efforts. A community can be people who value sustainability or follow a keto diet -- motivations that go far beyond their decision to purchase a particular product. Understanding them will enable brands to sell stories that align with the intrinsic values of the community.
But there’s a kicker: How do incumbents even begin the process, much less surpass the D2C brands?
Brands have one of two options: either begin by building their own D2C community from scratch by following something like the Interactive Advertising Bureau's DTC playbook, or they can identify and leverage an existing community.
The latter is compelling simply because it allows CPG companies to jumpstart the process by taking advantage of what I call “the other D2C,” which is direct-to-community.
The premise is simple: communities who are receptive to a brand because it resonates with their core values already exist. Rather than build a community from scratch as the D2C brands have done, incumbents can integrate themselves into existing ones. Authentic content tailored to the existing communities is pretty much the only prerequisite to success.
The trick is to identify the communities with whom a product or brand currently resonates, but that’s where technology comes in. Graph technology -- the same tech that Google relied on to revolutionize the web -- excels at community detection.
There’s no denying that consumers have changed. In a world of commodification, they thirst for authenticity. This is the real value that drives D2C success, and those incumbents that figure out how to create and leverage it will prosper.