By Scott Rigby, Chief Technology Advisor & Principal Product Manager, Adobe
With more and more businesses around the globe adopting DTC as an e-commerce solution, the nuances, and challenges that this brings are growing. Here at Adobe, we have identified some of the challenges that have affected different regions and where DTC might be heading in the future.
JAPAC still has some way to go
It’s an understatement to say that the pandemic of 2020/2021 has accelerated e-commerce and DTC models. But adoption varies from region to region due to economical and infrastructural factors.
Southeast Asia only 43% of population online
In Southeast Asia addressing huge issues such as internet adoption will be a crucial factor before companies can truly embrace into DTC models. Southeast Asia also lags behind the West when it comes to its electronic payment infrastructure with cash on delivery still a common place activity in SEA as well as in India.
But as China has successfully shown by going fully digital, brands can establish themselves on local social sites and even use that as a platform for transactions such as WeChat mini programs. The E-Commerce potential in SEA is exponential and is increasing YOY. The market size is expected to reach a whopping $53 billion by 2023 from mere $19 billion in 2018. Overall, the market size of Southeast Asia is only going to grow if projected numbers are to be believed.
APAC/Australia
In Australia, the ecommerce market now sits as the 10th largest in the world (based on revenue) with an ecommerce market value at $33.1 billion, and a growth rate of 8.9% projected for 2021. The market consists of 5.2 million consumers with a total of 31% online shoppers and the online goods spend grew 95% YoY.
As expected, online shopping is mostly popular in major cities such as Melbourne, Sydney and Canberra which would suggest that cities and more built-up areas have the infrastructure in place to be able to utilise ecommerce and DTC to the best of its potential.
Most interestingly, according to an Adobe 2019 survey, 62% of Australian consumers want to purchase from brands with diverse advertisements. Tapping into the cultural diversity of Australians could be key to helping unlock adoption of DTC models. By understanding the wealth of cultural diversity of this region means an effective product strategy can be tailored accordingly from the beginning, enhancing better brand engagements.
North America / USA
Direct to Consumer sales are thriving in the States with 45.5% growth in 2020, with that figure set to rise in 2021. That growth has come at a cost and has highlighted some problems in the USA. The desire to get products quickly and easily with shorter delivery windows has risen sharply, this has led to delivery services across America recently reported to be the fastest growing job industry. As per stats, 41% of consumers in the market are willing to pay a charge for same day delivery and 24% consumers would pay more to receive package within a 1–2-hour window.
This thirst for quick delivery is fuelled by companies promises of free returns particularly with fashion items. But the cost of returns and wastage is leading to an increase in carbon footprint, as the cost of delivering and returning items that sometimes end up in landfill is becoming increasingly unsustainable. The solution to these issues isn’t getting any easier with the USA market tricky for retailers with an apparently unregulated market around waste and recycling. This is still being impacted by the 2018 decision from China to close the doors on taking on global waste.
Although convenience is a high consumer priority, their impact on the environment is also appearing on more lists. Those DTC companies that can find ways of helping consumers make more eco-friendly decisions could well find success in this region. Apple leads the way with its recycling set-up, but innovations such as Optoro’s reverse logistics set up is helping companies rethink the way returns are handled.
Europe
With a wealth of languages and countries running at different speeds, the different levels of maturity and varying degrees of discretionary spend means Europe is a volatile market. The reaction to the post-pandemic world is causing much uncertainty within ecommerce as businesses try and get a handle on a unique eighteen months of consumer spend. The repercussions for executives regarding consumer goods and retail industries is that a ‘typical’ post-recession pattern should not be expected. This is mainly impacted by the different developments across the continent such as the varying speed of vaccination campaigns and how the ‘post-pandemic’ world will affect disposable income trends.
DTC is no longer an innovative trend so standing out in a crowded marketplace is key. One such success story during those uncertain times was UK bike company Brompton Bicycles. During the height of social distancing in Britain they launched ‘Brompton Live In-Store Expert’, a live video service that offered tailored personal advice in restricted times. With customer demand for bikes soaring, this was an innovative accompaniment to their DTC model that made them stand out from the crow.
Even those successful with DTC still need to consider how they engage with their customers in a changing world. The pandemic affected consumer’s lifestyles with a key area being people having to adapt their exercising habits. Gymshark is one of the most successful exercise-wear unicorn businesses that fully utilised DTC, but with their main focus being gym-goers they needed to re-think their approach. By adapting their marketing materials and listening to their customers they were able to keep their presence strong and navigate some tricky challenges.
Adapt and be ready for big changes
Although the challenges across the globe regarding the pandemic have been similar, different regions have had to handle them in different ways. Ensuring that DTC adopters are able to adapt and be proactive to the next set of challenges in the coming years, could be where the next big winners will emerge.