Why D2C brands need to expand beyond social media ads
By Anshuk Aggarwal
Over the last 5 years there has been a lot of buzz around Direct-to-consumer or D2C brands. D2C is nothing but selling directly to end customers through your own website without involving intermediaries such as distributors or retailers. This is why the name “D2C” was coined.
One of the main questions we hear when we talk about D2C is how does a D2C brand directly reach the end customer and what has been different in the last 5 years that has propelled the growth of the D2C industry.
Facebook and Internet accessibility
For starters, the evolution of smartphones and the emergence of networks like Jio have made the internet easily accessible to millions of people in India. The number of active users on Facebook is proof of this. India currently has 330 million active users on Facebook, almost double that of the United States – the second largest country for Facebook. Just 5 years ago, the number of Facebook users in India was only 180 million. Increasing the user base meant access to a wider customer segment, fueling the dreams of D2C brands
The Covid network
In 2020 and 2021, Covid also brought tailwinds to the entire D2C industry. Malls have been closed for a while and more and more people have been forced to shop online while sitting at home. The inertia of online shopping has suddenly been challenged by a barrage of startups in the online space offering everything from groceries to ready meals for one-click delivery. The end result was that people who had never shopped online before 2019 did so in 2020 for the first time.
While all of this was happening, the ecosystem also evolved to keep pace with growing customer demands. Platforms like Shopify have gained momentum by offering brands the ability to build D2C websites in just a week. Delivery providers like Shiprocket have extended coverage to thousands of PINs in India and reduced delivery times to just 1-2 days. New companies have emerged in an attempt to address India-specific issues, such as the high return-to-origin (RTO) rate.
Meanwhile, the D2C industry has become ripe for 10x growth. Success stories have started to emerge from brands like BoAt or MamaEarth who have made it big by taking the D2C route. This caught the attention of the investor and we saw the total number of transactions increase in 2020 and 2021. In 2021 alone, a total of two billion dollars was injected into D2C by investors across more than 100 trades. And for every VC-funded D2C brand, there are 50 more that are seeded and/or looking for VC money. What better way to entice investors than to show them monthly customer growth?
Here are Facebook and Instagram.
Talking about e-commerce acquisition
60-80% of customer acquisition across most D2C brands happens on the Meta app set. This exposes D2C brands to a high level of vulnerability. Small variations in the cost of impressions (CPM) on Facebook could lead to a huge drop in the bottom line for D2C brands. Founders and investors had always known this and accepted it as an inherent risk in the industry.
So in 2021, when every brand raised venture capital and poured money into Facebook and Instagram, the CPM started to increase. So much so that it has increased by 20 to 30% for most brands in the space of a year. But that’s not all, another key shift happened in 2021 that floated the entire advertising industry. This was Apple’s announcement that it would stop throwing third-party cookies on its ecosystem. This means that if you see an ad on the Facebook app on an Apple device, then click on the ad and go to a Safari browser to complete the purchase, Facebook may not be able to track the event. purchase. This essentially meant less data for Facebook and resulted in less precise targeting.
Coupled together, several D2C brands have seen their acquisition costs increase by 40 to 50% during the year 2021. The question therefore arises,
What should D2C brands do in the face of a new reality?
Over the past 6 months, I’ve interacted with over 100 DTC founders about how they’re overcoming this challenge. A few common threads emerged.
Focus more on increasing customer lifetime value. This can be done by increasing the repeat rates of existing customers by providing them with better cross-selling or up-selling opportunities. There are tools that can help a brand do customer marketing through Whatsapp, email, SMS, and push notifications. These prove to be very effective in increasing repetitions.
Create alternative and cheaper ways to drive more valuable website traffic. This could be through influencers or using alternative advertising platforms like YouTube or Snapchat where the competition is even less and the cost of impression is perhaps a fifth of what Facebook or Instagram offers.
Several DTC brands are also opting for the Omnichannel strategy. Having a presence on websites, marketplaces, and offline retail also increases opportunities to reach customers. Often we see brand searches increase significantly on Google when a brand is listed on marketplaces like Amazon or Nykaa
D2C is here to stay. But founders need to do more than just activate their Facebook or Instagram ads to scale a brand today. Gone are the days when ads alone could drive a brand to over 1,000 orders a day. Today, founders need to be more creative to stand out as a brand and entice potential customers to come to their website and make a purchase.
The author is co-founder of AdYogi. The opinions expressed are personal.
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