How Direct-to-Consumer Brands Can Thrive During COVID-19
With the latest economic data showing the global economy heading for a deep recession, consumers around the world have started to hunker down as investors, policymakers and governments speculate about the shape of the recovery.
Numbers published by the Chinese authorities show how rapid a return to growth – in month-on-month terms – can be achieved, but the general consensus is that COVID-19 has shaken the structural integrity of the global economy and therefore the recovery will be slower than the much-talked-about ‘V-shape’ bounce back.
As you read this, you’re probably thinking, “I thought this was an article on brand behaviour, not economic fundamentals.”
And you’re right to think this, but the reason why it’s important to outline such considerations is that brands and businesses are starting to think of/plan for recovery and viewing this through a lens of economic data and not hyperbole is vital.
Brands laying the foundations for recovery
Brands responding quickly to the current lockdown, delivering new digital experiences or services, are putting themselves on a solid footing to bounce back in the aftermath of this crisis.
Take a brand such as boutique fitness studio Barry’s Bootcamp, as a case in point. The company was among the first in its sector to close its physical studio spaces and launch classes live on Instagram. Quick thinking and demand for in-house exercise have seen their Instagram following jump from 50k to 100k in just three weeks. The brand also spun up a direct-to-consumer web portal in a matter of days to sell studio equipment directly to customers, plus launched a podcast series, to support at-home exercise.
Many direct-to-consumer, or digital native, brands are performing well in the current environment. Given their smaller size and digital-first focus, many are responding more quickly to changes in customer habits than established players.
Cocktail production business Blacked Lines is one of these brands. Usually selling kegged cocktails to restaurants, bars, and hotels, the brand has started selling bottled cocktails directly to the public. Building brand equity with consumers via a B2C model will undoubtedly support the business in a post-COVID-19 world when people are back enjoying cocktails in out of home locations.
I see this trend of interacting with digitally native brands in my own life, with my exposure up since the start of lockdown. I now subscribe to Thriva (a health diagnostic start-up), All Plants (plant-based meals delivered to my home), ON (a footwear brand with no physical stores) Norwegian Pure 3 (for supplements) and purchased toilet paper through the aptly named Who Gives a Crap.
Consumers are becoming more brand curious during the lockdown as they shift online to buy items that they would’ve purchased in-store and/or try brands for the first time due to a lack of availability (think grocery).
Many are trying to live a replica of their normal life by finding replacement activities, looking online for both everyday needs as well as leisure.
We’ve seen this behaviour in China - a country now entering the stage where there are no reported new domestic cases of COVID-19.
During the outbreak, Chinese consumers showed a mindset which was reflected in consumers adjusting to the new pandemic era by trying out new things, with a strong emphasis on the digital sphere.
Pre- and post-COVID-19 behaviours
Like horses loaded in the starting gate at the virtual Grand National, timing and first-mover advantage will be important in the coming months as the recovery starts to gain traction, with some brands benefiting over others.
If people’s expectations about what they want, value and need change as a result of the pandemic, undoubtedly the playing field for brands will also alter.
We just need to look at the 2008/09 financial crisis to see the impact this had on people’s behaviour and consumer expectations.
Take the online marketplace Airbnb, for example. The business launched three times before it found success. Its third launch took place at SXSW in March 2008, approximately six months before the US housing market collapse that triggered the economic turmoil and has defined the past decade.
One of the reasons for the success of Airbnb – I stress one as there are many factors – was the timing of this third launch. When the US housing market bubble burst, many US citizens had an asset – their house – that had quickly become unaffordable. Many therefore overcame their aversion to renting their house/apartment/bedroom out to a ‘stranger’, in order to extract value from their wounded asset.
Legendary investor Bill Gross was curious about why some start-ups succeed and others fail. So, he gathered data from hundreds of companies, his own and other people's, and ranked each company on five key factors – timing, team, idea, business model and funding.
Surprisingly, he found that timing was the key factor that stands out from the others, with this being the main driver of success for 42% of the 200 companies he evaluated.
We have post- and pre-financial crisis behaviours, driven by economic factors - in some instances - such as low-interest rates or reduced productivity and I believe that we’ll start to see post- and pre-COVID-19 behaviours that’ll spawn a new set of direct to consumer brands.
As the emergence of Alibaba after the SARS epidemic in 2003 showed, new entrants can fill the vacuum created by shifts in consumer behavior.
Identifying the winners and losers in a post-COVID-19 world is of course difficult. Although you can never predict when a market will develop, we can have a pretty good idea as to where the trend is heading.
It’s important that brands understand the specific ecosystem factors that influence a target customers' willingness to adopt a solution. Brands also want to consider the incumbent competition's inability to address a customer pain point.
As a business that prides itself on understanding audiences, we’ll be watching data - both economic and consumer - closely to understand the shape of a post-COVID-19 world and the new consumer behaviours that come with it.
China began the COVID-19 crisis earlier than the rest of the world and is now starting to edge its way back to a new normality of existence. Our colleagues in China have been tracking the public’s changes in behaviour and attitudes and the data presents an opportunity for the UK to learn from the experience of others and plan for the coming months. Download 'COVID 19: Lessons From China' below.