Polly Wong, President of the direct marketing firm Belardi Wong, pointed out that in 2022 there are ... [+]
Many new companies have found it easy to start a successful business by selling direct to consumers (DTC). Quality home furnishings, luxurious shoes, and fashionable apparel all have found space on the internet to show their wares.
Polly Wong, President of the DTC marketing firm Belardi Wong, pointed out that in 2022 there are new challenges that will make it more difficult for DTC companies to be successful. She acknowledges that, in the past year, the skyrocketing costs of supply chain logistics were a challenge to companies. Now the cost of marketing is very much a key factor as well. Print has increased +10%-20%, the cost of using Google has increased +20%-30% and use of all other social media haves skyrocketed as well. While many DTC companies are pleased with their +15%-20% increase in sales, much of the increase is absorbed by the cost increases companies had to accept in the last few months.
There are other cost increases that companies now face, including customer acquisition costs and staffing costs. Human Resources have been a challenge since young people these days are very willing to change positions often in hopes of earning more in the process. As a result, companies constantly need salespeople and support associates. Changing associates means retraining them, ensuring that they become positive spokespersons for the company, and that is both costly and time consuming.
Many of the new DTC companies are appealing to affluent customers who have the discretionary income to spend. However, returns often are staggering. In women’s apparel, returns can run as high as 60% of total purchases. On top of that, DTC companies have to restore the garments into saleable conditions before they can be sent to another customer. Not so long ago, department stores used to have 30-35% returns and complained about that level of returns.
Polly Wong and her company work with 300 DTC companies. (I list some in my Postscript.) There are several recommendations she makes for the coming year. I list a few of them below.
1. Companies must have a depth of assortment. You cannot have just one mattress or a single new widget and expect to generate sufficient sales volume at a time when prices are rising. You have to have an assortment from which customers can choose.
2. Be open to a multi-channel business model. While many companies start through e-commerce to gain acceptance, many companies (including Amazon) have discovered that brick and mortar stores help solidify the company and make their growth more substantial. Warby Parker, the eye-glass specialists that started their concept strictly on-line, now as of 2/2/22 has 166 stores throughout the United States. 24 are in California alone and more are coming.
3. Use social media to promote your merchandise. There are 6 major social media platforms/companies that I discussed in a recent blog. They are Facebook, Instagram, Twitter, You Tube, Pinterest, and Twitch. Not all have the same audience or attraction, but all have a substantial audience. Once again, costs have risen sharply so one has to select the platform that serves the proper target audience.
POSTSCRIPT: Polly Wong and Belardi Wong work with hundreds of companies. Clients include Blue Dot, Birkenstock, Crate & Barrel, Arhaus, Serena & Lily, Johnny Was, Bombas, Tea, and Parachute. Their expertise has helped these clients discover new ways to communicate with customers. Many are affluent and can afford some of the luxurious items now being offered on e-commerce
