How Can D2C Brands Survive the Economic Downturn? A Founder’s Perspective

What does resilience mean to D2C founders and marketers?

Let me rephrase that- What does resilience mean to D2C founders and marketers in times of economic uncertainty?

When you plan your next quarter’s strategies, I want you to think of that unpleasant scenario of your start-up fading from public memory and your competitors appearing in summits and whatnot, telling what they did to survive the economic downturn- things you wish you’d done.

Because when media companies run headlines like The honeymoon may be over for D2C brands..

Big brands like Shopify and Netflix X are laying off hundreds of employees..

And investors are tightening their funding wallets; you know the situation has turned a little dicey.

As a co-founder whose own start-up’s success depends greatly on how the D2C ecosystem is faring, the stakes are equally high for us.

I want you to do well.

Really, really well.

You and I may have enjoyed seeing D2C brands flourish during the last two years of the lockdown, as more and more people turned to online shopping, but the world is returning to ‘normal.’

More and more people are joining back offices physically, heading back to gyms and malls, and ‘revenge’ shopping offline, and as a consequence, mobile browsing times are reducing.

People are spending less online (unless it’s Google Pay, and my transaction history is the stuff of memes, like most of us these days) and becoming more reserved.

To make matters more wonderful, with the recent privacy changes in iOs14.5, ads no longer reward marketers as they used to, making it harder to acquire new customers, while ad spending has risen drastically.

D2C brands depended heavily on FB advertising to reach new customers, not having the budget to outdo offline brands through traditional media advertising.

But here’s the playground currently.

These offline brands have seen you grow- and want their piece of the pie.

Competition is rising not only because more and more e-commerce brands are launching, but market leaders offline, with an enviable ad budget, are entering the space too.

In fact, some D2C brands (Sugar Cosmetics, Mamaearth) have expanded via offline stores as well, which is turning out to be a smart move considering today’s scenario.

It’s intense- stakes are high, VCs are getting tougher with their feedback, and their generosity and funding may not come to you again as easily as before.

Many of them are asking questions about how you’re planning to grow, what your CAC and Retention metrics are, and how well prepared you are to run your brand without an influx of seed money.

To survive, you need to change how you market.

Thankfully, because of working with more than 175+ D2C brands globally, I have been able to spot what will drive a brand’s success in challenging times.

What Makes a D2C brand Profitable?

In my experience, there are four things that determine a company’s profitability-

1. Cost of making and developing your product
2. Cost of acquiring your customer (CAC)
3. Cost of shipping, and
4. Cost of retaining that customer (LTV)

Now with the pandemic causing painful delays and warehouse prices rising rapidly, R&D and logistic rates can’t be fiddled with much, especially if you’re passionate about developing an original product and having your catalogue not running out of stock.

But the cost of acquiring and retaining is a juggling game, one where I’d rather have you spend more on acquiring, but ONLY WHEN your retention strategy is powerful and effective.

The issue I see is that most D2C brands look and sound the same.

They communicate the same way, their ads are competing on the same channels as their competitors, and most of them meld into another.

Even their websites are annoyingly similar.

So if you wanted to change this, what should you do differently?

I strongly recommend that you focus on optimising three strategies that will have the highest impact on your profit – your acquisition, Retention, and RTO strategy.

Let me show you how.

Reduce CAC with Whatsapp Chat and Instagram Dm’s

I strongly believe Whatsapp and Instagram Marketing are high-impact ways of reducing your customer acquisition costs.

Whatsapp is actually a one-stop solution to surviving the economic downturn.

It all comes down to chat. Conversations. Feeling like a brand cares enough to develop a personalised relationship with you.

Ironically, digital shopping’s biggest challenge is that it feels digital. And, as I mentioned earlier, repetitive and not engaging.

How you communicate to your audience is key to standing out and building loyalty.

Turning the classic quote around,

“They may will not forget what you said- but because they will never forget how you made them feel.“

Chatting is a collaborative effort, one that needs to sound human and natural (this is why most previous chatbot models failed and became, as Gen Z calls, ‘cringe’) and has huge potential for personalisation.

Next time you run an ad, route queries to your Whatsapp Chat or Instagram DM. In fact, your Call-to-Action (CTA) should be let’s chat/ DM us. Encourage their questions!

Prompt them (mindfully) by asking if they have any doubts and make it very easy for customers to feel reassured while being guided to the right product.

You can make it fun and send just the right amount of information (versus the heavily detailed product pages) that a customer needs to make a decision without feeling overwhelmed.

The strategies are endless – if you’re interested in learning more, take a look at how we used conversational commerce (the new buzzword for using chat and conversations to drive customer support and sales) to deliver results for D2C brands like Man Matters, TMC, Urban Gabru and more.

You should also check this post- How to Leverage 2 Way Communication for eCommerce on Whatsapp

Boost Retention by Delivering Excellent Customer Support

You can make your CMO’s day by giving them more money to bid on ads. (I asked mine and felt a little bad because I said it only to confirm my hypothesis, and the excitement in his eyes died, sorry!)

But here’s the catch- increase your ad bids only when your retention metrics are optimised.

I find that despite it being written about, customer support from most brands is still under-invested.

What does a brand need to be told for them to understand how important delivering pleasant, joyful, and pain-free shopping from your brand needs to be?

Since most of your customers have now encountered a few brands that have an excellent customer support strategy, you cannot afford to treat it lightly.

But here’s the thing, like TJ Stein, Sr Director of Member Services at Italic, said, you don’t need to give each customer ‘WOW Experiences.’

It’s just not scalable.

Instead, basic customer support and experience strategies must be established across channels.

And I say basic because such standards are now the bare minimum.

I’ve seen brands that are ‘transparent’ leave a stronger impression and make customers come back repeatedly.

Let me explain that. Right from when they’ve placed the order, you need to communicate that the order is placed, dispatched, shipped, how long it will take to ship, and inform if there are any delays in advance.

Once they have your product, ensure basic usability instructions are sent to the customer.

And when time has passed, and it’s time for them to potentially refill, send them a reminder while making it extremely easy to purchase again, preferably right on chat!

Keeping your customers in the loop is a simple and effective way to ensure loyalty and repeat purchases.

There are many campaigns you can employ to automate this entire process too, like Re-order, upsell and cross-sell, and more, all of which efficiently use 2-way communication to increase retention.

If you need more tips on optimising your customer service, take a look at this post: How to Create a Customer Support Strategy for Your eCommerce Business

Reduce RTO with COD Verification & NDR Campaigns on WhatsApp

From what I’ve seen, around 3 out of 5 D2C brands experience high RTO (Return to Origin), particularly on cash-on-delivery orders.

Up to 25% of all COD Orders are returned! Perhaps it’s because of an incomplete or wrong delivery address or incorrect contact number – sometimes even done deliberately.

Reverse logistics eat into your profitability, and with each return, your resiliency is called into question.

To combat this, I’ve found using Whatsapp (surprise surprise!) can help reduce RTO.

Maybe this post should have been titled How Can D2C Brands Survive the Economic Downturn with Whatsapp!

That’s how strongly I believe in using a channel where the open rate is 80-90%, 3-5x times more than email and SMS.

Use both Cash on Delivery (COD) Verification and Non-Delivery Report Campaigns (NDR) by reaching out to customers on Whatsapp in real time.

If they weren’t available at the address and requested another delivery time/slot, you can still get their order to them instead of bearing the expense of all failed deliveries.

You can double-check the authenticity of your COD orders and attempt a successful second delivery attempt by automatically re-confirming on Whatsapp.

These two campaigns will effectively reduce RTO by 60%!

Act Now

It’s the survival of the fittest as competition keeps rising.

Do not wait for the next round of funding to reduce the sting of loss.

At the onset, your role as a D2C founder or one of the founding members has to shorten the path to profitability.

Start now and use easily scalable tactics (but efficiently) to reduce your acquisition, increase your retention and decrease losses through RTO.

Stand out by conversing with your customers and being there for them each step of the way.

And the journey doesn’t end after they buy- the real game starts when you have to keep getting them back.

I hope my tips in this post help you strategise.

If you are a D2C founder and marketer and want to find out what and how LimeChat can help you scale and communicate better, then reach out to me on Linkedin or book a demo here.