As direct-to-consumer businesses continue to influence almost every commercial enterprise, highly successful beauty ventures are revolutionizing consumer expectations on a greater scale. This shift provides superior opportunities of DTC brands to build unique connections.
The 2020s is predicted to be the most revolution year in the beauty market. The 2020 spirit of beauty is more inclusive than ever, too; from innovations in hyper-personalized products, to the boom of products servicing subjects previously considered taboo.
Now valued at $532 billion, this industry is expected to grow between 7 to 10% in the following years. Certain categories — skincare, male grooming and hair, for example — predicted to have more than 10% sales growth year-over-year.
Beauty’s rapid boom has attracted many new beauty players, many of whom are introducing new products, innovative solutions, seamless customer experience, fresh ideas and advanced business models. Huge retail giants, such as H&M, for example, have started their own beauty journey, while other retailers are focusing on AI-Driven solutions and demographics that have historically been under-served by big beauty brands.
Since the market is highly competitive with the changing face of the industry, many companies are giving their digital efforts a well-needed makeover.
2020s will see changing consumer perceptions and greater expectations followed by the brands’ advocacy and loyalty — factors that will drive more demand for the CBD market and attract new players.
“My 2020 prediction for the CBD industry is that it will be an extremely volatile time,” says Olivia Alexander, founder of CBD product company Kush Queen. “Retailers have taken chances on brands that don’t actually have clout. The FDA is now present, and we will see a lot of brands not make it past the next shift in regulation.”
As the competition boosts in the next years, it will become crucial for companies to gain accurate and timely customer insights and ‘follow’ the authentic approach to understand feelings of beauty consumers.
Direct-to-consumer companies like Birchbox and Glossier have built large consumer bases in a short amount of time. What’s more, big brands such as Walmart and Sephora have also now installed their own subscription boxes
Glossier is a one of the most successful examples of a DTC beauty brand. The Glossier brand is unique in in terms of establishing database of thousands of followers before even it launched a single product. Glossier emphasize is on its communication with customers, and even goes so far as to let them influence the products the brand makes.
According to Richard Kestenbaum, co-founder and partner at Triangle Capital LLC, the direct-to-consumer strategy offers a number of opportunities. “It eliminates the need to share profits with a retailer. More importantly, selling direct-to-consumer enables two-way communication between the brand and the consumer, without interference from the retailer.”
What is Direct-to-Consumer Retail?
The concept is defined as the promotion and sale of products directly from the manufacturer to customers — eliminating the need for channels like marketplaces, middlemen, brick-and-mortar stores, and third-party retailers.
With less trust on third-parties, fewer negotiations, and less limitations on fulfillment, the DTC model is an attractive instrument both for start-ups companies who need an easy entry into a market, as well as well-established brands who are eager to grow their online presence while also paying close attention to the customer journey.
How Do Brands Win With the DTC Model?
Many experts are predicting 2020 to be the year of acquisitions and closures in the DTC space. So how should brands adapt and win in this age of increasing competition?
A lot of famous DTC companies are born out of mission-driven initiatives — whether they’re focused on changing an industry like Glossier with skincare; on sustainable approach like 4Ocean or simply removing barriers to entry to products, like Ro for men’s health. More companies are favoring a direct-to-consumer approach because there is more room for experimentation.
With millennial and Gen-Z shoppers, there is more transparency in retail than ever before — and DTC brands are using multiple channels to communicate with customers. What’s more, some beauty brands went even farther by personalizing shopping experience – prompting customers to check previous order history, shipping details are pre-populated options and tailoring the way customers navigate through their website.
In a personalized experience, the items offered by the shop can be personalized and diversified. This is becoming increasingly popular for gift-givers and tech enthusiasts who want a personal touch on their everyday carries.
Younger generations continuously place emphasis on both aesthetics and experiences that are unique. As a result, many turn away from big brands and, instead, prioritize indie and boutique options that can offer them a more seamless connection. This desire is motivated by a move toward authenticity as Millenials and Gen Z internalize their purchases as part of their personal expression.
As most of the companies are reaching out to consumers directly, powering their brand messaging, and ultimately the customer engagement, the channel explosion needs to be transformed, too.
Brands like Burton and Nike have their own D2C models—navigating customers to their websites, mobile apps, or branded retail stores. This innovative omnichannel approach helps brands to engage with consumers previously unserved, or underserved, by traditional retailers. Brands now has the power to manage and control consumer-facing content, their purchasing stories, and their supply chains.
Why DTC brands should invest in technology and AI-driven Omnichannel Approauch?
Innovating with Technology
A report presented by CommerceNext and Oracle Customer Experience, “How Leading Retailers and Direct to Consumer Brands Are Investing in Digital,” discovered that DTC brands are investing more heavily in acquisition marketing than traditional brands. In addition, DTC brands are increasing investment on advanced technologies such as AI-driven personalization, AI/AR solutions and customer data platforms to enhance — and disrupt — the shopping experience.
According to “How to Manage Customer Service Technology Innovation,” by Gartner, “Gartner predicts that by 2021, 15% of all customer service interactions globally will be handled completely by AI, an increase of 400% from 2017.”
AI can be used to tailor customer data, predict consumer behavior and target specific groups of potential or existing customers, as well as related ones.
Revieve’s AI-Driven Product recommendation engine, for example, combines market-leading selfie skin diagnostics with in-house computer vision tech, that measures over 100 different metrics from user’s face.
Therefore, with the help of advanced users’ personal information, as well as their product selection and personal advise based on their skin analysis, companies – as a result – are able to increase shopping cart size and average order value, increase conversion and decrease shopping cart abandonment.
AI Skincare Advisor includes, for instance, age and location as user inputs and AR Makeup Advisor considers for instance preferred foundation coverage and preferred look.