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Telecommunications, Media & Technology

3 Ways Consumer Tech Can Drive Growth With a D2C Model

Raj Shah
Raj Shah

The consumer electronics and appliances industry has held up remarkably well amid the economic uncertainty of the COVID-19 pandemic. That said, we believe direct-to-consumer (D2C) models would strengthen more brands’ positions as customers seek safe purchasing options and demand for devices such as laptops, tablets, headphones and smart speakers has risen as people continue to work from home and look to technology for productivity and entertainment.

For the moment, large retailers are the single greatest winners of the work-from-home and broader consumer shifts driven by the pandemic. And even with health concerns, stores may still be relevant as many consumers will always want to try out new devices or get in-person customer service support, and traditional sales channels enable more convenience and store locations nearer to customers.

Yet significant value and opportunities exist in brands building out a D2C experience. For example, consumer electronics brands can have more control over the end-to-end customer lifecycle – from the first point of research through to a repeat purchase -- allowing the brand to own the order fulfillment and logistics experience and expand loyalty through learning more about customers. When big box retailers like Best Buy decided to temporarily close stores and shift to curbside pickup this year, some consumer electronics brands already had robust online ordering capabilities while most were still highly reliant on third-party retailers for distribution.

 

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  • In the U.S. alone, consumer electronics will account for 22 percent of e-commerce sales in 2020 ($156.5 billion) and will account for nearly 50 percent of all U.S. retail sales in 2020 (up nearly 18 percent year-over-year), according to eMarketer.

  • Massive opportunities remain to boost e-commerce and D2C sales in different markets. Only 18 percent of respondents to a recent Wunderman Thompson survey of consumers in six countries including the U.S., United Kingdom and Australia said they favor a brand’s website when shopping for technology online, with 29 percent favoring Amazon (the largest percentage) and 23 percent favoring retailer websites (second largest percentage).

  • A UK Office of National Statistics survey from August 2020 found only 18 percent of UK adults would buy electronics online.

 

Build brand ecosystems

Consumer tech companies are faced with three major opportunities in the near future:

  1. Understanding consumer demand. By owning the customer at the point of purchase retailers in both physical and digital environments can see more customer data than manufacturers. Sales data may be limited to just inventories sold in a geography unless customers voluntarily provide more information – e.g., through filling out customer warranty information. Customer data is key to not only being able to target customers with offers and upgrades but to potentially customize products to a customer’s specific needs and desires at a higher profit margin for the brand.

  2. Creating brand loyalty. Brand differentiation focuses either on new product features or on price. With features, there are few advantages – competitors can easily match demanded features through reverse engineering. Pricing is a race to the bottom, cutting margins razor thin. Brands need to create differentiation through experiences that are personalized, anticipatory and seamless to prevent any thoughts of switching for convenience.

  3. Moving past product to services. Brands that offer not only the core product to a customer but also ancillary services can both expand their revenue per customer and establish a recurring revenue stream. A dishwasher company may be able to sell a soap subscription. As Apple has done, brands may turn their products into subscriptions – paying a flat fee a month for an iPhone, with a built-in upgrade plan. The PlayStation of the future may be a subscription which sends a player a high-end display, 5G internet access and customized controllers all upgraded every so often per a subscription plan.

 

Beyond having a basic D2C platform to sell directly to consumers, brands will need to ensure that they have customer data platforms (CDPs) in place to ensure customer data can be securely managed and to use that data to drive insights across all channels. CDPs have enabled Publicis Sapient clients to be more effective in targeting offers and services to prospects and customers.

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Optimizing supply chains for D2C brands

With demand high, consumer electronics brands must ensure supply chains can handle large volumes of online orders. Brands that go D2C must create their own strategy on how to fulfill customer demand rather than managing retailer supply and demand. AI-driven insights and recommendations, powered by customer data, will enable brands to respond to demand fluctuations and supply chain disruptions. Post-pandemic,there will no longer be pure e-commerce or retail commerce, only commerce, which makes the imperative for data-driven decision making even greater, as brands create shopping experiences where intermediary channels drive to direct channels and vice versa. The brands that will win are those that allow customers to engage them seamlessly across channels to build stronger, direct relationships that bring them closer to D2C. Brands that want to move quickly into this space should implement Rapid Response Teams to assess risks as well as identifying ways to bring agility to existing processes as they shift to a D2C model.

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Rapid Response Teams

Rapid Response Teams (RRTs) explore many solutions that companies can adopt in the near-future to unlock new areas of value and strengthen their positions in the market.

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D2C prepares brands for digital futures

Consumer electronic brands can look to companies like Dell for inspiration on how D2C can transform a business. Dell has a long history of D2C and saw demand increase when the pandemic hit as businesses and consumers sought devices and solutions to help them work from home. The company saw visits to DellTechnologies.com and Dell.com grow 77 percent and 28 percent year-over-year, respectively, and saw double-digit growth in sales from both businesses and consumers in the first quarter. As vaccines are distributed and the pandemic fades, consumers will increasingly value e-commerce D2C experiences that bypass traditional retailers and are always available regardless of store closures or lockdowns. When the right features, products, and services are in place, a brand can create a formidable value proposition with consumers on why it makes sense to buy direct and stick with the brand when they’re ready to repurchase. And with global consumer electronics revenue set to hit $450 billion by 2024 and e-commerce revenue set to top $164 billion that year, according to Statista, now is the time to enhance your customer experience to ensure your brand stays exciting and relevant.

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Peak E-Commerce Assessment

The Peak E-Commerce Assessment (PEA) is a high-speed audit of digital environments to ensure a retailer is fully prepared for peak cycles of e-commerce demand. This rapid yet systematic review identifies shortcomings throughout the organization and delivers a comprehensive plan for swift digital transformation.

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Raj Shah
Raj Shah
Managing Partner, Telco, Media, and Hi-Tech Vertical