Arguably, it all started with Amazon delivering books, CDs (remember them), toys and games. Now many people have their weekly grocery shop delivered. Take-aways were normal part of daily life but facilitated by the restaurant themselves rather than a digital third-party provider that many customers have become accustomed to.
Then, e-commerce reared its disruptive head and began to divert shoppers from the traditional British High Street. Now, it’s standard to have your razors, make-up, booze, nappies and dog food on subscription models, ordered online from a specialist provider who delivers straight to your door.
The Digital Service Economy has revolutionised the B2C business models, but its relevance to B2B should not be underestimated. The fundamental reasons behind the success of the Digital Service Economy is that it is a logical and almost inevitable evolution of B2C customer engagement and transaction management.
Digital B2C has long been on the rise, and the arrival of Covid-19 has inevitably rocket-fuelled this transition from in-person to online. Because Coronavirus and lockdown has left consumers with digital purchasing as their only option, the balance between the two has swung even more firmly to online. However, even at the end of lockdown, of quarantine, of social distancing – it is unlikely that that shift will be reversed.
The Rise of Digital B2C
Digitally focused B2C companies have grown over the past few years to become serious competitors to traditional high street and omnichannel retail businesses, building powerful brands that stand for convenience, quality and innovation.
Cultivating their brand identities with a presence that cuts through the noise of traditional advertising and connects directly and personally with their target customer – their dramatic impact on the B2C has been immediate and industry changing.
No wonder, then, that the global incumbents have taken note and responded. The likes of Nike, Disney and P&G are increasingly investing in Digital B2C brands and customer engagement, broadening their portfolios of attractive products and services. At the same time, Digital B2C brands are establishing themselves as industry leaders in their own right, and many who have already established their online customer base are now looking to expand from digital channels into bricks-and-mortar, introducing pop-up stores, partnering with larger retailers and opening their own flagship stores.
For the last ten years, global brands have been gradually shifting their focus to digital with the intention of connecting to their customers on a more personal level and strengthening brand loyalty. Last year, Nike stopped selling stock on Amazon, instead focussing on making improvements to its website and MyNike membership programme, in a bid to “focus on elevating consumer experiences through more direct, personal relationships” (Nike spokesperson).
In the automobile industry, Tesla is already developing Digital B2C, driving additional innovation into the automotive business model. Below are some other examples of brands making business decisions based on the digital direct to consumer model.
- The Hut Group buys MyProtein for £60m
- Nordstrom buys Trunk Club for $350 million
- Walmart buys jet.com for $3.3 billion
- Unilever’s buys Dollar Shave Clube for $1 billion
- Walmart buys Bononbos for $310 million
- P and G acquires Native for $100 million
- Walmart buys Modcloth for $50-75 million
- Diageo launches ‘The Bar’ skill for Amazon Echo, which allows consumers to send a shopping list of cocktail ingredients direct to the Alexa app
- Kroger buys Home Chef for $20 million
- Walmart buys Eloquii for $100 million
- Disney announces a reorganisation of its company structure to create a D2C and international division, including Disney+ and ESPN +
So Why Is Digital B2C So Successful?
- Customer data is increasingly valuable (and driving the business model): Delivering to and for your customers directly means that, as a company, you accrue vast amounts of personal and transactional information about every person that uses your service or orders your products. That ranges from their name, age and address, to their clothes size, favourite grocery products, purchasing habits and average rate of consumption of a particular good. Having exclusive ‘ownership’ of and / or at least access to that data and the associated insights is the equivalent of owning an unused toolkit for maximising the value of customers you already have.
- Using customer data to drive innovation and strategy is the new normal: Ownership of a vast data mine is all very well, but without the ability to analyse and interpret it, it becomes useless. Digital B2C native companies are typically expert at mining, manipulating and analysing their data for value creation. Data is their bread and butter – it informs everything they do, from internal strategic planning, to new product and proposition development, A/B testing, and immediate and real-time personalisation of the customer experience. Knowing what your customer likes and understanding how best to lead them to purchase can be acted upon to increase sales.
- Owning the customer relationship can increase customer lifetime value: Digital B2C companies don’t just use customer information to analyse their customers and personalise the customer journey. They use it to cultivate messaging, engagement, memes, in-jokes and to establish a unique rapport that speaks directly to the people who know, use and love their product. That customer relationship then extends beyond the consumption of the product or service and to the company itself. The deepens the customer buy in to the brand and what it stands for.
What can B2B companies learn from Digital B2C?
The principles behind the success of Digital B2C – ease of use, convenience, personalisation, simplicity of message and customer centricity – are hugely applicable to many B2B companies. At Whitecap, we believe there are 3 key takeaways for the B2B sector:
- Use Customer data to inform product / service development: At this stage, most B2B companies are familiar with capturing data. However, some have a way to go when it comes to using it to inform strategy, customer engagement, business and operational improvements and to improve their bottom-line performance.
- Treat your customer relationships like your personal ones: This has come up in a number of Whitecap’s strategy projects over recent months. What B2B customers want from their product / service providers in many cases closely resembles what a partner or trusted friend would value in a relationship. B2B customers we talked to on a number of projects regularly cited the following values:
- Listening: Customers wanted to feel like their feedback, concerns and questions were being listened to and acted upon. This made them feel that they were in a partnership rather than on one end of a transaction.
- Support: Customers wanted to know that when things went wrong, the resultant support and issue management would effectively help address the issue at pace. Customers on these projects asserted that they would pay more for this level of support.
- A Stable and secure future together: Customers who knew what product developments are in the pipeline were more likely to feel an affiliation with and loyalty to their provider.
- If your business model is B2B2C, deliver value through the customer chain: Customer-centricity has been an increasing trend over many years, across almost every sector and channel. If as a B2B provider, your ‘business’ customer delivers a service of product to an end consumer, thinking two steps down the consumption journey and developing your product to serve the needs of your business customer’s customer can only make your offering more relevant to your direct customer. Always think – how can your customer best serve their customer, and how can we help them do that?
Looking ahead, it is likely that Coronavirus and the threat of future global events like this one, will leave a lasting effect on business decisions and customer behaviour. Simple acts like going to the shops – previously taken for granted – could significantly change, not only in the near, but also distant future as needs and also preferences develop.
As a result, levels of e-commerce will continue to increase, and will likely accelerate. That will mean more, and better executed, digital B2C companies, innovating digital channels and utilisation of data analytics.
Simply ‘being online’ won’t be enough, and only those with the strongest brands, best designed strategies and business models, and those with the most distinct message will come out on top. As B2C brands become increasingly expert at cultivating that customer relationship, it’s up to B2B businesses to keep watch, adopt the most relevant practices and seek to gain the commercial benefits digital and data have to offer.
Established in 2012, Whitecap Consulting is a regional strategy consultancy headquartered in Leeds, with offices in Manchester, Milton Keynes, Birmingham, Bristol and Newcastle. We typically work with boards, executives and investors of predominantly mid-sized organisations with a turnover of c£10m-£300m, helping clients analyse, develop and implement growth strategies. Also, we work with clients across a range of sectors including Financial Services, Technology, FinTech, Outsourcing, Consumer and Retail, Property, Healthcare, Higher Education, Manufacturing and Professional Services, including Corporate Finance and PE.