Earlier this week, we caught a presentation from Earnest in which Daniel McCarthy, social media’s favorite business professor, discussed that COVID’s long-term impact on consumer behavior has been basically non-existent.
Almost everything is back to where it was pre-COVID.
Watching the presentation, it reminded us of a newsletter article we wrote some time ago. And while this may appear like we’re piling on, we feel it’s a good topic to revisit.
From September 2021:
Back in April, we spent some time discussing Jeff Bezos’ final shareholder letter.
That letter, an exploration of Amazon’s value creation, used time as a heuristic for determining how much value Amazon has created for customers. He wrote:
“Customers complete 28% of purchases on Amazon in three minutes or less, and half of all purchases are finished in less than 15 minutes. Compare that to the typical shopping trip to a physical store – driving, parking, searching store aisles, waiting in the checkout line, finding your car, and driving home. Research suggests the typical physical store trip takes about an hour. If you assume that a typical Amazon purchase takes 15 minutes and that it saves you a couple of trips to a physical store a week, that’s more than 75 hours a year saved. That’s important. We’re all busy in the early 21st century.”
It struck us recently that many believe DTC has this same advantage over brick and mortar retail. After all, the logic goes, you order something online and it shows up at your door. That’s way more convenient than a trip to the store, right?
We’re not so sure.
The disconnect here, it seems, is that many brands are looking at convenience through a micro lens: it is easy to buy my product on my site. This is mostly true.
But most CPG purchases aren’t made in isolation. And most CPG purchases aren’t expressions of loyalty.
We’ve covered some of this before, specifically around trialing products and how loyalty develops, but it’s worth highlighting. Because, in these contexts, DTC is less convenient for many consumers.
Imagine, for instance, replacing a 20-item run Target with buying directly from brands. Would that be more convenient?
While Bezos can credibly position Amazon against a Target run (and therefore make a time savings argument), that’s much harder for DTC. And that’s OK.
This isn’t a suggestion that DTC is somehow faulty or less desirable, it’s about pointing out that, in the macro lens, you need to overcome an often unstated reality: That getting a customer to buy directly from you requires you to first get them to change a behavior that’s linked to multiple other purchases.
How you do that is up to you. But the sooner you accept that, the sooner you’ll find a competitive advantage over saving time. After all, as we wrote in Easy: We’ll deal with friction when we really want (or need) something.
As many in CPG are reevaluating DTC, we’re hearing many do that from a pure numbers perspective. And, yes, that makes sense. If your upside is elsewhere, it’s elsewhere. Find it.
But many seem to be skipping the part about: why would anyone buy direct from you to begin with? What advantage can you provide to your customer when they do? And is that advantage more valuable than the convenience they lose out on?