East Ventures, an influential venture capital company in Southeast Asia, believes in Direct-to-Consumers (D2C) startup founders who are very persistent in building customer-focused and innovative brands.
Why is that? In short, from a macro perspective, high global connectivity and the growth of a digitally skilled generation such as millennials and Gen Z have significantly changed consumer behavior. According to a McKinsey report, Gen Z's buying behavior is full of desire and personal expression. Of course, business people need to adapt to this.
1. D2C startups close to the new generation tend to have high LTV.
Millennial market segmentation and Gen Z are half of the total population. Almost 21 million new digital subscribers have emerged in the last two years. In fact, according to research from Bloomberg, Gen Z has $36 billion to spend. A great number that makes many brands look for ways to target this segment.
This is why D2C startups that can answer the needs of this new generation with products and communication styles that can touch them tend to be remembered by customers and have higher LTV (Lifetime Value) metrics.
2. D2C startups benefit from rapid adaptation
Global consulting firm Capgemini also found that more than 68 percent of Gen Z and 58 percent of millennials made direct orders to brands over the past six months, compared to 41 percent in all age groups on average. Only 37 percent of Gen Xers and 21 percent of Boomers made direct orders from brands over the past six months.
The data is certainly interesting. In fact, of all those who directly place an order with a brand, almost 60 percent say that a smooth shopping experience is one of the reasons for buying now directly, and 59 percent prefer brand loyalty programs. It is these statistics that describe the changing landscape of customer behavior.
To adapt to these conditions, a big brand lacks agility. Meanwhile, D2C startups are more adaptive and have the ability to be close to customers, and can even create great shopping experiences and personalized products. How do they do it? Read more below.
3. D2C startups have great opportunities because they have and can process customer data.
Yup, data processing is one of the tricks. These D2Cs have the great advantage of having customer data and processing them to create a personalized product or style of communication for each customer. Of course, this provides closeness or intimacy to the brand and customers.
With that, D2C also has the ability to find differences from each brand to increase competitive advantage and bring the built brand to become a market leader. Since East Ventures has also injected funds into various D2C startups, there have been many interesting insights. One of them is that D2C turns out to be more than just a product. But the core soul of D2C is the built community.
4. Base and Casual reap the sweet fruit of a data-driven strategy
One of East Ventures' portfolios named Base, a D2C startup that makes hygienic, sustainable, and halal beauty products, also has a cool strategy. The company is led by Yaumi Fauziah Sugiharta and Ratih Permata Sari. They have succeeded in creating a loyal customer base for their products.
One of the marketing strategies is to adjust the various existing segments and work with influencers or KOLs (Key Opinion Leaders) that match the brand identity. This strategy helps to maintain customer loyalty.
In addition, there is Casual, a D2C startup that offers personalized pants wear for men, which has also succeeded in creating a customer base that has the identity of efficient, well-groomed, and environmentally conscious young professionals. Casual also controls the supply chain and empowers local tailors to create products.
Customers in the D2C vertical have a strong sense of pride and ownership when they buy and use products from this DTC startup. Customers can also identify the brand's message and vision easily. In the post-COVID era, this is even more significant as customers want to connect themselves with the brands and communities they feel comfortable with.
5. Understanding customers and staying innovative is the key to long-term survival
As digital penetration continues to increase and more and more new D2C startups are emerging in the market, one of the critical factors for a successful and sustainable D2C startup is the ability to know customers and grow with them. D2C startups need to stay innovative and adapt to the needs of their customers.
D2C brands must develop and launch innovative, data-driven products that match their target segments. Equipped with a unique online shopping experience, D2C startups can develop campaigns, drive digital strategies, and launch products that help create and maintain brand stickiness in the long term.
East Ventures has more than eight D2C portfolios among more than 250 portfolios. There is plenty of room for D2C brands to evolve and grow, and East Ventures is committed to continuing to be the first to believe in startups that are at the forefront of innovation. (WEB)