Direct-to-Consumer Headwinds: An Opportunity for Change in eCommerce
For us in eCommerce, to say the last 4 years has been a rollercoaster would be an understatement. Flashback to 2018, with a record $3.6 billion VC dollars invested in the sector – to today, where many think the headwinds facing direct-to-consumer are too strong for most brands to survive.
Between the supply chain crisis hiking up shipping costs to iOS 14 skyrocketing customer acquisition costs, DTC brands are now facing staggering inflation as well – where it’s largely unknown how this will impact consumers’ pandemic-high spending habits. Margins are getting squeezed, and it’s understandable that many brands feel backed in a corner.
At Purple Dot, we’ve been on the frontline while brands navigated this new reality by turning to pre-orders. Afterall, if a brand’s summer shorts are delayed by two weeks stuck on a ship from China, it could mean a sell-through disaster. Tactically, selling on pre-order means they can still launch on-time despite that delay.
And as we worked through these most urgent, panic-led moments alongside our brands, magic started to happen: cue a critical AHA moment, and one we believe is fundamentally changing eCommerce – for the better.
Traditionally, brands have *waited* to sell products online until they were in the warehouse. But this unnecessarily reduces the window of opportunity to sell, creating waste and limiting potential sales. The AHA moment was a strategic one for brands: we don’t need products in the warehouse to sell it, only to ship it.
As a result, many brands who initially turned to pre-orders as a band-aid for a pressing supply chain issue are now using pre-orders as a core part of their merchandising strategy. Why? Because they realized they can sell more by selling earlier.
Natalie Paul, co-founder of We Are We Wear – a modern DTC swimwear brand, simply put it:
“For May 2022, pre-orders accounted for 100% of our improved sales performance.”
As Vogue Business pointed out, the pre-order model is far from new – the fashion industry has leaned into pre-orders for years. But it’s the pandemic that accelerated a whole new wave of brands to not only give pre-orders a try, but to create a long-term advantage through a ‘sell earlier’ mindset, beyond the immediate DTC headwinds:
Chef Jeffray Garner, founder of Marsatta Chocolate shared:
“As a boutique chocolate factory, we have so many ideas of potentially exciting chocolate. By having a pre-order experience, we now can quickly get customer input on new chocolate experiences, without yet making the full batch: A game-changer, that helps us do what we love doing best...making more memorable chocolate experiences!”
At Purple Dot, we’re inspired by the way brands are using pre-orders to re-invent the way they sell from first principles. Yes, in the age of Amazon, consumers often expect a fast “buy and ship now” commerce experience. But, the winning brands are realizing they can offer many different types of selling experiences – including both in-stock AND pre-order – to maximize and differentiate their opportunities with consumers.
From exclusive pre-order drops for a VIP audience, to never truly going out of stock to shoppers, to testing out new product lines, brands are making waiting not only worth it – but a desired part of the “be the first” consumer culture. As a result, we’ve seen up to 70% of pre-order customers pre-order again within 3 months, signaling that these brands have created a new, sticky shopping experience that they can expand on:
OYUNA, founded by Mongolian born designer Oyuna Tserendorj, shared their experience:
“As a brand that centers around conscious consumerism, offering products on pre-order allows us to reduce the amount of items we have to add to sale due to high stock levels or end-of-season. Next, we plan to use pre-orders to try out new styles to see what our customers are most interested in.”
So, instead of a world where cards are stacked against DTC, we see the exact opposite – and we’re seeing it unfold live, up close and personal. These modern brands are creating the shopping experiences of the future – ones that build trusted brand loyalty, that give consumers a genuine reason to follow a brand closely, and that establish a new business model to naturally introduce more sustainability into the industry.
This is why we’re excited to share that we are expanding and launching a new version of Purple Dot, exclusive to Shopify merchants. Over the last several months, we’ve been busy partnering directly with Shopify to create a lighter-weight version of Purple Dot that is fully self-installable from the Shopify App Store.
With the launch of Purple Dot | Turnkey, any Shopify brand can create a best-in-class, free-to-checkout pre-order experience within minutes, directly from the Shopify App Store. And with Purple Dot Premium, our existing version, brands can still charge upfront for pre-orders and get access to those funds early for cashflow, all while staying compliant with all major markets’ pre-order regulations.
And we have more exciting developments coming up, so stay tuned. We’re excited to continue to partner with the world’s most inspiring DTC brands, as well as our friends at Shopify, to reshape how and when eCommerce sells. Onwards.
Want to learn more about how you can sell more by selling earlier?
Reach out, we can’t wait to hear from you.
Read more with case studies: Case Study 1: SPOKE – Sell earlier with pre-orders | Case Study 2: Pocket Sport – Never go out of stock | Case Study 3: Handful – Sell despite delays | NEW Case Study 4: Sachin & Babi – Optimize purchase orders