#D2CDisruptionDiaries: Impacting the future of retail

The GCC market has undergone significant transformation over the past couple of years and the D2C model has been at the forefront of this change witnessing significant traction.

“This shift has been propelled and underpinned by several factors including high digital engagement with the region being one of the ‘highest digitally engaged’ globally. Coupled with the shifts in consumer behaviour and a growing emphasis on personalisation new brands have launched leveraging the D2C model,” observed session moderator Cynthia Makhoul, Director, PwC Middle East, setting the stage for a panel discussion at the Internet Commerce Summit (ICS) MENA 2024.

One critical element for new brands is to take a long-term strategic outlook when it comes to scaling the business.

For instance, Minimalist that sells watches and accessories scaled to more than 50,000 customers across the Gulf region over the past seven years. Product has played a key role in their growth, shared Chief Executive Officer, Ahmad Yousuf. “Product is the absolute key when it comes to an online brand, and once you’ve got the fundamentals, which is your product and service, I’d say you scale it up as much and as fast as possible.”

Ensuring efficiency by having the right inventory levels, keeping a close eye on profit per order, having the cost of customer acquisition under check are also crucial factors for scaling a business.

“When we launched Shift Eco it was important to understand our target audience, which is a niche cohort. As next step, we had to constantly test to gauge which platforms work best for us – D2C, marketplace or offline – to find the sweet spot. Also, being a startup that’s not cash-rich, we had to keep a close eye on return on investments factoring in elements such as marketing spend, cost of customer acquisition keeping them as low as possible,” shared Namrata Budhraja, Co-founder, Shift Eco.

“For instance, we realised quickly that our cost of acquiring new customers was extremely high because we are working in the UAE that already has a small population and our target audience is niche. So, we started exploring possibilities of creating an omnichannel presence. We started looking at collaborations, and eventually partnered with Etihad; now we are their green rewards partner. The B2B piece has really helped us get scale. We’ve started acquiring customers in Saudi Arabia,” she added.

Adding on, Hassan Tamimi, Managing Director, The Little Things said, “Data is one of the greatest drivers. Understanding and using that data to our advantage is crucial to establish a good online and offline presence. In addition, loyalty plays a huge factor as well in gaining customer resonance, and across channels customers look for different things. Here too data plays a key role for businesses to exactly understand customer preferences.”

At this point, taking a step back Aya Assaf, Co-founder, Koala Picks touched upon the various reasons why an entrepreneur chooses a certain channel to begin with.

“Startups often don’t have enough resources in the beginning to reach the masses, so we need to pick the platforms where our core customers shop at. In case of Koala Picks, our core customers are health-conscious mothers and parents looking for healthy snacks. The reasons we decided to take a D2C approach through our website as the main selling point is to stay close to our customers. This enables us to get almost instant feedback from them on any new launch, which is pivotal for a small brand as we need to react quickly and pivot if needed. The second reason is to keep our margin to breakeven as fast as possible. Volume is also important so at a certain point we decided to balance our online presence through our website alongside being present on online aggregators platforms and supermarkets.”

Staying in the food and beverage domain, Jonny Nixon, Commercial Director, Drink Dry LLC said, “While deciding upon the channel of choice, we were focused on occasions given ours is a marketplace for non-alcoholic drinks. We wanted to ensure hitting all the touchpoints that people would look for in our category – individual buyers, HoReCa or retail shelves. We were e-commerce first in our approach because we wanted to offer a great selection and high-quality products to our end consumers. We almost worked backwards. We saw the demand from B2B, HoReCa channel to revolutionise that space and retail followed suit on the back of that. If anything, we followed an omnichannel approach.”

Moving over to challenges, Makhoul asked about navigating roadblocks in business.

“Supply chain disruptions are affecting almost every business now. With rapidly changing consumer habits we have to find ways to quickly adapt. As an example, we had around 15-16 SKUs and spent a lot of money on air freight to accommodate changing consumer demands. So, it’s important to bear in mind that there will be high logistics costs initially that can be reduced by introducing the right processes, understanding consumer demand and better planning inventory based on data points,” Nixon responded.

“Supply chain is always a challenge, especially now with the Red Sea situation causing delays for us. So, the rule in business is always find alternatives and solutions. Stopping isn’t a solution,” Tamimi added.

More brands are pivoting online. The competition is increasing, it’s intensifying. So, the challenge is not only in capturing new customers, but it’s also in retaining them and having this long-term loyalty, observed Makhoul.

“Retention is one of the most important metrics to us and we look at it on a very frequent basis. Knowing that you’ve got high retention shows that your business is performing well, right. The number one thing for us is customer loyalty. And we gain that by providing the best customer service as possible while keeping the product quality at the highest possible grid, always looking at how we can build a meaningful relationship because I believe success is a byproduct of the meaningful relationships we create with our customers,” Yousuf observed.

“Taking customer behind the scenes through storytelling plays a big role in building trust and relationships. We take our customers behind the scenes to our kitchen. They can see how we are extracting colours from vegetables, for instance,” Assaf concluded.