Shopify & DTC: How to Stay Ahead of the Trends in 2023
Selling direct-to-consumers (DTC, or sometimes D2C) is no longer a niche business model.
As more brands, both new and established, cut out wholesale and retail middlemen, the DTC space is evolving faster than ever before. And the speed of these changes means staying ahead of DTC trends is vital to remaining competitive.
This article will explore 5 key DTC e-commerce trends that have emerged and how you utilize them to remain competitive as a DTC brand on Shopify.
The Current State of DTC
Fueled by the rapid rise in online shopping during the pandemic, many brands quickly embraced the DTC model. Such as Heinz, which launched its DTC Shopify store in just 7 days.
Considering this, it’s fairly unsurprising that DTC sales in the US doubled from $76.68 billion in 2019 to $151.20 billion in 2022 and are expected to reach $175 billion in 2023.
But as established brands increasingly start selling directly to consumers, competition within the DTC space is heating up. This is best demonstrated by looking at the percentage of DTC sales coming from digitally native brands. In 2020, these brands accounted for 40% of total DTC sales, by 2022 this figure more than halved to just 18.2%.
This competition along with an uncertain economic outlook is forcing rapid changes in the industry. As Ari Murray, VP of Growth at Sharma Brands, puts it:
“The single biggest challenge [with DTC] is that it can all change so quickly … you have to plan really far ahead.”
So, to assist with planning well ahead, there are 5 key DTC trends to pay close attention to.
DTC Trends in 2023 Worth Watching
1. Inflation will drive more flexible payment options
Most brands have seen their costs rise sharply due to inflation, but unfortunately this is a problem that’s also affecting brands on the consumer end as people cut back on spending.
In response to increased price sensitivity, brands are offering customers more flexible payment options. One popular option is buy now, pay later services that allow customers to pay over smaller, more manageable payments.
Gymshark, a well-known DTC fitness apparel brand running on Shopify, offers its customers both Klarna and Afterpay buy now, pay later services. They also partner with Student Beans and Veterans Advantage to make payments easier to manage for specific customer segments.
Many of these services can be easily added to Shopify stores with the help of apps and most take on payment follow-ups and the associated risk themselves making them more attractive to merchants. Shopify even has its own flexible payment service, Shop Pay Installments, for stores in the US.
2. Subscriptions are here to stay
Subscription pricing models have long been a distinct feature of DTC brands which isn’t going anywhere.
Consumers have come to appreciate this model thanks to the convenience of regularly scheduled deliveries of staples and perishable goods. It’s no wonder that Dollar Shave Club was an early DTC brand to popularize subscriptions with its razors.
Brands also benefit from the model with more recurring revenue, predictable sales, and the lock-in effect it has on customers.
These benefits mean that subscriptions are here to stay. However, to cater to price-sensitive customers, brands will increasingly offer discounts on initial deliveries. Such as how HelloFresh only displays the price of a customer’s first box.
The Shopify ecosystem is well supported by a variety of apps to manage subscriptions. You can view Shopify’s curated collection of subscription apps, or check out some popular ones such as BOLD, PayWhirl or Recharge Subscriptions.
3. Personalization will be driven by first-party data
Concerns over how personal data is used have been consistently trending up among consumers. This has led to some big changes such as Apple restricting ad tracking on its devices and Google phasing out the use of third-party cookies.
While this is welcome from a privacy perspective, brands often rely on this data to provide customers with personalized experiences. Apart from helping drive conversions for merchants, most consumers also expect personalization from brands.
With third-party data sources increasingly limited, an emerging trend among DTC brands is shifting to first-party data. That is, information collected directly from customers.
This can involve simply asking customers for their preferences. Which is something Curlsmith does well so they can provide personalized product recommendations based on their customer’s hair type.
Or, it can involve data collected from customer activity, including purchase histories and engagement with marketing campaigns.
This trend has seen merchants reprioritize email and SMS marketing over social media and other channels they have less control over in part because of increased attention on first-party data. These channels allow for personalized customer experiences at scale with Shopify apps like SmartrMail making it easy to recommend products and create automations based on a customer’s past interactions.
4. Customer engagement will receive greater attention
At its heart, personalization is about creating customer engagement. So with increased competition and price-conscious customers, we can expect DTC brands to ramp up their customer engagement efforts to safeguard sales.
Until recently, DTC brands have focused their engagement strategies on community building and cultivating loyal customers. While this remains important, it’s also a longer-term strategy. So the pressure to make sales in a challenging economy will result in greater attention to strategies with a more immediate payoff.
These engagement strategies will be focused around improving the conversion rate of online stores with the use of social proof and by creating a sense of urgency.
DTC mattress brand Casper already does a good job of this. Their website incorporates reviews into product pages so well that potential customers can filter reviews to see ones relevant to them.
Engaging customers visiting online stores is fairly easy to achieve with Shopify apps such as POP which showcases recent sales and Fomo which creates a sense of urgency through cart counters and selling fast and low stock nudges.
5. More stores will start selling directly through social media
Another strategy with a faster payoff we’ll see DTC brands embrace in 2023 is social commerce - letting customers purchase products directly from a social media post.
Social commerce tools including Instagram’s Shoppable Posts, TikTok Shopping and Facebook Shop have made it possible for e-commerce brands to leverage their social followers like never before. This drastically reduces the number of steps to purchase with customers not having to click through to an e-commerce website and go through the checkout process. Which in turn, improves conversion rates from social not to mention the shopping experience.
This strategy has already been embraced by brands selling products that lend themself well to social media, such as fashion, sportswear, and beauty brands. Fashion Nova, Huda Beauty and Hims are some brands currently excelling at social commerce.
Since they benefit from this trend as well, especially with ad spends (their largest revenue source) being down, we can expect further improvements to these tools. This creates a positive feedback loop between merchants and social media platforms that will drive this trend further in 2023 and see brands in more diverse industries jump on board.
6. Authenticity will be key to leveraging influencers
Influencer marketing has been a key strategy for many DTC brands to quickly build brand awareness. Notable examples being Casper, Warby Parker and Allbirds.
However, as more brands engage influencers to promote their products, it's hitting saturation with customer trust in influencers waning. Particularly among younger consumers.
This doesn’t mean that influencers aren’t still helpful in building brand awareness. But that brands need to become more discerning with which influencers they partner with.
Patagonia is a good example of a brand well respected for its sustainability and environmental ethos that has carried through these values to its influencer campaigns.
By being careful to only work with influencers with a genuine and well-known passion for the outdoors and the environment, Patagonia maintains authenticity in its campaigns.
Achieving a similar authenticity in influencer campaigns will be increasingly important to their success.
To that end, Shopify has its own service, Shopify Collabs, specifically built for this purpose. Boasting a database with millions of influencers, Shopify Collabs lets you find creators who most align with your brand, track their performance and even manage their commissions.
The amount of change within the DTC space is a reflection of how the business model is continuing to thrive in a post-pandemic world.
While keeping up with these changes might seem like a challenge, it’s ultimately good news for DTC brands as it demonstrates that direct selling isn’t just a temporary fad. Consumers have fallen in love with the convenience it offers so it’s here to stay.
And the best chance brands have to continue capitalizing on people’s new favorite way of shopping is by staying ahead of trends in the industry.