The retail sector is witnessing changes, with direct-to-consumer (D2C) brands leading innovation.
As 2024 wanes, key trends influence how consumers interact with brands and make purchasing decisions. From artificial intelligence-powered personalization to a greater emphasis on sustainability, D2C retailers are adjusting to the changing expectations of today’s shoppers.
AI-Driven Personalization
AI plays a role in how D2C brands connect with their customers. In 2024, there has been a rise in personalized shopping experiences.
“Rapid digitalization paved the way for new business models like marketplaces, direct-to-consumer and social commerce,” Michelle Evans, global lead of retail and digital consumer insights at Euromonitor International, told the National Retail Federation.
AI algorithms now process large amounts of consumer data, allowing brands to offer tailored product recommendations and personalized marketing that speak directly to individual preferences.
Full Glass Wine Co. faced the challenge of establishing its name in a traditional and fragmented industry while launching its direct-to-consumer model, according to co-founder and Chief Operating Officer Neha Kumar. Using advanced data analytics and AI, the company personalizes wine recommendations and selections based on consumer behavior, preferences and purchasing patterns.
“Through advanced data analytics and AI, we tailor recommendations and curate selections that align with individual consumer preferences and lifestyles,” Kumar told PYMNTS this month. “Our approach relies on insights derived from consumer behavior, purchasing patterns and preferences to make wine discovery intuitive, seamless and personal.”
Omnichannel Retailing
The lines between online and offline shopping continue to blur as D2C brands adopt omnichannel strategies. This approach offers consumers a seamless experience across multiple touchpoints. According to Harvard Business Review, 73% of retail consumers now use several channels during their shopping journeys.
Instacart prioritizes technological innovation with its AI-powered Caper Carts, which were tested in the United States and Austria this year. These smart carts, equipped with digital screens, aim to streamline the checkout process and enhance the shopping experience. Instacart plans a broader implementation to improve customer convenience.
Sustainability and Ethical Practices
As consumers become more mindful of the environmental and social impacts of their purchases, D2C brands are prioritizing sustainability and ethical practices, Bluestone PIM reported. These include eco-friendly packaging and transparent supply chains that align with consumer values.
The trend toward “reCommerce” is also gaining traction, with brands like Selfridges seeking to generate half of its sales from resale, repair, rental or refills by 2030, the report said.
Social Commerce and Mobile Shopping
Social media platforms are becoming integral to the shopping experience. In 2023, social commerce accounted for over $67 billion in U.S. sales, according to Shopify, a trend set to grow further in 2024.
The rise of mobile shopping is driving this shift, with mobile eCommerce sales reaching $2.2 trillion in 2023, representing 60% of global eCommerce sales, per the report.
According to the PYMNTS Intelligence report “Tracking the Digital Payments Takeover: Monetizing Social Media,” consumers are turning to different social media platforms for various retail purchases. Instagram leads for apparel, with 47% of shoppers using it for clothing purchases, while TikTok is preferred for beauty products (33% of shoppers). YouTube tops the list for food and beverage shopping, with 40% of its users making such purchases.
Flexible Payment Options
D2C brands are responding to high cart abandonment rates by offering more flexible payment options. Buy now, pay later (BNPL) services, particularly for more expensive items, are gaining popularity.
“Aside from enabling the use of Apple Pay and Google Pay, D2C sites are also offering [BNPL] schemes that work well for pricier products,” Influencer Marketing Hub reported.
Alternative payment methods, including digital wallets and BNPL plans, have become popular in online transactions due to the convenience and ease they offer. As a result, many eCommerce merchants prioritize supporting these payment options to meet consumer demand, with some even considering switching payment processors if they cannot accommodate certain methods.
Today, 80% of merchants accept digital wallets like Apple Pay, Google Pay and PayPal, while 40% offer BNPL options.
Direct-to-Consumer Growth
The D2C model is gaining ground, with U.S. sales projected to reach $177.3 billion by 2024, according to Emarketer.
This growth is driven by brands’ ability to control their messaging, pricing and overall customer experience, which gives them a competitive advantage in the crowded retail space.
Subscription Models and Loyalty Programs
D2C brands are also embracing subscription models and loyalty programs to strengthen customer relationships. These strategies not only provide a steady stream of revenue but also encourage customer retention.
“For 2024, we will see more [D2C] brands … offering the convenience of subscription pricing to their customers,” the Influencer Marketing Hub report said. It also becomes a huge incentive for customer loyalty and retention.
For example, Rent the Runway is shifting back into “growth mode” after focusing on cost-cutting and margin improvements from 2020 to 2023, CEO Jennifer Hyman said during an earnings call this month. As the company moves into 2025, its strategy centers around its subscription business, highlighted by the November launch of a new $119/month subscription tier aimed at expanding its customer base and setting the stage for growth in 2025.
“Now a subscription to fashion has become more mainstream,” Hyman said during the call. “We’ve seen high engagement among a much more diverse age demographic in subscription, and diverse use cases give us really nice momentum in our subscription business. 2025 is going to be the year where we really accelerate our subscriber acquisition and growth.”
