Seamless payment key to HK’s direct-to-consumer brands success

July 29, 2022 08:43

In the era of eCommerce, retailers understand clearly that presence in marketplaces alone is no longer enough to reach their consumers. It’s getting harder and harder to stand out in a crowded market, both online and off, so what can merchants do?

To cut through the noise, it is critical that retailers implement strategic business models that enable greater brand control, integrate their services into multiple platforms and partners and ultimately focus efforts on reaching global customers – directly. This direct-to-consumer (DTC) model is being used by some of the largest businesses in Hong Kong and mainland China now across the many facets of their customer journeys, and it is something that can be altered to fit businesses of all sizes.

To put it simply: DTC takes place when merchants sell directly to their customers instead of going through third-party channel networks such as wholesalers, marketplaces or retailers, and its adoption is growing at a rapid pace. Look no further than China, where the market is forecasted to almost double between 2019 to 2024, reaching a projected CNY¥120 billion in sales.

The rise of DTC

The DTC model gives both ‘well-established’ and upcoming retailers in the Greater China region an opportunity to reap in a slew of monetary and operational benefits. These benefits include increased sales and profits, while minimizing marketplace risks such as potentially being banned from listing on one, competition and changes to fees. In addition to larger profit margins, companies gain greater control over brand image and can tailor payment solutions specifically to the preferences of the unique and local markets they operate in, thereby improving their customers’ overall shopping experiences.

The maturing and proliferation of retail social commerce, and the accurate targeting campaigns offered by social media platforms, give DTC brands new ways to expand their businesses and reach new audiences. The rise of fast fashion retailer, SHEIN, spells telling lessons on how businesses can win consumers by utilizing and integrating with social commerce apps such as Instagram, Douyin and Xiaohongshu. Homegrown Hong Kong LANE EIGHT and clean technology company, Raze have also implemented DTC models and used a combination of retail social commerce apps and tailored payment solutions to interact with and reach their audiences.

The role payments play in the holistic DTC experience

While a thoughtful digital marketing campaign to optimize brands’ channels is important, it is also paramount to remember that a seamless customer journey is needed to ensure sales conversions - and payments is an integral part of this.

A study found that 55% of shoppers abandon carts due to unexpected fees, and 21% abandon due to complicated or lengthy checkout processes, making it all the more important for DTC merchants to ensure customer checkout experiences are as smooth as possible. DTC merchants that are fresh to the game face unique challenges, unlike established brands, when expanding into new markets.

Tailoring specific payment solutions to the preferences of their target audience in each market means that merchants should consider offering local payment methods to encourage customer conversions and cater for their new market growth. Alongside this, the complexities in sending and receiving payments in multiple foreign currencies, along with high transaction and FX fees, mean that DTC merchants may not have the resources to manage multi-currencies. Therefore, adopting the right payments provider is integral to ensuring businesses are set up appropriately to connect to the global digital economy, while minimizing customer drop-off rate.

Streamlining the payments process is essential to ensuring a smooth customer journey, reducing cart abandonment, and is the first pivotal step to empower independent and upstart DTC brands to capitalize on evolving consumer habits in a post-pandemic world.

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General Manager, Payoneer Hong Kong