3 ways to use the direct-to-consumer movement in your employee benefits strategy

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The direct-to-consumer movement — characterized by popular brands like Warby Parker, Glossier and Casper — has taken the retail industry by storm for the better half of the last decade. Whether employers are ready for it or not, its influence is about to infiltrate well beyond the retail marketplace and straight into the employee benefits landscape.

DTC, in which brands eliminate the middleman and sell directly to consumers, has become a popular model in e-commerce because it creates more meaningful shopping experiences for customers. Consider DTC darling Away, a luxury travel brand which offers highly curated shopping experiences in which people can customize luggage purchases to their exact liking. This way of shopping has become popularized by millennials, 60% of whom gravitate toward purchases that are an expression of their personality.

It should come as no surprise then that millennials — who make up the largest segment of our workforce today — will increasingly demand similar experiences from their employers when it comes to accessing and experiencing benefits. In fact, many of the tenets of the DTC approach in retail — customization, simplicity, and quality — will define the employer-employee relationship for the next 30 years.

Here are three basic principles, borrowed from the DTC playbook, that will soon define how employers approach corporate benefits:

1. Customized products (employee choice)
It’s not uncommon for DTC merchants to offer shoppers a brief quiz in order to source products that best meet their needs and preferences. At the very least, most offer a level of product customization that’s largely absent from big retail chains. Millennials not only prefer customization, they have come to expect it — and this applies not just in the marketplace but the workplace as well.

Millennials are what I call the “Starbucks generation”; since their teen years, they’ve been using 17-word descriptions (non-fat, light ice, etc.) just to order a drink from a barista. Meanwhile, employee benefits today feel more like a 1950s ice cream shop: Would you like chocolate, strawberry, or vanilla? In order to meet millennials at their need for customization, employers will need to look beyond the traditional “cookie-cutter” benefits packages towards benefits marketplaces which offer employees freedom of choice. In these personalized marketplaces, employees can peruse a menu of various benefits offerings and select those that best suit their needs and preferences.

2. More enjoyable shopping experience (better employee experience)
DTC brands are known for their clean aesthetic and seamless shopping experiences. To-date, employee benefits have been a complex language that few people can speak. Many people, especially millennials, don’t understand all of the benefits their company offers let alone how to access those benefits. This is a fundamental problem — employers are spending tens of thousands of dollars per year on benefits their people don’t understand or end up using. Just as DTC brands maintain radical transparency with customers, employers must look at new ways to bring benefits to employees that prioritize transparency and ease of use.

Imagine if employees could simply log in to a personalized benefits dashboard, which offered not only a menu of benefits to choose from but an overview of which benefits they’re currently receiving. In this format, you can guarantee no wasted dollars.

3. Meaningful products (meaningful benefits)
In the merchant-customer relationship, the lack of a third party intermediary provides a direct feedback loop which results in better, more tailored products. The same can be applied to the corporate benefits landscape. Today, it’s critical for employers to acknowledge in their benefits offerings that no two employees are the same, and that each individual has a different life situation and therefore different needs. By offering an array of benefits choices focused on immediate impact — whether it’s at-home fitness or streaming content subscriptions — employers can bring benefits experiences that are far more meaningful than the standard health insurance and 401(k).

These changes don’t just apply to culture-forward companies; they apply to every company. Just like DTC merchants aim to create greater loyalty with their customers, these are principles that all employers should adopt to create greater loyalty with employees and therefore generate higher retention rates. While this shift has been in the works for some time, COVID-19 has created more urgency for employers to adopt the tenets of the DTC playbook in their benefits strategies. In a time with so much uncertainty and so many new challenges, employers must be thinking outside the box to keep employees happy — and DTC-inspired benefits are the easiest way to pack a big punch.

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Benefit strategies Consumer direct