What Does D2C Mean?
Direct to consumer means selling products directly to the end consumer. Essentially, it cuts out any kind of middleman.
When brands sell directly to consumers, it means that they don’t sell their products to big department stores or wholesale their products to other brands. They simply are the only place a consumer can purchase their products from.
The purpose of the D2C model is to tailor your brand’s shopping experience to consumers rather than retailers, making it more convenient for consumers.
Why Consumers Prefer DTC
D2C caters to consumers’ desires for simplicity by eliminating middlemen and unnecessary product choices.
However, eliminating the middlemen doesn’t only benefit the consumer. Brands that manufacture, market, and distribute their own products can reduce costs, interact directly with customers, and provide an uninterrupted buyer experience that’s truly seamless.
What Are the Benefits of DTC?
Needless to say, the direct to consumer business model is an attractive option for start-ups since DTC provides easier entry into the market.
How?
Well, founders have fewer contracts to negotiate with third parties, fewer limitations on branding and fulfillment, and more immediate interaction capabilities with their customers. The latter point is fantastic for sourcing data that can be used to optimize marketing and sales strategies to fuel growth and boost a brand’s bottom line.
DTC’s Driving Factors
One study suggests that over 80% of consumers intend to purchase from a DTC brand by 2023. As a fast-growing business model, we’re confident that DTC businesses will heavily influence future brands.
How Direct to Consumer Brands Differ from Traditional Retailers
As we said earlier, unlike traditional retailers, direct to consumer brands cut out the middleman in many areas, including manufacturing, distribution, and marketing.
For example, when conventional companies might advertise themselves via TV, billboards, or magazine ads, DTC brands market themselves directly to the consumer. They do so through social media, YouTube, podcasts, etc. In other words, through online channels, brands communicate directly with their audience.
Direct to consumer brands put a lot of emphasis on customer experience and outreach so it’s unsurprising that, on average, their marketing budgets are increasing at higher rates than traditional retailers. In fact, in 2019, 78% of DTC brands said they increased their marketing budgets, compared to just 60% of conventional retailers.
DTC brands are digital-first, which often makes them more data-focused than their traditional counterparts. And at the risk of casting broad aspersions, as younger organizations, they’re also (usually) more open to experimentation. Compared to conventional retailers, who typically stick to their tried-and-tested strategies, DTC brands are still working towards profitability at scale. Often, this involves trying new things to see what works for them as a brand.
Lastly, the growth goals of these two distribution models are often quite different. Direct to consumer brands focus much more on scaling their business, customer acquisition, and personalization. Often they’ll work with technology innovations like AI and chatbots to achieve these targets.
On the other hand, it’s more likely that traditional retailers will have to satisfy internal stakeholders, therefore, to match a DTC brand’s rate of innovation and development, these retailers (usually) need to convince executives to take more risks and trial experimental channels. As you can imagine, there are often timely and arduous processes to be satisfied before marketers can hit the ground running.
Why DTC?
Here are just some of the reasons why, as an entrepreneur, you should consider adopting the DTC business model.
Meet Rising Customer Expectations
Consumer expectations are continuously rising. With internet access at an all-time high, nearly every consumer can research brands and make conscientious buying decisions. There’s more choice than ever before, which puts a greater onus on brands to meet their audience’s needs.
Consequently, customer experience has become the hill on which brands flourish or die. In fact, 89% of companies expect to compete primarily based on CX.
DTC is one of the many ways that can improve customer experience. Brands selling through traditional retailers often have little choice about how the product is sold, their branding, and distribution limitations are also common. Being at the mercy of their distributors, these brands rely on third parties to satisfy their customers. Conversely, when you sell directly to your audience, you take back control over the customer journey.
DTC, however, doesn’t eliminate every customer experience problem. You’ll still have to gather data to get insights into your audience’s needs so you can tailor your customer journey and branding to appeal to them. This is why an in-depth understanding of your end customer is crucial.
Build Better Relationships With Customers
With the direct to consumer model, it’s easier to communicate your brand’s values and mission to your customers.
If you sell a product via a traditional retailer, you might make a profit, however, you lose the opportunity to relay your brand’s story or interact directly with your customers. This is crucial for building long-lasting consumer relationships.
By selling through your own online storefront, you can utilize branding, promotions, content, and storytelling to engage with new and veteran customers alike.
But, this presents challenges, too. If you already have profitable partnerships with retailers, by switching to a DTC model, you could lose an essential marketing channel. So proceed with caution. Take Nike as an example — they’ve aggressively pushed towards direct sales, which has strained its relationship with some retailers.
Collect Customer Data
As we’ve just said, to customize a consumer experience effectively, brands need a thorough understanding of their customers.
This is why conducting customer surveys are worth their weight in gold. These are three of the easiest ways to identify your audiences through surveys:
- Priorities
- Requirements
- Pain points
Of course, there are plenty of other things you can gather from launching customer surveys, but you get the idea. Since the DTC model provides direct access to your customers, collecting this information is way easier than when you sell through an online marketplace or a traditional retailer.
Capitalize on Your Audience’s Favorite Sales Channels
Since direct to consumer brands (typically) operate 100% digitally, you must provide customers with a seamless online sales journey from researching products to browsing to finally buying. It’s also worth noting that more and more DTC brands are investing in their mobile audience to cater to a growing market of shoppers that use their mobile devices. In fact, over 67% of people admit to window shopping on their smartphones, and 77% of these digital browsers make impulse purchases.
In light of this information, it’s essential to establish which online sales channels your customers prefer then you can make sure you offer and optimize them as part of your DTC business strategy.
The Pros and Cons of DTC
No distribution model is perfect. While many brands have enjoyed success using the DTC model, businesses should carefully evaluate what’s necessary to make it work. Take a look at DTC’s pros and cons below to get a better feel for whether you think this model could benefit your business:
The Pros of Direct to Consumer
- Brands Have Full Control Over their Image: Your branding and communications aren’t diluted, so you can mold your brand’s identity exactly how you wish.
- Establish More Robust Customer Relationships: It’s easier to personalize customer interactions to build deeper connections.
- The DTC Model Unlocks New Business Opportunities Requiring Little Investment: If you’re already selling through a traditional retailer or an online marketplace, launching your own online store broadens your distribution base. The cost of designing and managing your own online store is minimal in comparison to its potential gains!
- You Own Your Customer’s Data Rather Than the Retailer or Marketplace You’re Selling Through: For instance, you can collect email addresses to grow your own mailing list and then send out surveys to gather even more customer data.
- Meet Consumer Demands: Online shopping is increasingly becoming a way of life for most consumers, so launching your own ecommerce store is a fantastic way to establish your online identity and meet consumer demands all at once!
- Capitalize on Organic Traffic by SEO-Optimizing Your Content: When done well, you’ll drive relevant traffic to your website without paying a penny for the leads.
The Cons of Direct to Consumer
- You’re 100% Responsible for Customer Satisfaction: When you go it alone, you’re entirely accountable for your customer experience and support quality. As such, the onus is on you to understand your consumer’s needs and fulfill them.
- Going Strictly DTC Alienates Larger Retail Platforms as Sales Channels: If you’re already enjoying profitable relationships with traditional retailers and online marketplaces, we suggest keeping these partnerships and running and launching your own DTC channels on the side. That way, you’ll enjoy the perks of each business model!
- You Carry All Your Operational Costs: From manufacturing to distribution to marketing, with the DTC model, you’ll handle it all.
How DTC Brands Market Themselves
As we’ve already hinted at, we’re seeing a shift towards ethical consumerism. More and more shoppers gravitate towards innovative brands that build authentic connections and boast the same values that they do.
This is where the direct to consumer model works perfectly.
It lends itself best to start-ups and niche businesses operating with smaller arrays of products and a specific target demographic. Often, their products are unique, eco-friendly, sustainable, fair-trade, etc. They sell the David and Goliath story — the conscientious small businesses versus mainstream corporations.
So as you’ve probably gathered, to succeed as a DTC brand, you’ll often need to commit to a cause. Consumers today want to support brands that do good in the world, and it’s what will likely inspire them to choose your DTC brand over a big-box store. If you’re wanting to go the DTC route, make your cause a part of your brand story and share it on your marketing channels.