D2C business model is seen as the next wave of successful e-commerce. According to Statista, D2C e-commerce revenue is projected to grow from $ 76.78 billion in 2019 to $129.32 billion in 2021 and reach $174.98 billion by 2023 in the United States alone.
More and more B2B businesses, particularly in the consumer goods industry, are adopting the D2C model to communicate directly with end-consumers. Rather than selling their products in bulk to a third-party retailer, they create their own ecommerce website, bypassing the middleman, and shipping their products directly to customers.
In this article, we will give you a holistic view of the D2C business model: Definition, Examples, Benefits & Challenges. Let’s take a look to check if D2C should be your next move or not.
D2C is the abbreviation for direct to consumers. It is the practice of selling a product directly to the customer through a company’s own web store, skipping third-party retailers or distributors. As a result of eliminating the intermediaries, D2C businesses often focus on developing their own online sales channels, and being less reliant on e-giants such as Amazon, eBay, Alibaba, etc.
Dollar Shave Club is one of the most prominent examples of a D2C brand. It is a razor, cream and after-shave cosmetics company.
What drives the success of Dollar Shave Club is its strategy in selling simple razors and blades directly to people through a D2C subscription model. Customers get Dollar Shave Club’s razors directly from the brand through recurring deliveries. Shaving is a routine. Shavers know how many blades they need. It’s the perfect opportunity for the subscription model.
This low-cost, logical appeal would have only been possible with the D2C model. Dollar Shave Club shaved off their supply chain costs and passed those savings directly to individuals.
Glossier is a beauty brand that sells chemical-free cosmetics with high-quality ingredients. As a direct-to-consumer brand, Glossier sells only via its website without relying on third-party suppliers. It also uses social media to promote its brand and products closer to customers.
The direct-to-consumer (D2C) business model eliminates the middleman, allowing you to get closer to your target audience and have greater control over your brand. As a result, you can have more competitive advantages over other models. Let’s see the advantages of adopting the D2C business model.
The D2C model means controlling all steps including produce, pack, distribute and ship your products. No need to work with a wholesaler or distributors so you can cut down significant expenses for intermediaries and don’t have to share your margin. This way, you will have total control over your margins, thus driving the customer lifetime value.
According to Nielsen, 85% of women say that if they love a brand, they will stick to it. So if you want to retain customers and get more repeat sales from them, it is necessary to maintain a good relationship with your customers.
The most common way to build a close knit relationship with your customers is engaging with them directly through every touchpoint with your brand during their buyer journey. It will be tough to nurture these interactions if you rely on middlemen to sell your items.
Going D2C enables you to have more autonomy in terms of connecting with your customers, gathering their information and don’t have to share first-party data with retailers. In particular, you will know exactly who bought products, and when, and through which channels. You can exploit this connection to build strong relationships and drive retention via targeted marketing campaigns.
Omnichannel commerce is a multichannel sales strategy that strives to create a consistent customer experience no matter where customers shop. According to Harvard Business Review, 73% of all clients use multiple channels during their buying process. UC Today reported that 90% of customers prefer an omnichannel experience that includes seamless service.
When your company is in charge of everything from manufacture to sales, you have complete control over all customers’ touch points. It means that your marketing and customer service are consistent regardless of whether you go through SEO, physical packaging, social media, print media, or other channels.
Although the D2C business model presents many benefits for businesses across various industries, there are some challenges that they need to overcome to make it successful.
In this fast-paced, challenging, and dynamic eCommerce market, more and more brands have shifted their business models to D2C. Plus, your brand also has to compete with some gigantic ecommerce retailers such as Amazon and eBay which have continued to strengthen their foothold in the eCommerce space. All of this means more brands are competing to sell similar products. If your brand isn’t able to provide customers with what they’re looking for, they will turn to others instead.
To execute a D2C strategy effectively, brands must have the necessary technical infrastructure in place to meet the customer requests. This means you need a platform that enables you to manage content and digital assets, handle eCommerce, integrate analytics, etc. Furthermore, this infrastructure must be adaptable enough to allow for future changes and the adoption of new technologies.
Customers prefer a consistent buying experience, regardless of the device they use to interact with your brand. They expect to begin searching for a product on their phone, then go home and complete the transaction while browsing other comparable products and even spying on your competitors to see who gives the lowest price.
Even while buying in-store, customers want to be able to see a product on the shelf and then go to your online store to check if there is a possible discount or alternative goods. This omnichannel purchasing experience is becoming more common, and if a D2C businesses want to compete, they need to incorporate it into their strategies.
D2C businesses should also deal with increasingly demanding customers and deliver exactly what they want at the right time. This necessitates a redoubled effort on the part of brands to personalize the customer experience.
Customers expect brands to cater to them from the time they enter an eCommerce site, showing products that may be of interest to them based on their location, demographic profile, previous purchases, and other variables, or risk losing their attention.
Basic data, like sign ups and page views, gives you a quick snapshot of how customers feel about your brand and products. To create personalized ads, D2C marketers require user data that spans the whole funnel, not just the point of purchase. They should use behavioral data to create targeted messaging for different user segments.
As D2C brands interact with the direct customers, it means they have to handle thousands of questions from customers per day. In fact, customers not only reach out to brands for help via websites but also other channels like social media, emails, phone calls, etc at any time in a day. Thus, it will be detrimental to customer experience if your D2C brand doesn’t have a support team who quickly answers customers’ questions. Customers may switch to competitors if they don’t receive the response or assistance they need in a matter of minutes.
When it comes to customer service, it is not easy for businesses to manually reply to many queries from customers from various channels all day long. Therefore, the omni chat system is the best tool that is used by many D2C brands to deliver a delightful customer experience.
D2C offers great potential to grow sales, improve margins, and be a direct link to customers. However, it also presents its own set of challenges that you should consider before jumping in. If you are still wondering whether to shift to D2C or start your D2C business from scratch or not, don’t hesitate to contact our dedicated team for free consultations.