Direct to Consumer Business Model for Brands
Considering going direct to consumer? Let’s have a look at trends of a current D2C market first. Companies like PepsiCo are already capitalizing on direct to consumer strategy. What to expect from the D2C emerging trend? Would it preserve its relevance and is there any at all? The question is rather what is convenient for the consumer, rather than for the brand.
The internet and social media opened new ways to sell and work on brand awareness, which gave a direct to consumer retail a massive kickstart. In the meantime, Facebook makes its move and tosses a life vest for small and medium businesses and launches its own ecommerce platform Facebook Shop.
What does direct to consumer mean
The term DTC or D2C (direct to consumer) first made its appearance among the beauty brands. Then the smart home brands and direct to consumer clothing brands absorbed the trend.
Direct to consumer (alt. D2C or DTC) is simply the sales made in a short and straightforward way from the manufacturer to the one who’ll own it and use it later (a customer). Any types of middlemen or third-party retailers, wholesalers or distributors, which were there to deliver products, fall out from the chain. There’s a decent amount of reason why this can actually be a winning strategy for brands, which we'll talk about below.
The main benefits of working with D2C
Why is DTC so attractive? DTC (or D2C) strategy provides emerging brands with easier entry to the market, more flexibility of not depending on any kind of middlemen, and sticking to their rules. This also allows the companies, who want to grow their online presence, to better evolve on the quality of the customer journey. Through D2C sales companies are able to maintain end-to-end regulation over the manufacturing, marketing, and distribution of the products. What other benefits a D2C company can get itself and give to its customers?
- Getting feedback from a customer and being closer to them
Gen Z and Millenials buyers feel the sellers being inauthentic in miles, and direct to consumer brands prove that they care about the core values of its audience by providing guidance, access to free information, webinars, tutorials, arranging ecommerce websites in a user-friendly way. And being maximum transparent by providing great product descriptions and product images.
On D2C buyer's journey, direct to consumer ecommerce brand is able to give an outstanding user experience and better navigate them across the website: by analyzing the previous shopping, search, browsing history, as well as order, payment, and shipment details. This experience could be enhanced by providing a mobile app.
- Building a social community
We are all social creatures and constantly seek our place, where we would be heard. This is what DTC brands can provide. Creating forums, groups, social network communities. Do not neglect customer reviews, and do implement them into your D2C marketing strategy. Read the examples of successful implementation of social community spirit into D2C ecommerce companies.
- Saving the budget
Essentially, cutting any type of middlemen from your ecommerce business model means cutting the costs of sustaining their services.
- Getting control over your product information
Here, in effective D2C marketing, you’re not depending on someone else to present your products. You are responsible for arranging your website and mobile app in a way customers get access to the original source of truth for a quality product detail page with extensive product information. Read how the successful sporting company benefited from using its newly developed app and implemented it to its D2C customer journey.
Most successful DTC strategies TOP brands use
- Bricks and clicks business model
The company integrates physical location points with ecommerce sites or mobile apps. And it’s worth mentioning, consumers feel more at ease purchasing directly from a manufacturer, having had physical contact with its products before. Though this model is not for every direct to consumer business, as it demands additional costs for maintaining the stores and its staff, which purely online small businesses usually don’t have.
- Taking advantage of the mass popularity of eBay and Amazon
Brands who sell their product at marketplaces benefit from their promising customer base and convenient delivery services. The pioneers in D2C business, Dyson Ltd., still uses Amazon as a selling point along with their own branded site. Check out more on a Dyson case here.
- Using other ecommerce platforms as a kickstart
Some D2C brands used Amazon, Google, Instagram or eBay infrastructure to grow fast and then aspired to connect directly to their customers and do direct to consumer retail through their own direct to consumer platform. Now, as they have built up capital and a customer base, it is easier to start a D2C business than from a pure scratch.
Some do partnerships with similar companies: from simple giveaways to arranging the common delivery routes or pickup points. How it can look like? Cooperate and make that sandwich work. Here’s an example. Leesa, an ecommerce D2C mattress company, partnered with a furniture retailer West Elm to showcase its products across the West Elm’s brick and mortar stores. Now the customers can easily find and try out and choose their perfect mattress.
- Newly emerged opportunity: Facebook Shop
From the end of May 2020 Facebook tosses a life vest for small and medium businesses and launches its own ecommerce platform Facebook Shop. Now it looks like a chance for D2C brands to merge it into their marketing and selling strategies. Mark Zuckerberg wrote on his page that the idea is that any small business can easily start selling using the app. Still, a platform will not be providing any type of delivery service so far. But the sellers will have a virtual store-front and later customers will be able to order in WhatsApp, Messenger, and Instagram Direct. Good timing though: when the niche struggled with the impact of coronavirus, Facebook took action. Though small brands were already selling their products through Facebook and Instagram, now this opportunity becomes more convenient with potential relevance for big brands. And who can say it can’t become a real competitor to Amazon?
Why should brands stay focused on both D2C sales & working with retailers?
Though cutting costs on middlemen sounds appealing, do not forget that it is now your full responsibility as a D2C brand to arrange a successful delivery process. And it’s not just about delivery. Modern-day customers are not willing to compromise, and an inexperienced DTC brand may face the challenge of product returns. To prevent a problem, check out an explicit e-book on How to Reduce Returns in Ecommerce.
According to Diffusion, just 9% of the US shoppers say customer service from D2C brands is better than that of traditional brands, and 7% think their returns process is easier.
To draw your customers from being an Amazon devotee is not a piece of cake, and even not the cookie crumbs. As a direct to consumer brand you should ask yourself a question (few, indeed):
- Would you be ready to efficiently organize delivery processes without middlemen? Would you have a stable revenue inflow to get enough resources for arranging deliveries yourself? Moneywise and staff-wise.
- Are you ready to keep track of the right amount of product supplies to avoid out-of-stocks?
- Do you have a proper storage place? Depending on which industry you operate in, that can include the brainer of keeping the right temperature, humidity levels, finding a safe and reliable storage company, arranging transportation of goods from the manufacturing site to the storage, and so on.
- Would you be able to guarantee the quality of the product and the quality of how it is delivered? Badly shipped product will instantly turn off your buyer base.
- What about the quality of UX? Poor customer experience will sink brand equity faster than Covid-19 restrictions do. This is the thing that you should evolve on. And this is an experience that couldn’t be provided on Amazon or other soulless ecommerce giants. Look, there are D2C brands that grow into multi-million dollar companies just by evolving on their relationship with customers.
If you still doubt and hesitate to say “Yes” to each question, do not hurry. Consider deploying both third-party retailers and marketplaces. No ecommerce company stretches higher than Amazon, at least for now. A D2C company can integrate the marketplace into its growth strategy. Stay focused on both D2C sales & working with retailers, until you have solid “Yeses” to each question.
Direct to consumer marketing tips
Let them subscribe.
Subscription base D2C will guarantee customers staying with a brand for a specific period of time. This, if a product is good though, eventually develops a habit and a sense of “it’s already a part of my routine and it would be harder to compromise on comfort of having the product/service in my life”.
Let your business philosophy be your “Northern star”
What differentiates DTC ecommerce from a traditional one? Direct to consumer brands have its own story, and it usually tickles some global issue (reducing plastic usage, cutting food waste, fighting for saving Amazon forests by donating part of the revenue to charity orgs, etc.) or just an everyday problem (producing cosmetics that fit all types and colors of skin, or house supplies that frees some time for desperate housewives and makes their routine a bit easier). Point out this message (a mission statement and a brand voice) and let it be your guiding Northern star through all D2C marketing activities. These direct to consumer brands managed to build a DTC strategy around philosophies, that appeal to a modern buyer.
Develop a mobile app
Integrating mobile apps into your direct to consumer business model allows retrieving the first-hand valuable data. That could be customers’ insights on a product, their response to discounts and special offers, etc. It could be any kind of application, that would make the customer journey easier and more fun: virtual try-on, mobile app for checking eyesight, or even being listed in an external application (Kannaway, a leading CBD company managed to get integrated to electronic health record (EHR) system and draw new clientele from there). Besides, you’ll be able to save search, order, or any other history to tailor personalized service and get your customer’s attention with push notifications. From anywhere.
Let’s take a look at a practical case of Futurum, an online store for equipment, apparel, and nutrition for cyclists and mountain bikers. In 2019 the number of mobile visitors at Futurumshop.nl store increased to 60%. The company focused on providing mobile shoppers with excellent experience and personalization to increase the number of loyal customers. As a part of the customers’ loyalty strategy, the mobile app was to deliver every customer their own version of Futurumshop. The company integrated the push messages to share personalized information on interesting products, new launches, and news. Integrated wisely, push messages are still an effective marketing strategy that helps to retarget customers back to the store, again and again. Read more on how Bintime helped Futurumshop develop a mobile app in a case study.
Offer stress-free and no-fees returns
15% percent of shoppers (global average) claim if they have a negative experience with the returns process, they wouldn’t shop with that retailer again. Omnichannel ecommerce company Radial found that 51% of US digital buyers said they avoid purchasing goods from online retailers that do not offer free returns. Сonsider simplifying the process of online returns to see a customer again. Return deliveries are quite an issue. As a seller, you’ll inevitably face it. Returns will cost $550 billion by the end of 2020, which is 75.2% more than 4 years ago. But retailers and brands can minimize these numbers: read our Ebook on How to Reduce Returns in Ecommerce.
Invest in product information
Since all middlemen and marketplaces, which helped deliver to customers product information (Amazon or eBay, for example, automatically uploads all product information on a product if it has it already in its catalog), it is now the manufacturer's responsibility to organize product information efficiently on a DTC ecommerce website. Learn how to create selling images for your ecommerce website and how to write product descriptions. Tip: You can also place the pictures of your products on free-stock pictures websites (Unsplash, Pixabay): a working way to go viral.
Make use of famous influencers
Social proof couldn’t be underestimated. People do listen to their icons. But even if you don’t have enough budget for celebs, that’s no problem. Start from the micro-influencers in your niche. Whichever you’ll choose, learn the DTC strategies examples of companies that do more than well now.
Glossier Inc. started with a basic beauty routine tips blog by a 29 y.o. New Yorker, who later found a multimillion-dollar direct to consumer company. What’s the trick behind it?
Use SEO and direct to consumer advertising
Outline a great SEO strategy, create separate landing pages for your products, and do not forget about Facebook Ads. Facebook ads have exquisitely specific targeting and retargeting algorithms. This is a perfect D2C digital marketing strategy, which is more of a necessity, than an option.
Do loyalty programs
Treat your shoppers right: create the rewards systems, do discounts, issue loyalty cards with the name tags, do giveaways.
Direct to consumer companies should make an accent on education, transparency and the quality of product data, and easy access to information. And a story, the “we feel you” and “we are here to make life easier for you” mode and real value. Direct to consumer strategy allows brands to get full control over the user experience, and customer contact information: and use it to gain return customers and get some loyal ones, and grow a community that shares the same vision. Well, I’m sorry to tell you, but a quality super awesome product is not a guarantee for effective direct to consumer sales. Do not forget to:
- Experiment with D2C marketing and with technologies like D2C mobile apps that give them easy access to all the product information.
- Cut a distance between a brand and a customer by rewarding shoppers with loyalty programs and giving them the ability to share their own creativity.
- Make sure your product is understood correctly.
- Invest time and efforts to create proper product detail pages, toss every type of relevant information which will make it easier to make a buying decision. And in case there's a need to transfer it between the systems that demand different data formats — to consider automating product content delivery.
- After all, content is a king, as they say (who are they? The big successful ecommerce brands). And do not forget to learn Examples of Successful Strategies by Popular Brands. The winner learns from the winners.