Direct to consumer (D2C) sales are fast becoming the future of eCommerce. 2020 saw $111.5 billion worth of sales in the United States alone, with future revenues projected to reach $174.98 billion by 2023. And that’s not all: D2C sales are growing three to six times as fast as overall eCommerce sales, with more than 57% of consumer brand manufacturers looking to cash in on the trend.
Disrupting the market with a 16% increase year over year, D2C is an attractive arm of the eCommerce market for both newer and more experienced professionals. However, its unique structure and digitally complex elements often complicate its execution. In order to establish a successful venture, business owners must clearly understand D2C requirements, potential obstacles, and their customers’ intended experience.
This article will reflect on all elements of the direct to consumer sales process, parsing out its unique model, benefits and challenges, and some steps for creating a sustainable business in today’s evolving marketplace.
What is Direct to Consumer?
Direct to consumer business models (also called business to consumer models) are eCommerce structures that allow businesses to ship products directly to their customers. By avoiding suppliers and third-party retail companies, D2C models are more affordable to operate. Not only do they create a wealth of customer feedback to enhance and improve their offerings, but they elevate the meaning of customer experience to a whole new level.
Direct to consumer businesses are noted by six primary characteristics:
- A low barrier-to-entry
- Very financially accessible
- Flexible pricing structures
- Strong focus on customer experiences
- Heavy first-party data and analytics
- Direct shipping (no middlemen)
It’s important to note that D2C businesses can exist both in physical stores and online locations. However, many experts believe that D2C will be almost entirely online within the next couple of decades.
What is The Direct to Consumer Model?
D2C organizations are structured similarly to other vertical business models. Digital or physical storefronts advertise and ship their wares to consumers on an entirely self-sufficient basis. By eliminating expensive wholesalers or retailers from the mix, D2Cs reallocate funds to their fulfillment centers and marketing efforts.
Due to their unconventional formats, D2C businesses reflect flexibility throughout their pricing scales. Many direct to consumer brands offer subscription based or hybrid payment plans that are designed to keep consumers coming back, greatly increasing predictable revenue. Customers may also have the option to adjust or change their pricing models to meet future needs, adding to their loyalty and longevity.
The direct to consumer model naturally puts a heavy emphasis on the customer and their needs. By continuously gathering customer responses and analyzing first party data sources, D2C businesses optimize their products for the end-user. This creates a positive feedback loop that encourages retention, reduces churn, and otherwise increases the business’s profit margin.
Examples of Direct to Consumer Brands
The number of successful D2C businesses are on the rise, and with them competitive brands finding new footholds in the industry. A few of the most popular include:
- Dollar Shave Club: Subscription program that ships grooming and shaving supplies right to the customer’s door.
- Stance: This company creates customized socks, activewear, and underwear.
- Blue Apron: This food and beverage company allows users to order meals and ingredients within insulated boxes.
- Cotopaxi: An outdoor gear business that directly sells unique backpacks, hiking gear, and apparel to adventure-minded consumers.
- Brooklinen: D2C brand specializing in ultra-high-quality bedsheets and comforters.
Why D2C is Successful: What Consumers Love About it
Direct to consumer brands are the customer’s business model of choice, and for good reason. These brands clearly value the customer above all else, reducing overhead costs for buyers by eliminating unnecessary or decentralized middlemen. This was particularly evident during the initial stages of COVID-19, where D2C brands gave consumers the rare gift of choice and expedience all in the same package.
Items that are both ubiquitous and unique are well-liked by customers shopping at D2C outlets. After all, why should consumers settle for over-the-counter socks and razors when they can have high-quality versions shipped directly to their doors? Highly responsive customer service teams ensure that these customers always get what they’re looking for, and quickly.
The D2C model’s greatest achievement stems from the faithfulness and loyalty of its consumers. Simple, easy to understand platforms streamline the buyer’s journey and meet consumer expectations with a myriad of digital touchpoints. Strong marketing campaigns, particularly on social media and email, let customers connect with a like-minded community at no additional cost. For D2C companies, customer experience is everything and its biggest selling point.
Benefits of Selling Direct to Consumer
Moving to a D2C business model can invite a large amount of growth, streamlining your customer’s experiences through first-party data and insights.
Streamline Your Process
Rather than handing customer experiences to third party retailers or distribution centers, D2C models retain full control over their entire shipment process. This streamlined approach reduces overhead, enhances product management efforts, and removes unnecessary third-party hiccups whenever possible.
More First-Party Data
First-party data refers to the information collected by your company via audience interactions. Names, email addresses, and order histories are powerful elements of the D2C strategy, particularly for remarketing and email campaigns.
Ability to Fine-Tune the Customer Experience
Direct to consumer brands always have their finger on the pulse of customer feedback. Reviews, comments, and customer service inquiries can be used to better refine the offered product, and otherwise enhance the customer’s experience.
Challenges of Selling Direct to Consumer
Not all that glitters is gold, and D2C isn’t without its drawbacks. Below are a few primary disadvantages that businesses may notice while moving to a D2C model.
Supply Chain Issues
Direct to consumer logistics can be complicated, no matter how experienced the D2C founder may be. Small batches, order accuracy, and customer communications have a tendency to drop off the map, even if unintentionally.
Obtaining (True) Conversions
D2Cs are familiar with the pattern of customers converting for a free trial, but cancelling their membership or service before the billing period. This prevents a full conversion and lowers customer retention, costing money per lead. For this reason, getting true conversions from your leads can be difficult.
Enlisting the Right Technology from 3PL Providers
True D2C brands need a large amount of information regarding shipping statuses and fulfilled orders. Choosing the right third-party logistics (3PL) partner is increasingly important, helping to avoid customer dissatisfaction and confusion. Using helpful software such as an ERP may help to reduce this issue, although picking the perfect 3PL is still essential to success.
How to Sell Direct to Consumer
Direct to consumer businesses take time to establish, even under the best of circumstances. Follow these tips to transition to a D2C business model as easily as possible:
Focus Product on Customer Pain Points
Understand exactly what’s troubling your customers, both with and without your product. What keeps them from trying what you’re offering? Audience listening and content moderation practices are a must-have for any D2C.
Simplify The Shopping Experience
Design an online shopping experience that exudes nothing but simplicity. Eliminate unnecessary jargon, streamline your UX, and make the checkout process as easy as possible.
Rely on a CRM
Customer relationships are key for selling directly to consumers, which is why CRM programs are vital to any successful organization. Keap, Salesforce, and Pipedrive are all examples of common CRM platforms for D2Cs.
Enlist the help of an ERP
Despite its simplified delivery process, direct to consumer selling is anything but easy to manage as there are a lot of moving parts to consider. Leveraging the capabilities of an ERP software like Xentral is a great way to maximize productivity without sacrificing your workflow. Try Xentral’s ERP software for 14 days, at no cost to you.
Content is easily one of the most important aspects of D2C selling. Since you are ultimately running an eCommerce operation, you will need to leverage platforms that are available to the greatest amount of online users. Rely on constant content production and social media outreach to retain and acquire new customers, staying abreast of changing industry trends.