The direct-to-consumer model (D2C) is accelerating in the commerce space and it’s quickly becoming a popular way for new brands (or existing manufacturers) to enter markets directly, but, the big difference…they cut out the need for and the reliance on a middleman.
Without a middleman, D2C brands take care of the manufacturing, marketing, and the distribution of their own products. That means they accelerate their product to market and more impressively, keep complete control over how a customer buys from them.
A big win for customers? D2C brands can give people the authentic brand experiences they crave. And, that word ‘authenticity‘, is rated as a pretty important buying factor by 86% of people surveyed.
Over the last year, a third of consumers report that they have bought directly from a D2C brand as it becomes increasingly easier for companies to connect directly with their customers (thanks World Wide Web).
Not surprisingly, it’s millennials that are at the forefront of driving this change with their buying preferences geared towards convenience, low cost, transparency, and more streamlined purchasing experiences. Several of characteristics that come with the D2C model.
So, let’s take a closer look at the D2C model, why it works so well, and some D2C brand examples conquering international markets.
What does D2C mean?
D2C or direct-to-consumer is a term used to describe brands or manufacturers that sell directly to the consumer. It’s a pretty self-explanatory term.
Essentially, the brand produces and distributes the product through its own channels, bypassing the traditional form of needing a retailer or reseller to handle the distribution. D2C brands sell via their online store, social media or even a dedicated brick and mortar retail store.
An example of a D2C brand is Jimmy Fairly which designs, manufactures and sells its own eyewear collections online and through their small number of retail stores. As quoted on their own website “We can skip the middlemen, offering you the best quality products, at a fair price. Directly from us to you.”
But hang on a minute…you might be asking yourself what’s the difference between D2C and DNVB? Well, the answer is not a huge amount. A D2C brand goes directly to the consumer either online or offline, whereas a DNVB is a subset of a D2C brand – it will always start online, however as it grows this can lead to offline activities too. The similarity lies within the distribution model, in that both go directly to the consumer.
But it’s not just small new brands that can be classed as a D2C, even big brands can be D2Cs.
Essentially, and here’s where creating one too many abbreviated business models can start to get really confusing…DNVBs will always be D2C’s but, D2Cs can’t all be DNVBs. We suggest you read the article linked above to see just how many categories there are within the D2C model!
Why does D2C work?
Ease, better price point, that authenticity we mentioned earlier…
88% of consumers prefer to buy directly from the brand if given the option which shows a real shift in consumer behavior and exactly why D2C is gaining momentum.
We touched on it early, but it’s millennials that are driving this form of business model. D2C brands typically appeal to this demographic and as millennials are expected to spend $1.4 trillion this year (making them the highest spending generation in 2020), business owners have every reason to look more closely at the D2C model.
Typically D2C brands are environmentally conscious, authentic, socially responsible and offer a seamless buying experience which are all aspects millennials look for when choosing to spend their money.
Interestingly, nearly 70% of millennials take into consideration the company values before making a purchase and online ads, Instagram, influencers, and so on have a huge impact on their purchasing decisions.
This all matches up nicely with D2C brands as social media plays a large role in the overall strategy of getting their products to consumers. Most successful D2C brands know how to target their audience on this medium – hashtags, video content, and Instagram all play a big role.
Simply, D2C brands ‘get’ this type of marketing and brand voice much better than traditional retailers.
What are the benefits of a D2C business model?
#1 Cutting out the middleman means bigger profits
Naturally, selling your product(s) to your customer, without the need for a middleman (the retailer) means your profits are your own. You don’t need to cut your margins to sustain a complex network of resellers and removing third party interactions means you’ll make more money.
#2 More control
The traditional retail model takes control away from the manufacturer and gives it solely to the retailers selling the products. However, a D2C model allows the brand to take back this control, putting them in direct contact with their customer.
This means you manage how your customer interacts with your brand and handle every aspect of the customer experience. It allows you to meet the needs of your target consumer, influence how they interact with you, and most importantly builds a relationship.
#3 Access to data
With a D2C model, you’re interacting with your consumers. This means you’ll have access to the enormous amounts of data that you can gather from the people that purchased your products, including buying trends, demographics etc.
This of course helps you provide a more unified marketing experience and allows you to develop or improve your products based on personalization and create better buyer personas.
#4 Sell to anyone, anywhere
Using a retailer to distribute your products means you’re defined by the countries they ship and sell to. Following the D2C model literally means customers can shop from your brand in any location you ship your products to – especially if you translate your website.
It means you have the tools to dominate digital and physical retail environments based on your business plan.
What are the challenges of a D2C business model?
Of course, not everything is paved with gold – there are also a few challenges associated with the D2C model that requires some thought.
#1 Competing with retailers
The biggest challenge is that you’ll have to compete with retailers who were once your friend but now firmly your competition. Retailers have experience in selling to consumers and are already established and trusted.
As a new brand, it can be difficult to establish yourself as a trusted and reputable company without the backing of a retailer doing the selling for you.
#2 Order fulfillment
Shipping your products can be quite problematic for newly formed D2C brands. That’s because you’re competing with bigger retailers that offer the expected “free next day delivery” and “free returns” model that not all D2C companies can offer (afford) from the beginning.
It’s also another complicated process in itself handling the shipping and stock management of your products.
#3 Marketing and customer service
You’re on your own – so that means you’ll need your own marketing strategy, ad budget, and in-house customer service team. Whilst a small D2C brand can handle several roles at once, to really see growth it often means you’ll need to spend budget hiring.
The limits of relying on the middleman mean there’s room for exponential growth for D2C brands. Increased margins also mean there’s a budget for setting your sights on going international.
Let’s take a look at a few D2C brands going multilingual and giving an even more personalized experience with a fully translated store.
We mentioned them earlier but this French eyewear brand, Jimmy Fairly, has changed the way people buy glasses. Traditionally buying glasses was expensive and let’s face it, an unsexy experience thanks to opticians.
But Jimmy Fairly turned the old business model upside down with an affordable, design-centric concept that puts the ease of buying first. Not to mention branding that appeals predominantly to millennials. With a cult following in France – it’s only a matter of time before Jimmy Fairly becomes a household name and the norm for purchasing glasses.
With retail units, social media and an online store – Jimmy Fairly has now brought their eyewear model to Europe. Since adding 4 languages to their online store, their international turnover has increased x10.
As an industry worth $532 billion and counting, beauty is a fierce space to compete in. But natural products, personalized experiences, and vegan philosophies mean the brands that once dominated are having to make room for new innovative beauty companies.
One such D2C brand, gitti, is taking on nail varnish. This usually toxic substance has been given a huge facelift, with 77% natural ingredients and a plant-based formula, their tagline ‘conscious beauty’ couldn’t be more true.
It’s early days for this German beauty company – but given they’ve added French and English to their website and mentioned in Vogue, Glamour and Grazia – you can’t help but feel big things are coming their way.
A skincare brand doing things differently, with a tailor-made skincare range, a monthly subscription model, and a skincare expert to follow your journey…Seasonly just about ticks every box when it comes to personalization.
Using ‘normal’ models and ending the buzzword associated with ‘clean’ beauty – this skincare D2C has a big social media presence.
Taking things one step at a time – Seasonly has added English to their originally French website to start their journey into cross-border ecommerce.
The future of D2C
It’s not hard to see how the D2C business model is advantageous for brand owners. Full control over your manufacturing, distribution, and direct contact with your end consumer means businesses get full control.
It’s also a sign of the times with a pandemic changing consumer buying behavior now more than ever – more manufacturers will likely turn to D2C ecommerce to sell directly to their customers.
There’s work to be done that’s for sure. From your own distribution channels to putting in the effort to build your social media channels – but it can undoubtedly be highly successful.