Direct-to-consumer companies are still very popular. They bypass the retailers and suppliers to sell directly to their customers. This type of access to your audience has many benefits, but also comes with some challenges.

DTC: What You Need to Know about Selling Direct-to-Consumer (+ Who Is Doing It Well)

Before ecommerce, you could only shop for almost everything online. Previously, shopping meant buying multiple types of goods from one place, such as a grocery or traditional retail store.

However, ecommerce has seen a steady increase in global sales over the past 10+ years.

The chart below shows that retail ecommerce sales totaled USD 1.3 trillion worldwide in 2014. In 2014, that figure was $3.35 trillion. Thanks to Covid, it jumped to $4.28 trillion in 2020.

eMarketer projects that ecommerce sales worldwide will reach more than 6 Trillion dollars USD by 2024.

The evolution of ecommerce is continuing to transform the way people shop. More and more brands are now going direct to consumers to help build stronger customer relationships. What does this mean? What are the benefits (and drawbacks) of selling DTC products?

These questions, as well as the benefits and challenges of selling directly to consumers, will be addressed in this blog post. A list of best practices will be shared to help you get started with your DTC strategy.

What is Direct-to-Consumer (DTC, D2C),?

Direct-to-consumer businesses sell their products directly to customers. They do not need third-party wholesalers and retailers. Although DTC is more popular now, it was a significant departure from the traditional model.

Differences between DTC and Wholesalers

It is easiest to explain the differences by describing the product distribution process.

The typical retail model has manufacturers selling their products to wholesalers who then distribute them to retail stores. They work closely with these retailers to ensure that the product is in the correct places. The customer receives the brick-and-mortar shopping experience.

Direct-to-consumer models bypass the retailer and wholesaler to directly connect the manufacturer to the customer. This improves the manufacturers’ feedback loop, and, if done right, can create direct relationships with your biggest supporters.

The best thing about a DTC business model is also its weakest point. Even if you sell DTC, all the steps of the typical retail model must still occur — even without the assistance of a wholesaler or retailer.

Why are brands going direct-to-consumer?

Online shopping is rapidly changing the role of traditional retailers.

Customers are purchasing more products online and going directly to the source. For example, they visit Chanel’s website to learn more about their makeup offerings, rather than walking into the Neiman Marcus department store or other department stores.

Businesses can leverage a direct-to-consumer model to improve their profitability. This allows them to control the entire process from manufacturing through shipping and delivery. DTCs often offer lower pricing due to their higher margins.

It’s not only for well-known brands. Many legacy brands still want to keep up with digitally native vertical brands (DNVBs).

Lawrence Ingrassia, the author of Billion Dollar Brand Club, writes that technology has always lowered barriers to entry in DTC retailing. Entrepreneurs no longer require retail shelf space or an enormous ad budget to compete with corporate giants.

Implementing a DTC model business model has the downside in that the manufacturer must manage all aspects of retail. However, the upside is that customers will be more loyal and retain their business. There will also be more options available for new customers looking for something other than what they are used to.

Three Advantages of DTC

Direct-to-consumer ecommerce sales in 2019 reached $14.28 Billion in the U.S. The eMarketer estimates that this number will reach $17.75 Billion in 2020 and $21.15 Billion in 2021.

Online marketing is a great way to reach your customers and grow your business. There are many other benefits that you should also be aware of.

1. Owning customer data.

Wholesale sales of your products to retailers give you limited feedback about how their customers are purchasing your products. DTC sales allow you to bring this data into your line of sight.

Here are a few examples

• Analytics web that shows how customers interact with your site

• Demographics about who is shopping for your products – and who is buying

Data is power. The more data you have about your customers, you can map their journey and develop new products to satisfy consumer demand. You can also follow trends that are relevant to your shoppers.

2. You have more control over your customer experience

Directly selling to your customer will give you more control over the customer journey and experience. You can create a shopping experience that appeals specifically to your target customer by leveraging all of the data you have from them. Are they looking to shop on Instagram? Do they prefer one-click shopping?

Your marketing strategy will be more targeted and flexible. How do they find products similar to yours? Customers can also reach out to you more easily if they have questions. Great customer service can make the difference between making your customers happy and making them unhappy.

You can improve your customer experience by obtaining more direct feedback from customers. This will allow you to react faster to changes in customer behavior, shopper demand, and trends.

3. Improved relationships with customers

If a brand does not have a direct-to-consumer presence, the retail intermediary acts almost as a barrier between the manufacturer’s customer and the manufacturer. DTC allows you to establish direct relationships with customers.

One, you can collect the email addresses and telephone numbers of shoppers and market directly to them (including via SMS marketing). Social media can be used to increase brand awareness, and community, and encourage user-generated content. Ingrassia states that brands that build a better customer experience, such as seamless returns and ease of purchase, increase their chances of being long-lasting brands. 

2 Challenges to DTC

Direct-to-consumer selling has its challenges. This adds an entirely new set of business processes to an already complex wholesaler-retailer relationship.

DTC brands are expected to be more innovative and creative than any other manufacturer. Web Smith, an ecommerce expert, says that there is no set of rules. DNVB growth should be flexible and adaptable. Brands need to find new opportunities wherever there are none. They have to be open to doing what hasn’t been done before.

1. Management of the business operations.

Removing the middlemen involved in a traditional manufacturer-distributor-retailer relationship is part of the value of selling direct-to-consumer, but it’s also the source of one of the biggest challenges.

Your customer-facing interactions with customers were very limited before DTC. Also, bulk sales were the only way to make money. Selling DTC will allow you to have closer and more personal interactions. Your business will have responsibility for:

• Packaging the product to be delivered to end customers
• Setting up and maintaining an ecommerce shop front, as well as other digital sales channels
• Support and retention of customers, acquisition, and support
• Shipping and processing of orders

2. Tech shortage.

The biggest thing that manufacturers don’t have when selling DTC is technology. They lack the technology that will underpin their ecommerce programs. To provide rich brand experiences to customers, you will need to reconfigure the online presence. It may also require a complete overhaul of your back-office tech stack.

Kobe Digital is a SaaS ecommerce platform that allows you to sell products online. It also lets you run promotions, and discounts, and integrate with other partners to make shipping easy.

Five Examples of DTC Brands

Many direct-to-consumer companies today share a common thread: they claim to solve a long-term problem that people have taken as a given.

Many of these brands Ingrassia described in Billion Dollar Brand Club didn’t have much knowledge about the products they were trying to sell. “But they knew they were being gouged and they figured there had got to be a better method,” he stated. “So, they reset the terms for the competition.”

Let’s look at five DTC innovators that wouldn’t accept “That’s just how it is” as an answer.

1. Burrow.

Burrow offers modern modular furniture that moves and lives the same way as us. The brand was founded by two people who realized there wasn’t a middle ground between “cheap but flimsy” or “heavy and costly”.

They created a modular sofa that is high-quality and easy to move. You can also add or subtract sections to make your living space larger or smaller.

The cost savings are even more: “By delivering our sofa directly to you, all retail markups will be removed and shipping costs will be reduced by over 70%.”

2. Solo Stove.

Solo Stove makes fire pits, camp stoves, and other outdoor products. How can you innovate on a simple fire pit? It burns efficiently without any fuel, and the best part is that their Signature 360-degree Airflow Design ((TM),) leaves “nearly zero smoke and minimal ash to clean.”

3. Glossier.

Glossier is a huge success in the cosmetics industry. The business was started by Emily Weiss, a blogger who shared her love of beauty. This is one of the most magical opportunities in DTC. A traditional business creates a product and then builds an audience. Weiss did the reverse.

She has been able to sell through traditional cosmetics retailers by building deep relationships and a community with her audience.

“Glossier’s success is due to how they leverage Intothegloss.com and the various social media channels to make products for their audiences,” Alison Gaither (an analyst for Mintel’s US Beauty and Personal Care Reports). Glossier is essentially Intotheglossier’s focus audience. They can easily find out what their followers like by asking “What is your favorite scent?”

4. Dollar Shave Club.

The cost of buying razors from the grocery store was quite high. The Dollar Shave Club founders decided to change that. They argued that you don’t need to spend so much to get a “f**king great” blade (co-founder Michael Dubin’s words).

Ingrassia writes that the idea of $1 razors seemed crazy. Unilever spent $ 1 billion — crazy money — to purchase the company in 2016.

5. Casper.

Casper, a mattress-in-a-box company, says they are “setting a new benchmark in sleep innovation,” and have innovative products you can order online to deliver right to your home.

The best thing about this is that you don’t have to go to a traditional furniture store.

8 Tips to Get Started with D2C

It’s not surprising that entrepreneurs and anyone with great product ideas are taking advantage of this opportunity, given the annual increase in DTC sales. It’s not always easy, but it’s easier than ever.

1. Find a solution to a problem

DTC brands saw an opportunity to disrupt what had been a complicated shopping experience. Burrow is the furniture brand that I mentioned earlier. They offer a few basic styles that can easily be reconfigured and configured. You won’t need to buy a brand-new couch when you move into a new room. Plus, there’s less markup.

2. Choose a product that you use every day.

DTC can make a difference between selling a regular product and a novelty item. You can invent or disrupt the buying process, and the need for the product is already established.

Consumer packaged goods (CPG)brands are one of the few that can reap the benefits of adding DTC into their business model. Popularity is growing for packaged snacks, vitamins, and sodas, as well as skincare, soaps, and other beverages.

We spoke earlier about Dollar Shave Club. But they are not the only razor brand that follows a D2C model. Harry’s, and Billie’s are two examples.

• Harry redesigned men’s razors for a cleaner, more functional, and affordable design. Then he turned it into a subscription-based service.

• Billie launched a similar subscription service, but with a product line specifically for women.

These companies made razor shopping easier and cheaper. They also strengthened their brand value by creating strong, effective branding.

3. You can return your purchase with no hassle.

Ecommerce presents a challenge in communicating the product’s value to customers who are unable to touch, feel or see them. Conversion problems can arise, especially in the apparel and home furnishings categories. Customers will be more comfortable buying a mattress without seeing it in person if they have a friendly return policy. Customers will feel confident knowing that they can return the mattress if it is not what they want.

4. Collaborate and learn from influencers.

Influencers are a great way for your brand to be seen by your target audience. If you are just starting in DTC, you may not have an audience. But influencers do. Make sure that the influencer resonates with your target audience.

Jeni’s Splendid Ice Creams just released an ice cream flavor in partnership with Dolly Parton. It sold out within hours. This partnership was also featured on high-trafficked media sites Delish and Thrillist.

5. Your digital property can create an experience.

Many reporters have written about today’s homogenous DTC design today. Your website should offer a unique shopping experience that will make you stand out. Your ideal customer will respond to what you do, but the bottom line remains: You must make an impact.

Natori‘s homepage uses vivid, bright imagery to immerse you in the environment they have created. This, along with thoughtful merchandising throughout the website, makes browsing more enjoyable and rewarding.

6. Use creativity in your marketing channels.

First, you must have a clear and compelling value proposition. Next, tell the story clearly and succinctly across all channels. But creativity doesn’t have to be “not strategic.” Let us take a look at some of the most popular marketing channels and discuss how we can determine their suitability.

• Email marketing: This is non-negotiable. You can leverage this opportunity if your customers are willing to give their email addresses in exchange for content from your brand.

• Content marketing: Customers can benefit from using content to communicate about your brand. This includes SEO, community building, and education. If you sell a product such as skincare or vitamins, it is possible to create educational content that customers can trust so they know your brand truly understands the product.

Social media marketing: While the number of social media platforms is growing every year, you don’t need to be everywhere. Consider two things. What product is most effective for your brand? And where are your ideal customers spending their time? Based on these questions, choose the platform that makes the most sense.

7. Customers should leave reviews.

Marketing messages are not enough to convince people to make big-ticket purchases. Customers trust their friends and family more than they do marketing messages. Reviews can come in a close second. Reviewers want to hear from real people about their experiences with the product to better understand whether it meets their expectations.

You can ask buyers to send pictures and tell you how the product worked for them in certain verticals like homewares, cosmetics, and apparel. This is the type of content that you can add to your website if you use customer feedback. Let’s take an example: Renting black tie gowns is a brilliant idea. However, there are some issues. For instance, the fact that a dress may fit differently in different sizes or the inability to adjust the length. Revelry Invites customers to send photos of themselves wearing their rental pieces. This includes their sizes and how they fit. It’s clever because it’s truly helpful.

8. Create a brand community.

It can be difficult to describe brand communities without sounding too marketing-jargony. These examples should help you get an idea of our direction. Do you know how many Harley Davidson customers wear HD gear? They would never purchase another brand of motorcycle.

This is amazing brand advocacy. But the community goes one step further. These customers have a way for each other to identify and a place to connect. Even Harley Davidson riders can join motorcycle clubs!

Wrapping up

Today, vertically integrated brands are a popular trend in commerce. There are advantages and disadvantages to selling directly to consumers, without having to go through intermediary distributors like wholesalers or retailers.

It’s hard to deny the importance of personal connections with customers and being able to quickly respond to their feedback. It does however require many processes and technology, which are usually handled by retailers and distributors.