D2C Business Model: Learn from Top Performing Businesses

direct to consumer marketing
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Considering Implementing D2C business model? Let’s have a look at trends of the current D2C market first. Companies like PepsiCo are already capitalizing on a 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 direct-to-consumer retail a massive kickstart. Let’s dig into the details of direct-to-consumer sales and marketing.

What is the D2C Business Model?

The term DTC or D2C (direct to consumer) first made its appearance among 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. 

How to Build a D2C Business?

Building a D2C business is a time-consuming process that requires reviewing your relationships with customers and includes many evaluation processes.

Here are some of the basic steps of building a D2C shop:

1. Reevaluate your customer relationships. Your direct-to-consumer strategy should involve building strong and transparent relationships with your clients. Define their goals and needs and map their customer journey. 

2. Build your performance marketing plan. Your D2C strategy should be aligned with your website. You’ll have to think through ideas of how to grow customer lifetime value, decrease buyers acquisition costs, and use the best working marketing strategies of D2C brands. 

3. Think about customer service integration. The customer support team is a core of a successful D2C business, as they will work directly with your clients and ensure customer satisfaction. You’ll have to plan the special training for this team, supply them with professional marketing tools and facilitate their work, so they could guarantee your customers a personalized customer experience and support. 

4. Notify stakeholders and organize your teams. Traditional top-down hierarchy does not work for D2C companies. You will have to organize cross-functional teams and make sure their work and communication are effective. Your team members should get organized around your set of direct-to-consumer goals. 

5. Analyze your customer experience and find the business partners. You’ll need team members who will be working on website operations and evaluate the customer experience. It’s also crucial to choose the right digital partners who can take care of your website, customer service, and, especially, product information management, as you will be facing the challenges of controlling massive amounts of data.

Gepard PIM solution can help you with this task and take care of your data-related processes while you can focus on more creative tasks and D2C strategies

Benefits of D2C Strategies

Why is direct-to-consumer marketing so attractive? DTC's (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. 

Let’s look at the main benefits of D2C companies.

1. 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 their 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.

2. Personalizing customer experience. On D2C buyer's journey, direct-to-consumer eCommerce brands are 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. 

3. 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.

4. Saving the budget. Essentially, cutting any type of middlemen from your eCommerce business model means cutting the costs of sustaining their services. 

5. 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. 

 D2C Trends in eCommerce 

1. 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.

2. Taking advantage of the mass popularity of eBay and Amazon.

Brands that sell their product at marketplaces benefit from their promising customer base and convenient delivery services. The pioneer in the 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.

3. 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. 

4. Building successful partnerships.

Some do partnerships with similar companies: from simple giveaways to arranging the common delivery routes or pickup points. What does it look like? Cooperate and make that sandwich work. Here’s an example. Leesa, an eCommerce D2C mattress company, partnered with direct to consumer furniture retailer West Elm to showcase its products across West Elm’s brick and mortar stores. Now the customers can easily find and try out and choose their perfect mattress. 

5. 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. 

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. 

Although small brands were already selling their products on Facebook and Instagram, now this opportunity becomes more convenient with potential relevance for big brands. 

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. Moreover, 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.

If you are one of the direct to consumer brands, ask yourself the following questions:

1. 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. 

2. Are you ready to keep track of the right amount of product supplies to avoid out-of-stocks?

3. 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. 

4. Would you be able to guarantee the quality of the product and the quality of how it is delivered? Badly shipped products will instantly turn off your buyer base. 

5. 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 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

1. 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”.

2. Let your business philosophy be your “Northern star”.

What differentiates DTC eCommerce from a traditional one? Direct to consumer brands have their 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 organizations, 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. 

3. Develop a mobile app.

Integrating mobile apps into your direct-to-consumer business model allows retrieving 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. Read more on how Bintime helped Futurumshop develop a mobile app in a case study.

4. 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.

5. Invest in the 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. 

6. 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 with the micro-influencers in your niche. Whichever you’ll choose, learn the DTC strategies examples of companies that do more than well now.

7. Start blogging.

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? 

8. 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. 

Direct to Consumer FAQ

Let’s find the answers to the most frequently asked questions about the D2C business model.

What is D2C Strategy?

D2C (direct to consumer) strategy is a business strategy where brands and manufacturers sell directly to their buyers, without the intermediaries such as wholesalers, retailers, etc. In this case, the whole process, from producing goods to their distribution is fully under the control of D2C companies

You can get a comprehensive understanding of direct-to-consumer strategy, marketing, its benefits, and best cases in our article about D2C strategy

What Are Some Examples of Fashion D2C Brands?

Basically, fashion D2C shops stood at the origins of direct-to-consumer sales. Here are some of the popular apparel D2C brands: Warby Parker, Reformation, Everlane, Isaia, Allbirds, Bombas, Paloma Wool, Genuine People, Aurate New York. 

Fashion brands tend to choose direct-to-consumer business models, and if you decide to open a D2C shop, it’s useful to learn from their experience. In our D2C strategy article, we demonstrated the real-life business cases of D2C apparel brands. 

Are There Any Successful D2C Startups?

Casper, BarkBox, Dollar Shave Club, Beauty Pie, Native startups turned into successful business ventures, thanks to efficient marketing strategies that cut out the middlemen and allowed brands to fully control their customer data.

Here you can read more about prospering DTC brands in different industries and learn how they mastered this business model.  

Is DTC Brand Profitable?

Covid-19 brought changes into the life of many direct-to-consumer companies. With the start of the pandemic, when many brick-and-mortar shops were shut down, and buyers had to shop online, many D2C eCommerce stores had a sales boom.

Meanwhile, it is more challenging to make a profit on a normal basis. Acquiring customers online is costly, so direct-to-consumer stores have to invest a lot of money into their marketing. However, with the well-thought D2C business strategy, the companies can raise brand visibility and build lifelong loyalty among their clients. 

Gepard: Your Next Step to a Successful D2C Marketing

A skillfully implemented D2C business model enables you to fully control your customer shopping experience, buyers' contacts, and all the information related to your direct-to-consumer sales

None of these can be managed without an efficient product information management system. With its easy-to-navigate interface, full functionality, intelligent techniques, and constant support, Gepard will help you flawlessly manage and automate your data-related processes.

Entrust your product data to enthusiastic professionals - book your free personalized demo now. 

direct to consumer strategy
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