D2C or Direct-to-Consumer is an eCommerce strategy that allows brands or manufacturers to sell directly to the consumers with no middlemen. In other words, it shortens the supply chain by eliminating the middle segments, such as retailers, and introduces the products straight away in the market — that is, approaching the consumers directly.
Perhaps D2C is not a new trend. Rather, it has existed since the time when farmers, potters, jewelers, and other businesses sold their products directly to the consumers. Once new modes of transportation came into our lives, businesses started expanding, aiming to reach a more geographically spread-out clientele. Gradually, a simple model turned into a completely new business in which the supply chain played a crucial role.
Only in the 1990s, the era in which the dot-com was ushering, D2C got highlighted as a modern business and marketing trend. This term referred to online retailers who sold products to their online consumers. However, as time passed, brands and manufacturers started employing various channels to reach their customers, sky-rocketing the age-old model as a revolutionary model in the eCommerce market.
This model is advantageous for many reasons that we will discuss in detail in this article. Its sustainability can be judged considering the history of this model. What we see today is simply an evolution.
In addition, the pandemic has further strengthened the roots of the D2C approach, as many manufacturers look for ways to cut down the prices involved in selling their products, and consumers expect more transparency and quicker services from their product providers. In 2021, the estimated growth of the D2C market is around 19.2%.
That’s not all. According to the Direct-to-Consumer Purchase Intent Index, we should expect that more than 80% of end consumers will make at least one purchase through a D2C brand within the next 5 years. With such impressive stats, D2C undeniably is one way to go in the coming years. If you too want to explore the D2C avenue, you are in the right place to get started with D2C this year.
Traditional vs. D2C: Difference in Approach
Traditional selling usually refers to a complete supply chain, which involves the manufacturer, wholesaler, distributor, retailer, and then finally the consumer. This is a B2B+B2C selling model, where one business sells to another business until the last element in the chain sells the product to the consumer. With so many players involved in the delivery of the products from the manufacturer to the consumer, it is the price of the product that bears the direct impact. That is why buying products from wholesalers is comparatively cheaper than buying them from a retailer.
D2C cuts to the chase. The middlemen are replaced by marketing and advertising. That means, manufacturers advertise and market their products via channels that connect them directly to the consumers. As a result, customers get to know about the products directly from the original company that designed and manufactured them, allowing buyers to build a relationship with the brand and purchase the product at no added costs.
The marketing approach of both models differs at multiple levels. For instance, the brands that follow the traditional route have to focus on building their relationships with other elements in the supply chain, while also nurturing their relationships with consumers, as well. Their marketing and pricing strategies involve targeting both segments.
However, the D2C model follows a very simple marketing approach where businesses have full control over their product, its branding, pricing, and delivery to the end-user.
Now comes a key question: How and why does D2C work?
Well, aside from gaining full control over the products and pricing, D2C also lends authenticity to the brands, creating brand value among the customers. Stats tell us that 88% of the consumers prefer to buy from manufacturers if they are given the option. This certainly is a major shift in consumer behavior, which gives a solid justification to why D2C is gaining popularity. A significant customer base comprises millennials, who are expected to spend around $1.4 trillion. D2C is therefore emerging as one of the most favored purchasing preferences among a younger audience.
Another interesting factor that contributes to the growth of the D2C market is that more and more customers now consider the company’s values as one of their deciding factors when they select a brand to purchase from. D2C brands are extremely typical for the factors that govern the environment and social consciousness of their products, thus appealing more to the customers.
The Benefits of Direct to Consumer
The D2C model is economical not only for customers, but also for manufacturers. Just imagine yourself wearing the manufacturer’s shoe in the wholesale supply model. You will first have to connect with wholesalers, advertise and convince them to become part of the supply chain, create agreements, discuss the cut-percentage they would take and then also invest in researching the right distributing partner for you. All of this is going to cost you money. Obviously, this will cause your profits to go down.
With D2C, your investment is focused on finding the right channels to advertise and sell the products. That’s it. No extra cost is needed to add supply-chain partners. Thus, larger profit margins.
More Control and Freedom
With D2C, you are in total control of your product and have the freedom to opt for omnichannel selling. While in the traditional model brands lose control once the products hit the shelves, D2C allows brands to have total ownership over their brand, starting from the initial engagement right up until the product has been sold to the customer.
As far as omnichannel selling is concerned, according to a report by Moffett Nathanson, around 5% of consumers make purchases via a voice assistant device. This number is expected to grow to 50 percent in 2022, which is just one of the several innovative selling channels of the present times.
Access to Critical Data
This is crucial, especially at a time in the market when data is everything. Brands not receiving first-hand data of their customers is one of the major drawbacks of the traditional model. These companies need to put in extra resources to find out the expectations of their customers, which, when provided by third-parties, may not always be accurate.
D2C allows businesses to capture the crucial data that can help them in elevating the customer experience, improving customer service, and modifying their products as needed. In short, the D2C model gives access to opportunities and highlights areas needing improvement.