Direct to Consumer: the next frontier?
Direct to Consumer (D2C) has been a hotly-debated topic in the e-commerce industry for the past few years. And with the world having undergone massive changes in response to the Covid-19 pandemic, more and more D2C brands seem to have emerged – while many established brands have turned to D2C strategies to survive.
Brands that take a D2C approach for a product or line of products need to be able to deliver a flawless customer experience
With the ability to bypass traditional methods of selling goods by removing the middlemen, D2C brands are able to price their products more competitively. And with direct contact with consumers, they have more control over their brand image, reputation, associations and marketing techniques.
However, the D2C business model isn’t all fun and games. By removing wholesalers, distributors and retailers, D2C brands take on much more responsibility for things including logistics and cybersecurity – and they haven’t all been adequately prepared.
So, what does this growing trend mean for third-party middlemen? And how can established brands take advantage of D2C strategies without changing their entire business model? Let’s dive in.
What is D2C, and how will it impact third-party retailers?
While the D2C business model may seem fresh and cutting-edge, in many ways it’s a fairly old-fashioned approach to selling goods. Think back to the days when people were relatively immobile and lived in small towns – most ventured barely more than a few miles from where they were born. Thus, suppliers generally sold their goods directly to customers – think farmers, bakers or dressmakers.
However, with the emergence of modern transportation and technology, this original D2C approach to business quickly went out of style. Why buy from your local farmer when you can get better quality, less expensive grain shipped in from a farm out west?
With these changes came wholesalers, distributors and retailers, who each played an important role in the supply chain. First, we have wholesalers, who are manufacturers that sell their products to retailers in bulk.
Then we have distributors, who are in charge of most of the supply chain – from packaging and mailing goods to managing inventory and logistics. Finally, there are retailers, who are tasked with selling the products directly to consumers.
In a D2C model, you strip it back to the basics: a manufacturer who sells their goods directly to consumers and takes on all of the roles and responsibilities previously allotted to the middlemen.
While the D2C approach allows for greater control and considerably higher profits, it also puts more responsibility on the brand itself. Important tasks that used to be outsourced to third parties are now on their own to-do list. And if they mess up a vital step – such as inventory or website security – there’s no one else to take the fall.
However, this risk hasn’t stopped D2C brands from popping up left and right. Some of the most well-known examples are big names such as Dollar Shave Club, Casper and BarkBox, which have each carved out their niche and found lasting success.
So what does this growing trend mean for third-party middlemen? For many businesses, it might signal the end. Should D2C continue its growth and domination of online retail, third-party retailers who aren’t willing to adapt will be left behind.
For example, instead of only buying in bulk from wholesalers, retailers could charge a fee for local D2C brands to use their physical stores as brick-and-mortar pop-ups. At the end of the day, if they’re going to survive, third-party retailers will have to find creative ways to work with D2C brands instead of against them.
Established brands can try a hybrid D2C model
Instead of going full D2C, established brands can consider instituting a hybrid model using certain D2C strategies to expand their business and reach new customers. With a hybrid model, brands can maintain profitable partnerships while they also choose a product to sell directly to consumers.
However, before trying out a hybrid strategy, brands need to make sure they’re ready and ask questions like: are we prepared to take full ownership of the supply chain for this particular product?
Furthermore, brands can’t just choose any product. They need to identify a product that meets consumers’ needs and simplifies choice – and, most importantly, they have to make it more affordable than the competition.
Additionally, brands that take a D2C approach for a product or line of products need to be able to deliver a flawless customer experience. From the moment a consumer sees their ad to the delivery of their 100th subscription box, brands need to possess a deep understanding of consumers’ needs and desires to pull it off.
Thankfully, there are solutions that brands can use to gather the consumer data they need to create a successful D2C experience: advanced brand tracking software like Latana. With the ability to choose your exact target audiences and specify customized KPIs, brand tracking software makes it possible to build intelligent, well-developed D2C strategies.