The retail industry has undergone substantial change in recent years. Ten years ago, commerce was very different from what it is today. You definitely noticed that many brands have been shifting their business strategies and are switching to a direct-to-consumer sales from the standard retail sales model (DTC or D2C).
A direct-to-consumer (D2C) e-commerce approach allows manufacturers to completely control the development, promotion, and sale of their products via digital channels to consumers. The D2C model eliminates the middlemen in comparison to traditional retail, which depends on distributors and wholesalers, giving producers more control over their brands.
Let’s take a closer look at some of the advantages of starting a DTC brand:
What is a DTC Business Model?
Direct-to-consumer, or DTC, is a business model where you sell directly to the end users. The strategy is that you remove the intermediaries and lay emphasis on completely owning the process yourself.
This removes wholesalers and retailers, thereby bringing down costs and maximizing gross margin. DTC marketing is aimed at targeting messages specifically to people who are most likely to buy the product. One of the biggest advantages of this model is competitive pricing. You aren’t necessarily competing with big brands with the added baggage of your product going from manufacturing to wholesale to retail.
Over the last few years, the DTC trend has seen huge growth because it allows merchants/manufacturers to have complete control over their business operations, including:
Let’s take a glance at some of these advantages of going DTC in detail:
A direct-to-consumer brand gives you complete control over your product’s message. By starting a direct-to-consumer business, you get to decide what products you want to sell, how much you want to charge, and where you want to sell them. There are no middlemen telling you what to do. If you build your own brand, you’ll have full creative control over your company’s image and messaging.
In marketing, customer lifetime value is the measure of total revenue a business can generate from a customer during the entire period he/she remains a customer.
If you run a traditional retail business model, there will be a lot of intermediaries and it’s bound to bring down your margins. This brings down your overall CLV. For example, imagine you are running a business where you sell wallets using the traditional retailer model. In this case, you will have to sell it at a low price so that the intermediaries can make it up and resell them again. However, in a DTC model, you sell the product directly to the customer, thereby giving you the biggest margin.
One of the biggest disadvantages of selling on a marketplace, like Amazon, for example, is that it doesn’t offer much scope for establishing or growing your brand identity. Neither do you have much control over your brand messaging. Selling direct-to-consumer ensures that you don’t let a slip in standards, allows you to consistently maintain the quality of your product and you can make sure it reaches the target audience in the way you want it to reach.
Since there are no middlemen involved and you sell first-hand on your own website, you have greater control over your brand messaging and imagery. It makes your messaging much more effective.
In a DTC business, you have the complete freedom to set your prices however you want. You know exactly how much you’re going to charge for your products, so you won’t have to deal with price negotiations. And since you’re the only retailer in the market, you can set the right price you want. This, again gives you control over the overall business process and removes constraints that lower your margins.
Everyone loves personalization. Customers find the shopping experience much more exciting when a brand directly interacts with them. This ranges from an order confirmation mail to a quick customer support reach-out mail and everything in between – customers love it when you establish a personal connection.
Satisfied, happy customers eventually go on to become your brand advocates and there’s no better marketing than word-of-mouth. They enjoy shopping with pioneers of the product and connecting with someone who knows it remarkably well.
So far, we’ve discussed about the biggest advantages of going DTC. From building your own brand to personalized customer service to enhancing brand messaging, it offers numerous pros. However, a DTC model may not be for everyone and it’s important to look before you leap. Analyze your existing business model, operations and marketing activities. Then make sure if you have the right skills, resources and strategy to shift to a DTC model.
Ultimately, your business goals, product, market fit and resources determine your scope to shift to a DTC model. Take into account your current strategy and make a detailed plan if you’re planning to take a leap.
Do you feel confused with DTC marketing activities and scaling your online store? Get a free audit & consultation here. (Yes, it’s really free).
we love working alongside ambitious brands and people