Synopsis: Today, business is different. It’s about production and distribution as well. In this context, a new kind of company is emerging, with brands that produce, pack, distribute and ship their products, be it wine, clothes, consumables, and more.

All these, without sharing their margin. It is the core of direct-to-consumer e-commerce. Direct to consumer business model has its pros and knowing how it works along with some challenges and tips to start can help a lot.

D2C is a company that manufactures a given product in its facility and distributes it within its channels. These channels could be one or more from an e-commerce platform, a social media channel or a retail store.

It allows enterprises to connect with customers individually and directly, reach out globally, offer customized products and build a profitable revenue stream. It can work for any industry.

What is D2C business?

Knowing the difference between D2C and B2C (Business–to–Consumer) retailing can serve as a guide to understanding the D2C business model in a better way.  

1) D2C 

• D2C is a business model where product manufacturers or service providers sell and ship their products or services directly to the end consumer without any mediators.
• D2C brands sell their products directly to consumers through self-owned sales channels, such as online stores, outlets, or showrooms.
• Earlier, D2C was known for high-value, luxurious items like automobiles, fashion, footwear and jewelry brands. D2C companies sold their products directly to their customers through their brand outlets or showrooms.
• Things have changed, and individual products such as smartphones, laptops, wearables, electronic items, cosmetics and consumables are available on a manufacturer’s website.

2) B2C

• B2C is also a successful business model. It is a sales model where companies sell products to consumers through any channel.
• B2C usually depends on a retailer coming in between a manufacturer and customers. In the standard B2C model, intermediaries typically sell products from multiple manufacturers.
• B2C is where any business that sells products to end-users. It does not matter whether the organization itself manufactures the product or buys and resells it.

 An important thing to note between D2C and B2C is that all D2C models are B2C, but not all B2C is D2C. And, D2C business models are a part of the B2C model.

Challenges associated with D2C e-commerce

Direct-to-consumer brands are often viewed as online businesses because they access the market without intermediaries. People now shop online regularly, giving providers strong reason to focus their efforts on digital commerce for the greatest impact. However, handling D2C business requires more effort, and challenges such as the following: 

• Change in customer habits: Nowadays, customers shop from multiple platforms including websites, apps, social media, etc. It can be difficult for D2C brands if they are not prepared to consistently adapt to the consumers’ ever-changing behavior.

• Competition with other retailers: One of the biggest challenges for D2C brands is competition with retailers. These retailers have experience in product sales and understand what the market needs.

• Advertising, marketing, and development: Today, running marketing campaigns are quite expensive. In addition, new teams may need to be hired to handle social media and content marketing, for which new D2C brands may not have enough budget.

• Order fulfillment: ​​Several new D2C brands often struggle with order fulfillment. It is because these brands need to ship their products, and also need to compete with market leaders like Amazon and others for quick delivery.

• Technical infrastructure: For the proper execution of a D2C strategy, companies need to have a robust technical infrastructure. It can be daunting for brands that are just starting.

Benefits of D2C e-commerce

According to studies, the size of the D2C market is expected to be around $100 billion by 2025. D2C commerce is growing rapidly and there are valid reasons for this. Some of the key benefits of the D2C business model are:

Building brand visibility

D2C business owners have a dedicated website, an app, and sometimes, even a physical store, where customers can visit and purchase specific products. In this way, a D2C business model gives business owners complete control of the supply chain and allows them to run marketing campaigns and target potential leads that will turn into lifelong customers and generate brand loyalty.

Growth of business operations

Expansion of business operations becomes easier with D2C e-commerce, as business owners can take advantage of the latest technologies to gather customer insights and modify marketing strategies. This approach can improve user experience, invest in product innovation, and provide shorter turnaround times.

Maximum revenue

Directly dealing with customers allows D2C sellers to offer reasonably priced products, as they save on packaging, shipping, and retailers’ commissions. Moderately priced products attract more customers to e-commerce stores and also increase repeat customers. With more users visiting and making purchases on e-commerce websites, brands can increase their revenue and profits.

Better customer engagement

Direct dealing with end-users gives businesses valuable insight into how users interact with their products across multiple channels. With structured and high-volume data at their disposal, D2C brands can improve their conversion and customer retention rates by offering personalized products.

Customer-centric shopping experience

With the D2C business model, manufacturers can offer multiple shopping channels, increase customer touchpoints with an online and physical presence, track consumer behavior, analyze shopping trends, collect direct feedback and offer tailor-made products to end customers. 

Starting a D2C business model

A major shift has taken place in the way customers browse for and discover new products available. The D2C sector has seen a meteoric rise, especially during the COVID-19 epidemic. What you need is: 

A clear business strategy

Develop a strategy to help you gain an understanding of the market and devise methods that work best. Get answers to questions about the information that should be included in your business strategy document. Know about the best tools for your business.

A brand-first approach

Have a clear understanding of the market potential in establishing your brand’s mission. A startup’s online presence is mostly identified by its brand. Populating your platform with comprehensive product descriptions, videos, interesting content and more can boost your brand exposure.

Managing and obtaining CRM data

You need useful information. If you can manage and organize this data properly, you win. It is important to manage and interpret data to identify opportunities to better understand the customer.

Best consumer experience through customer service

Customers must be satisfied through messages and service interactions across all channels to build trust. High-quality content works across websites, social media platforms, email and other ways. FAQs and chatbots help.

Innovation

In today’s digital age, the latest technology is not enough. Modern consumers are better informed. Providing customers with a unique product or a unique platform experience can help.

Analysis, evaluation and implementation

You need a business strategy that includes the right tools. These technologies make it hassle-free to analyze consumer behavior and outcomes. To achieve goals, analyze customer preferences and measure your progress. Invest time, effort and money to go D2C.

Mistakes to avoid in building a D2C brand

Here are some common mistakes companies make when trying to build a D2C brand. Knowing about some of the pitfalls could help your business grow. 

• Not getting the pricing right 

Sell your product at a price that will attract your customer and allow you to make a margin on each sale.

• Not understanding the brand value and failing to articulate it

Focus on making your brand stand out from everyone else, and be prepared to articulate that.

• Focusing only on revenue, not customers 

Repeat customers bring growth no matter what the business. Revenue is important, but getting repeat sales is even more important.

• Creating barriers to change

D2C brands need to be flexible in an ever-changing market. The best approach is to create a financial strategy and constantly monitor when things start to change.

• One-way communication

You need to add interactive elements to your content to show that you care. Users will feel connected by adding surveys or questionnaires to your blog posts.

To conclude

Migrating to a D2C business model is a necessity if businesses want to survive in a highly competitive ecosystem. 

D2C brands are not exclusive niche consumer products or damaged goods anymore. The transparency is increasingly enticing to customers as they look for alternatives to the limitations imposed by traditional retailers.

Now that you know what D2C business is, you can look forward to getting a share of this profitable pie. The right digital platforms and technologies to gain the ability to be more creative and take control of your brand image are essential to further success of ecommerce development.