Why go direct-to-customer? In 2020, 10 years of e-commerce growth occurred in just 90 days. Consumer behaviour as we know it has shifted for good especially when it comes to the perception of convenience and the experience of shopping online. While shopping on the Internet is no longer such a big leap of faith even for the most senior amongst us, this comes with new expectations in the realms of communication, customer experiences and brand connection.
What we’re experiencing now is a upwards acceleration of trends that existed before the pandemic – industries that did well are doing even better, whilst ones with poor performance, plummeted. Consumer brands equipped with resilient, future-ready business models with their customers at front of mind have pulled further away from their industry peers, and those with legacy business models maybe left in the lurch.
Exploring a mix of business models has emerged, and while many companies are positioned to sell on ever growing marketplace platforms, something about the direct-to-consumer model is taking hold. What’s even more interesting, is that direct-to-customer (DTC) businesses that are hitting maturity at this point, have become some of the fastest growing eCommerce business successes – turning over billions.
Riding the D2C Success Wave
Take Dagne Dover, for example, a feedback based luxury bag brand that pre-sold nearly $40,000 worth of their high-end totes (their products range from $125 – $500). Recently, they have had over $1 million dollars worth of sales since launch and received $1.25 million from angel investors related to brands like Coach and Warby Parker.
Another DTC success story comes in the form of the Dollar Shave Club, a name now synonymous to the subscription model. They have just been snapped up by Unilever for $1bn. Just this week, Amazon-backed Indian D2C beauty brand MyGlamm has just raised $71 million in investment.
Even legacy companies are acknowledging the D2C appeal. FMCG company Emami Ltd has just increased its stake by 15% to 45.96% in Helios Lifestyle, a male-grooming products seller under The Man Company brand. Hindsutan Unilever Ltd, India’s largest packaged good maker, is also set to make product lines available direct-to-customer via mono brand sites. Even Nike aims to grow the share of its DTC sales from 30 percent today to 50 percent in the near future.
It’s clear that things are looking promising for DTC. While there are some added details and logistical costs to consider — such as warehouses, customer service and order fulfilment — there are still many benefits of going the D2C route for eCommerce businesses. Here are a few:
Reasons to Go Direct-To-Customer
- Fuels innovation: With direct access to customer feedback, D2C provides the insight that closes the gap between R&D and product innovation. Having that immediacy to evaluate and test brings the brand closer to their customer’s needs, creating even more specific solutions.
- Drive sales: Brands may need ways to resolve middlemen conflicts especially if they are already selling through retailers, outlets and distributors. An option would be to create e-Commerce exclusive product lines while being on the forefront to proactively share customer feedback and insights with its channel partners.
- Customer-insight generation and community building: We’ve seen the impact of fan bases and follower-ships through the lens of celebrity for years. Creating that kind of loyalty and advocacy for brands isn’t that farfetched, especially when customer insight is evidently being used to benefit customers themselves. Free samples, involving them in test phases and feedback-based changes invites a sense of equity and provides direct learning for brands to stay in touch with their customers.
- Brand building and differentiation: Having an in-depth understanding of the ‘direct’ part of DTC can set a brand miles ahead of the competition. As many options as there can be for customers, there will be just as many opportunities that DTC channels have to reinvigorate that customer relationship and to do what the brand has set out to in the first place – making life easier for its chosen audiences.
At the rate things are going, competition is growing dramatically and it seems as though everyone is jumping on board the eCommerce train. While it’s never been easier to start a business, scaling it is where the hard part lies. Though there can be longevity and many benefits to the D2C business model, sustainable growth calls for more: a knowledge of evergreen performance optimization implementations, an urgency to connect and adapt with customers, and a persistent desire to better customer experience overall.
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