The D2C model allows brands to build a real relationship with their end consumer. By selling directly to your end consumer, you can tell your brand story directly to them. Traditionally, if your product was chosen over competitors on a retailer's website, you may have won the sale, but did you build a relationship with that customer?
Historically, brands have sold to retailers or intermediaries who maintained the relationship with their customer. That means all the precious data on buying trends and even more so, demographics were hidden from brands.
With the customer's email or physical address, the brand can provide a more unified marketing experience. Consumers expect a better experience than they have historically had.
Direct-to-Consumer
When selling to a retailer or middleman, you have very little control over what happens between them and the customer. One of the hardest parts of being a brand is creating products that your target audience will love and buy. If you don't have a direct line of communication with your customer, how effective can you be in launching new products?
Here are 3 things to consider before you start selling on an ecommerce platform or marketplace:
1) Increased dealer fees
When you are not in control of your retail space, there are fees and costs that you cannot choose or ignore. Some are hidden, some are disguised, some are fees, while others are only revealed when transactions are close to completion. When you start to summarize all the fees, fees and charges that an e-commerce platform can charge, you will find that they amount to a substantial part of your sales margin. If you add shipping and fulfillment, you are looking for reason enough to consider an alternative.
2) Management of multiple sales channels
You are likely selling through multiple channels such as ecommerce platforms, your website, dealers, or bricks and mortar stores. Managing sales across different channels can be challenging as each comes with different requirements and can put a strain on resources in terms of time, cash flow, inventory, processing, or shipping. Not owning the transaction process also has its risks, as any errors or challenges experienced in other channels can affect brand reputation and customer satisfaction. From the outside, it may appear that companies have a powerful empire that sells their products; however, a multi-channel approach can also dilute a brand and the way it engages with customers.
3) Is the competition too close to be comfortable?
The presence in large platforms or markets would mean selling side by side with competitors, which can help the characteristics of a product outperform others, but can also be a risk if inferior or substitute versions are sold on the same website . This drawback should be considered if your product cannot easily stand out, as customers are just one click away from the next option.
Trademark effect
It may seem time-consuming and resource-consuming, but having your own online store is a long-term strategy for establishing your own digital brand ownership on the ever-expanding internet. Having an online website is more than a static placement or window to your digital store, it is more of a means to deliver your brand in its entirety using elements of design, user experience, customer interactivity and connectivity to really increase the presence of your business and take advantage of the relationship that consumers have with your brand. Essentially, D2C enables a brand to further dominate its own destiny, personalize its engagement with customers, and maintain significant autonomy among its peers on the Internet.
Selling through your own online store also provides more control over your margins by eliminating. There has been a dramatic change in the way some brands reach their customers. Instead of using wholesalers or retailers, brands that go directly to the consumer sell directly to the end customer.
The resulting shift in power has been devastating for traditional retailers, yet simultaneously some of the most innovative and successful companies of the last decade have been born out of this movement. It is important that you understand why companies go directly to the consumer so that your business can build a successful brand.
Resource management
Gone are the days when giant consumer packaged goods (CPG) companies and department stores dominated the market, with their intense focus on supply chain management and the benefits of being the first to come.
The centuries-old tradition of CPG - which was based on the search for efficiencies between the supplier, the manufacturer, the wholesaler, the retailer and the distributor - that used to crown the titans of the industry such as Nike, Pepsi-Cola, Unilever and P&G, it is less and less relevant. The sales process is less expensive, less dependent on third parties, more focused on direct marketing and more adapted to the end consumer.
Replacing the old banners is a new crop of more agile and relevant companies that are better prepared to thrive in the 2019 customer-centric, data-centric consumer market.
Direct-to-consumer brands, often referred to as D2C or DTC, have banished the old-school supply chain mentality and reliance on third-party distribution.
Sell the products
In short, the D2C model means that as a business, you sell your products directly to the customer, and in the process, going direct improves the customer experience, improves the voice of your brand, and you control almost every aspect of the consumer journey. .
Direct-to-consumer selling ignored that traditional norm. The companies decided to cut out the middle man, wholesalers and distributors and instead harnessed the power of the cloud and the rise of e-commerce to sell their products directly to end consumers.
If you could imagine a new product, produce it, build a website, and get people to buy it, you could, in a matter of months, imagine a new consumer brand, launch a product, control a brand's history, and build a brand. million dollar D2C brand from scratch.
Direct-to-consumer businesses typically have several (if not all) of these eight characteristics:
They are the starters of a low-barrier-to-entry industry.
They are flexible in terms of capital and / or can lease and rent part of the operations.
They are extremely passionate about their clients.
They have first-hand data leveraging and analytics experience.
They eliminate intermediaries to be able to send directly to consumers.
They understand the importance of communicating directly with consumers (using CRM software).
They have more pricing flexibility than traditional retailers.
They illustrate increased use of digital marketing (especially email and social media).
Consumer market
A DNVB is a company that has a strong focus on the consumer market it serves and the online customer journey, and owns most aspects of distribution. The use of direct selling enables these consumer brands to establish relationships with customers and provide them with the products and services that the consumer expects, which ultimately also means a better experience. Unlike a traditional retailer or e-commerce player, DNVB is born into the digital age, emphasizing the user experience, challenging the conventional shopping experience, and creating compelling content as an integral part of its merchandising funnel.
Eliminate the middle man
When you eliminate the various businesses that stand between you and your client, you also get rid of the entities that take a portion of your profits. For example, if your business sells T-shirts, and you want to sell those products through multiple wholesalers and retailers, you will have to sell them at a low enough price that they will brand it again and resell it to customers. That's eating up your profit margin, which is a measure of your profit relative to the cost of your goods, expressed as a percentage. The lifetime value of each customer will be less the more intermediaries you have to pay to get your product out into the world.
Better connect with your customer
When you depend on other companies, distributors, and retailers to sell your product, you are missing out on a lot of data that could be invaluable to your brand. In fact, customer data has become one of the most important assets for digital native brands.
Let's say you are still selling those shirts through a retailer. The only information you are likely to get from the department store where your t-shirts are sold is based on inventory: volume sold, volume returned, and future demand. That may be fine for inventory management, but it doesn't tell you much about your customers.
Let's say you are selling those same shirts through your own website. You have the opportunity to present each of your customers with additional products at the checkout (cross-sell and upsell) to inform which products can go well with their existing t-shirts.
You have the opportunity to test your prices to determine if you have room to charge more, or if you could actually sell more shirts if you lower the prices. You can email follow-up surveys to your customers to find out if they liked the shirt, if the item was delivered on time, and if it met their expectations.
If the shirt is returned, you have a host of cancellation tactics that can help you figure out exactly what went wrong, so that you can ultimately offer a better product to your customers in the future and create a better experience. And finally, you have the flexibility to send follow-up emails asking customers questions about different colors, sizes, and styles of t-shirts to help guide you through product development.
Expand mindshare fast
In a traditional selling model, if you wanted your t-shirts to be a national brand, or a global brand, you would really have to illustrate to wholesalers that your inventory can move.
It would probably take a few years to prove that you have established a local or regional presence, and then you would have to find national distributors. The same could be said for an international presence - show success, find new relationships, and expand - rinse and repeat. It could take years (even decades) to start earning your customers' trust.
In the D2C model, you can reduce your time to market because you are cutting out all the middlemen mentioned above. Once you launch your website and your product is available, you can technically sell it anywhere (as long as you have shipping capabilities).
For years, Gillete dominated the market for men's razors, but with the launch of Dollar Shave Club in 2011 and Harry's in 2013, that multi-billion dollar industry has changed. Gillete was said to have around 70% of the market share in 2010, and today, it is close to 50%. That's the power of expanding mental engagement on a digital platform.
Control your brand story
When you ship those shirts of yours to a third party distributor, or start asking retailers to sell them for you, you are giving up control of your brand. It may not seem like it at the time, but little by little, you are putting control of marketing in the hands of another company.
Three of the four Ps of marketing - price, promotion and placement - are directly in your control if you have a direct-to-consumer brand.
You can test the A / B price, you can increase, decrease or do whatever you want with your price depending on the economics of your company (versus having to do what works for wholesalers or distribution points).
You can offer promotions based on your own customer data and control the sales flow using a variety of sales tactics. And, the product is launched and sold on your website, so you know where it is being placed, how it is presented to the customer, and how it is (hopefully) being perceived.
Be everywhere, all the time
When your product goes through a traditional supply chain, you rely heavily on a few large outlets to sell your product. Often times that means exclusivity agreements and limited pricing flexibility. Let's say you are selling your t-shirts through a point of sale, and you want to offer a quick sale.
Most likely, you are limited in what you can do. Or what if you want to beta test a new product and get immediate feedback from your customers? Chances are that same point of sale doesn't want to sell a small batch of their new product.
Being D2C means that you can control your product through your various "push or pull" marketing techniques. These include your own website and through the various channels where you sell. You can use not only your website, but also social media channels, email campaigns, and more.
Most D2C brands use some type of CRM software or platform to get a 360-degree view of their customers (and potential customers) and to communicate with their consumer market (sometimes) on a daily basis.
Interaction with a customer is just a click away, and there's nothing to stop you from talking to them, whether it's for sales or for customer service. Consumers now expect immediate action to be taken when they have a problem, and if they can be responded to immediately, it should create a better customer experience. (Even more legacy frontline companies are picking up on this. In the last year alone, I have had two issues with a particular financial institution and resolved the issue not through the traditional customer support channel, but through Twitter. And it was about 10 times faster).
Being a D2C company doesn't just mean you're digital, and it doesn't mean you're a multi-channel retailer (selling on multiple digital channels). It means that you can also be an omnichannel retailer, taking advantage of both digital marketing channels and physical points of sale. It may not seem like it at the time, but little by little, you are putting control of the marketing.