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March 31, 2021
Did you know that approximately 81% of consumers will make a B2C purchase directly from the producer within the next five years? This emerging trend is known as D2C (short for ‘Direct to Consumer’, also styled ‘D2C’) and is gaining momentum.
No wonder – given how a lot of purchases have moved online, companies which traditionally relied on retail outlets for sales are now investing in building relationships with clients. They forego the middle man, instead of funneling sales and interactions to intermediaries.
In this blog post, we will take a look at why the direct to consumer business model is rising in popularity, share some D2C best practices, and provide you with examples of leading D2C brands that successfully implemented the direct to consumer business model.
One of the biggest drivers that make the direct to consumer business model so appealing is that it offers an elevated level of control over their branding, distribution, and communication. Not restricted to middlemen or third-parties that will not necessarily prioritize their brands, they have better control over their marketing messaging, including their digital marketing efforts, and how they communicate directly with their clients.
It is this close contact that enables D2C companies to build long-term relationships with their consumers and offer them great value through subscriptions, promotions, or even customer-exclusive sales. Taking into account how DTC companies have direct access to their customer data (such as their purchasing history), they’re more in control of each buyer’s brand journey and can fine-tune their business offering to align with exactly what their customers are looking for.
For instance, let’s say that a brand wants to sell more of a particular product – for example, washing powder. Assuming that they embrace the direct to consumer business model, they will likely have direct access to sales data and know frequently clients purchase detergents (for instance, every two months). By understanding these shopping patterns, the brand can target them with promotional campaigns exactly when they’re about to restock.
Furthermore, with the impact of the COVID-19 pandemic, we’re seeing the emergence of two new consumer habits. Firstly, more and more people are buying online due to health and safety concerns. Secondly, given how personal consumption has decreased in 2020 by a shocking $63.3 billion in the U.S alone, customers need more convincing before deciding to buy. Given how retailers offer and promote thousands of products from numerous producers, leaving sales and promotion entirely in their hands might not be enough. Considering how the consumer journey and clients’ needs have changed, adopting the D2C model allows companies to be more flexible and tailor their offerings to better suit their customers’ status quo.
So, how can this business model be introduced to a company to improve the chances of success and building better client relations? Here are five points to consider.
A value-driven approach can elevate the profile of D2C companies to make a difference in their respected markets. Namely, DTC brands can flourish if there is room in the market for new products or services that solve a particular customer pain point. The best way to do so is by demonstrating benefits and explaining how your products or services will add value to your consumers’ lives. This will give your business the edge it needs to excel in the client space.
From high-quality, eye-catching photos and enticing products description, to promotions and more. The direct to consumer business model gives companies limitless possibilities – provided that the content you put out provides value and is on-brand. That said, be careful to not overwhelm customers with too many options, as it will lead to the dilemma of choice.
One great example is mattress company Casper, which noticed that most customers hated the process of buying mattresses – particularly, having to choose between a number of options. What the brand decided to do was introduce a single model, which met the expectations of most buyers. The result? $1 million in sales in the first month, and $100 million after two years!
Several D2C companies are tapping into the need of customers to find and invest in products that they wouldn’t find anywhere else (or, at least, at an equally competitive rate). A good example is luxury watch brand Rolex, which is known for being extremely careful with the number of products they offer outside of their own sales channels. This allows them to maintain their premium brand image.
Add-ons and exclusive goods support the convenience that DTC brands offer – why would consumers spend and invest their money elsewhere when they can easily find the products they are looking for directly at their favorite brands online and/or offline outlets?
Another benefit that direct to consumer business models offer is that infrastructure can be adapted and updated to align with customers’ needs.
These include implementing easy, free returns, which will make customers feel more secure in case they want to exchange a product. With a reduced purchase risk, they will rest assured that they will be able to get either a refund or better-fitting replacement product.
Another best practice for D2C companies to consider is to think beyond having an easy-to-navigate eCommerce store. Not only does your retail space need to fit your business, but it also needs to offer good UX to customers and drive your business growth. Research different platforms, look at opportunities for flexibility and scale, and hone your offering accordingly, using a solution that will suit both your business and your customers.
Connecting existing infrastructure with specific digital marketing tools can provide great effectiveness to your direct to consumer implementation. Take a look at the key key advantages below:
So, taking into account these best practices, what are some of the top examples of D2C companies that have noted success in their direct to consumer business models? Here are some that have inspired us and our business approaches.
The Dollar Shave Club is a prime example of a D2C company that successfully took on the global giant Gillette. The company founders noticed that the shaving accessories market was dominated by just a few brands worldwide, neither of which addressed their customers’ constant need to restock. DSC decided to offer customers a subscription model and attract new clients with a vast amount of original content on their website. The company quickly took the shaving and personal care market by storm and became so big of a threat that Unilever acquired the business for an impressive $1 billion in 2016.
This high-profile brand set up a Shopify store to enable direct sales – a move that was made for the first time in the brand’s 153 years of existence. It quickly achieved its objective of giving away 21,000 coffee samples in a year, knocking 90% of its goal out of the park within just a couple of hours! While the campaign had to be finished earlier, free samples contributed to the significant growth of Nescafe’s customer base.
With smart light bulbs becoming an increasingly popular smart home technology (now offered by companies for the likes of IKEA), General Electric decided to take advantage of the trend. For this purpose, they launched a DTC brand, C by GE, which offers Bluetooth-connected light bulbs and switches controlled via an app and optimized to integrate with Google Assistant. Offering this product allows the brand to interact with its customers while also providing a solution for their need for cutting-edge products and technologies.
With more and more buyers turning to online channels for their shopping, investing in a direct to consumer business model seems like the right direction for B2C brands.
Successful D2C companies have proven that a shift in a traditional retail approach can reap big benefits. These include:
If you’re thinking of elevating your business with a direct to consumer business model, don’t hesitate to reach out. We’ll happily discuss the best suiting solution for your business and how we could support you throughout the D2C implementation.
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