D2C Business Model: A Rising Trend

It’s no secret that 2020 changed how customers handle their shopping needs as COVID-19 has had a massive influence on how they purchase products. In 2021, many businesses adopted various e-commerce strategies, however a notable trend that many startups previously deployed and later adopted by big giants is the shift towards Direct-to-Consumer (D2C) business model.

What is Direct-to-Consumer (D2C)?

Direct-to-consumer is the sale of products or services directly to consumers. D2C brands typically bypass third-party retailers, wholesalers, or agents and only sell online, although some D2C brands have created pop-up shops or other physical locations to complement the multichannel journey that consumers expect today.

Brands, including Nike, Nespresso and D2C startup Bloom & Wild have leveraged the direct-to-consumer e-commerce model to their advantage by developing slick websites supported by edgy and effective marketing. The pandemic has fueled the D2C trend, with big brands like Heinz and Coca-Cola jumping into the space as lockdowns drove consumers online.

Some businesses are so successful in the D2C model while others are tremendous failures. A business can have different strategies for their brands but most importantly they need to have clear, well-communicated objectives and metrics if they want to get the most out of their business.

 Reasons that make D2C business to flourish

1) Wonders of Personalization

D2C businesses are known for providing a great, tailor-made personalized experience for the customers, and ensuring smooth customer retention by maintaining the satisfaction levels of the customers at the other end.

2) Scope for greater Profit Margin

With the scrapping of intermediaries and saving a lot of inventory costs, the scope for the profit is significantly higher and thus attracts a lot of potential businessmen in the D2C sector.

3) Valuable Data

With the valuable data available readily, it becomes easier to track down the history of orders, customer' contact details are also at the disposal of the marketer which gives them full control of when to target the customer with what kind of deals.

4) Peak into the taste patterns

With all the data and analytics made available smoothly, it becomes a cakewalk to know the taste& preferences of the targeted customers and use it to their advantage.

5) Rise of the subscription business model

In the past five years, D2C subscription brands have grown over 100% each year, 15% of consumers have signed up for a subscription to receive products regularly. A classic example of a D2C subscription brand is the Dollar Shave Club, the shaving accessory subscription company that leveraged the D2C model to make its venture successful. It aimed to simplify the market by offering blades at a fraction of the price (USD 1), delivered to the customer’s door every month. Its effective branding & campaigning, and deploying the customer data for better logistics and product availability helped it to become successful and later acquired by Unilever for USD 1 billion being valuable and disruptive in the industry.

Conclusion

The brands that position themselves transparent throughout their business strategy (production, supply chain, supplier relations, etc.) will, in the long-term, capitalize on that trust and credibility with much greater probability. D2C allows companies to have total control over these factors, and at the same time a greater capacity to prolong this positioning without any obstacle throughout its journey.

The road to D2C offers a lot of opportunities compared to traditional channels. D2C has become a crucial area of e-commerce that this area of retail will be worth USD 175 billion by 2023, up from almost USD 77 billion in 2019 as reported by a US-based market research firm, E-Marketer.

References: 

1. https://www.adroll.com/blog/10-d2c-trends-to-look-for-in-2020
2. https://medium.com/@goodrebels/the-rise-of-direct-to-consumer-7fb82066d40d#:~:text=The%20D2C%20(direct%2Dto%2D,further%2019.2%25%20growth%20in%202021.&text=Meanwhile%2C%20brands%20like%20Beavertown%20Brewery,D2C%20in%20a%20short%20time.
3. https://www.the-future-of-commerce.com/2021/10/14/d2c-business-model-guide/
4. https://www.the-future-of-commerce.com/2022/01/06/b2b-mobile-first-customer-centric-d2c/
5. https://www.the-future-of-commerce.com/2021/09/07/how-to-personalize-customer-experience-a-dtc-road-map/
6. https://www.the-future-of-commerce.com/2021/11/17/dtc-brands-definition-examples-strategy/
7. https://www.the-future-of-commerce.com/2021/06/16/successful-d2c-startups/