D2C eCommerce Everything You Need to Know
D2C eCommerce it’s easy to start, manage and control and also requires a lot of marketing, find out exactly what you need to know here.
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It is the era of the consumer, and it is changing how businesses engage with their customers and sell their products.
Up until now, large-scale retailers like Amazon and Target were running the eCommerce show all on their own. However, things have changed, and many brands are choosing to engage directly with their consumers.
This has eliminated the need for retailers and middlemen in the mix, allowing brands to offer high-quality products at lower prices to consumers through a unique business model called D2C.
Let’s understand what it is.
What is D2C?
D2C stands for Direct to Consumer. Defined in the simplest terms, it is a business model where a brand sells its products and services directly to its customers.
There are no retailers or middlemen involved. The distribution and logistics are also taken care of by the D2C eCommerce brand, instead of relying on external retailers and their networks.
Most D2C brands partner with third-party logistics services to deliver their orders to the consumers where the business is online.
The most iconic D2C retailer is perhaps NikeTown in London, with its entire range of products artfully displayed in a showroom that showcases its best aspects.
The most iconic example of online-native D2C is perhaps Away, a travel fashion and accessories company that has modernity at its heart.
The Key Benefits of D2C
It is extremely easy to get started as a D2C eCommerce business, especially in this digital age. With a product that sells, good packaging, a well-researched market, and a good website, you can get started immediately.
There are five key advantages of starting a D2C business:
1. Total Control Over Cost
One of the major benefits of being a direct-to-consumer brand is that you get full control of the prices you set on your products. Let’s understand this with an example.
In the traditional retail method, if your product sells for $50 through a retailer, it is likely that your business splits the proceeds 50-50 with the retailer.
On the contrary, with a D2C model, your business can sell the same product for $45 or less and still receive a higher value per product sold as compared to the traditional retail model.
2. More Control Over Packaging
Given that the entire world is entering a phase of eco-friendly designs and sustainable materials, it has become important for consumers to see that a brand cares about the environment.
Through the D2C model, you get better control over the packaging of your products.
A great example is the skincare brand Juicy Chemistry: along with making its products from natural ingredients, it delivers them in eco-friendly packaging from A to Z.
On the other hand, retailers have their own packaging needs that account for logistical complications, which necessitate packaging compromises that a brand would prefer not to indulge in.
3. You Can Tell Your Story
D2C businesses function through websites and other digital channels that let the consumers directly engage with a brand.
This gives your business an opportunity to build a deeper connection with your consumers by enabling you to tell them your story.
Instead of mechanically picking out products from a retail shelf based on pricing and packaging alone, D2C eCommerce delivers more shopping value to your consumers.
They get to know how your brand came to be, what its values are, and whether their own values resonate with the same thoughts. It helps you build customer loyalty. Again, Juicy Chemistry does it right:
4. More Flexibility for Exploration and Experimentation
D2C brands can get creative with their ideas without having to worry about retailers’ order volumes and stagnant inventories.
It isn’t a game of hunches or gambles anymore, where you put your trust in a retailer and wait for them to sell what you have worked hard to create.
Instead, you can invest some more in marketing and create a buzz around your own products, helping you sell better.
You can release testers or teasers on your website seeking direct consumer feedback on whether they would like you to produce similar products. This direct feedback allows your brand to be more innovative than the rest.
5. Data Gathering
The world knows the importance of consumer data today. A business that has high-quality insights into its consumers would best every other brand in the niche any day.
D2C brands have the capability to gather this invaluable consumer data through software like CRM and business intelligence.
Your brand can gather data like the age and gender of the buyers, frequency, average order value, geographical attributes, and more by studying your buyers.
On the other hand, selling your products through a franchise or retailer wouldn’t give you any idea of the audience that is purchasing your products. You would only know how many units you sold and for what price.
Challenges in D2C Businesses
As every coin has two sides, so do D2C business models, which have a few flaws that need to be smoothened over before you decide to adopt them. Discussed below are some of the key challenges in starting a D2C business.
1. You Need Heavy Marketing
Online retailers offer tough competition for you to win against. Think of Amazon, Target, Macy’s, and the like – these retailers are big, and everyone knows about them.
Chances are that if you need something, you would look up Amazon for your needs rather than directly order from the brand.
Instead of building a profitable relationship with a retail partner like Amazon, you would need to redirect this budget into building your own brand and gain each customer individually.
You would then need to design a sales pipeline that delivers you a specific sales velocity that helps you break even soon. There is always a chance that your efforts might not pay off.
2. All The Responsibility is Yours
While D2C allows you to be creative with your products and packaging, it also means that you need an exclusive budget to do that. You need to research not just the products but packaging designs as well.
You also need to plan market strategies and align the logistics. You need your own marketing and sales.
There is a lot to be looked after. With retailers, all your business needs to do is supply the product and let them handle the rest. However, with D2C, your brand is built with your own two hands.
3. You May Miss Markets
The reach of online businesses is far and wide. However, online retailers have a further outreach.
If you are competing against brands that sell on Amazon on Target, you may need to put in extra effort to understand where your audience is and how you can reach them.
Improving your outreach may prove to be more challenging initially, where very few people know about your brand, and you only have a few products on the market.
Continuous marketing and effective outreach strategies are essential parts of D2C businesses.
Despite the challenges that a D2C business model poses, it does offer higher returns and loyalty.
A great example is Nike – earlier in 2021 the brand announced that it had shut down its wholesale partnerships with Amazon and Macy’s to enhance the creative freedom and customer value of the brand.
Since then, brands like Under Armour have also followed suit.
D2C is springing back after having hibernated for years on end. Let’s now discuss the ten simple steps to launch your own D2C brand.
How to Launch Your Own D2C Brand
Everything starts with a business idea that aims to solve one common problem in a unique way for a demographic. According to McKinsey, there are five essential elements to consider if you want your D2C business to be a stellar success:
- Bring all hands on deck. There needs to be an openly collaborative environment between your workforce and teams for your ideas to be a success
- Adopt the “Y+1” strategy for resource allocation, where the resources and investments are adjusted in advance of the growth
- Technology is an essential aspect to fuel business growth. This makes it necessary to have digital talent on board
- Customer experience holds the key to sustained growth and success. Focus on designing a great customer experience
- Foster long-term relationships with your customers
You need answers to the following aspects to launch a D2C brand of your own.
1. Make The Business Your Brainchild – Your Own Child
Owning a D2C brand essentially means that you are the orchestrator of the show. You are the manager, the director, the executive, the marketer, and the salesman.
A D2C brand has a clear idea of its roots, how it wants to grow, what it wants to achieve, and what its purpose is.
To launch your own D2C eCommerce brand, you need to think like an entrepreneur. Start with an idea, but account for all the realities as well.
2. Have a Definite Purpose
There are very few brands that reach success in real-world markets by starting small.
One example is the Indian apparel brand, Bewakoof, which started out as a humble brand for customized tee shirts. Today, it has grown into a full-fledged fashion business that offers a plethora of choices for buyers.
All through its journey, Bewakoof remained loyal to its motto: doing things differently regardless of public opinion. Have a purpose for your D2C brand that resonates with your target audience.
3. Have a Direction
Ask yourself the critical question: does your idea have what it takes to succeed?
According to a report by eMarketer, the total value of sales in D2C eCommerce in 2021 was $128.33 billion in the USA. These figures alone aren’t enough to give your business an opportunity to succeed. You need direction to begin your efforts.
The first step you can take is to survey your target audience and ask them questions directly.
Get to know what your target audience needs from a particular product. Better yet, ask them the kind of solution they are looking for. This is where you start innovating.
4. Create Brand Awareness and Hype Things Up
You need to build your brand around the feedback you received from your target audience. In order to ensure they perceive your brand as authentic, follow up with your consumers and let them know how you are proceeding with the business idea.
Create hype around your brand and product so that you already have an engaged audience ready to purchase when you launch.
A great example is Slurp Laboratories, a skincare brand from Korea. In order to deliver a product that customers would love and purchase, they initiated a mass survey to know what the major concerns were:
5. Be Shrewd with Expenses
Although it is cheaper to start a D2C brand as compared to a physical business, there still are expenses you should be aware of:
- Cost for registering a website domain name
- Website hosting costs
- Technology costs (like cloud and SaaS)
- Working capital
- Marketing costs
Your budget to get the first product launched should also account for these expenses, in addition to research and development costs.
6. Start Building
In the end, goals are achieved by doing. After analyzing all the survey data and product research information, you finally need to build prototypes of the product you would be selling. This step is comprised of multiple tasks:
- Sourcing materials from the right vendors
- Managing labs and production units
- Ensuring compliances
- Designing the packaging
When all the aspects above are finetuned to the vision of your D2C business, you would be ready to launch officially.
7. Build The Right Team
It takes the combined effort of multiple experts to achieve business goals. You can ideate alone, but the execution requires expertise, and you need to hire that expertise.
Onboard industry professionals like marketers, engineers, designers, accountants, etc. to help you get your business running on the rails.
Hiring professionals is important if your D2C eCommerce start-up is looking to build investor relations to receive funding. You need to show them your team is as capable as any to make the idea work.
The most exciting part of starting a D2C business is to finally launch your products to the market. To catalyze the sales, you can take a few prior but necessary steps to ensure that your consumers know what’s coming:
- Get your marketing team to create hype around the product
- Leverage digital advertising
- Optimize the SEO of your website to rank for keywords that matter
- Set up automated “Thank you” emails for your buyers. You can also insert a teaser for the next launch with these mails
9. Continue Marketing and Improving
Not all of the feedback your products receive would be positive. There would be some constructive reviews to let you know how you can do better.
Ensure that your social media marketing reflects how you are building a better brand based on this feedback. To create a standalone D2C eCommerce that is successful, it must be consumer-first.
Prioritize your consumers and continue to deliver value and improvement with each product you launch.
10. Customer is King
The era of the customer is back. Brands cannot survive without listening to and working on the feedback they receive. Especially for a D2C brand that banks almost completely on online sales, it is essential to deliver value to the customers at every stage:
- The website experience should be seamless and intuitive
- The checkout should be smooth and secure
- The sales and support teams should be easily accessible (and trained, if possible)
- Follow-up should be scheduled by default
2 Exemplary Examples of D2C eCommerce
Learning from examples is the best way to solidify the lessons. The two brands discussed below started with a humble idea, but with perseverance and vision, they are now successful D2C businesses.
A brand that understands the challenges that dog owners face. There aren’t many brands that sell the whole range of quality dog products all in one place. This, and their business model is completely unique: they are a subscription-based service.
Dog owners can subscribe to BarkBox and receive treats, toys, and other goodies every month. This brand has made the life of a dog owner extremely easy by taking everything off their hands and scheduling it to clockwork through subscriptions.
Furthermore, they encourage their patrons to share pictures of their dogs with BarkBox goodies to get featured on the brand’s channels.
The idea of simplifying a dog owner’s life by taking the supply run off their hands is a great step towards success. The cherry on top is creating community-based participation that builds trust with the brand.
A skin and makeup brand, Glossier knows how hard it is for consumers to find the right products. The brand understood the brief: consumers in skincare wanted products that are reviewed and recommended by real people as a way of trust.
Glossier, therefore took a unique twist on marketing. It identified its “Superfans” – the consumers with the highest volume of purchases with it – and sent them free products ahead of launch to test and review.
Doing this helped the brand bring more people on board since these reviewers weren’t paid influencers but actual people.
D2C eCommerce is emerging as the next big avenue to woo customers.
- It lets businesses connect directly with customers
- Business can tell their brand story
- It enables businesses to gather firsthand customer data
- It helps to launch a brand without much budget
Statistics today are in the support of D2C business models – the time is opportune for entrepreneurs to explore this path.
The Final Word
D2C eCommerce is BIG today. 64% of consumers around the world were reported to have purchased items directly from the brand website in 2022, according to Statista.
If those figures don’t make it evident enough, a study reports that better pricing and quality are driving more consumers to purchase directly from brands.
It only goes to say that if you have a well-informed vision and direction for your D2C idea, the market conditions today are optimum to make it work. You can take the help of this guide to get started.