D2C is a business strategy in which producers sell directly to their consumers (D2C or DTC for short) without the need for a wholesaler, retailer, or any other middleman. There are social, commercial, and historical reasons that make it popular day by day.
Launching and growing without any intermediary and having control over all processes from manufacturing to marketing, sales to delivery; is an ongoing demand for these businesses. Especially in the Covid-19 pandemic, too many brick-and-mortar businesses which are mostly manufacturers, have been unable to operate as usual so they had to start selling online.
The majority of them became D2C brands when they adopted their D2C business to omnichannel sales strategy. According to Statista, the sales volume of D2C e-commerce will be almost 175 billion dollars in 2023, only in the United States.
Different shopping habits, behaviors, and advantages of generations Y and Z create great advantages for D2C businesses. According to Forbes, in comparison with other generations, young people who are under 35 give %52 more importance to the value statement of a manufacturer when they purchase a product.
The ability to change is one of the key factors in the success of D2C businesses. They also have great advantages compared to other strategies. Consumers choose D2C brands for a variety of reasons, including better pricing offers, no middlemen, faster delivery times, better digital experiences, and a sense of worthwhile shopping.
What is D2C?
D2C stands for direct to consumers. It refers to a strategy that has no middleman in the whole process. D2C businesses rely on the idea of creating confidence with customers directly, without the need for an intermediary. With few physical locations, D2C brands typically sell primarily online or via digital platforms.
D2C brands mostly operate in a specific product niche. Since the design, production, marketing, sale, and delivery of the product are carried out by a single-center, they can act much faster than traditional businesses when a change in their business model or adapting a trend is necessary.
History of D2C Businesses
In the days when modern transportation facilities were not available, people could only shop from local producers and intermediaries. Due to geographical difficulties, moving a product was an expensive process that took days at best, exhausting, and consuming limited energy resources. Therefore, the majority of sales during this period fit the “direct-to-consumer” model.
With the development and spread of transportation technologies, D2C businesses have decreased. Although the first paper catalogs were distributed by mail in the 15th century, and there were some successful examples of reaching the end-consumer through catalogs in the following years, very few D2C businesses made large-scale sales until the 90s, when online shopping opportunities began to become widespread.
During the dot-com bubble of the 90s, many D2C businesses were created. D2C has become one of the popular business models again. Meanwhile, manufacturers that can manage their online presence by using digital distribution channels wisely have achieved great success.
D2C Business: Now
The rise of direct-to-consumer (D2C) brands and the innovative customer experience they began to give consumers shocked the retail industry in the early 2010s. With a direct-to-consumer strategy, these businesses were able to understand their customers’ demands and pain points and provide answers to specific problems with their specialty products. They were forward the intermediaries in consumer communication and satisfaction because they knew the product and could change it.
When we came to the 2020s, the Covid-19 pandemic had a restrictive effect on globalization and consumer habits. People returned to locals’ shopping options, as well as online opportunities. D2C enterprises are once again experiencing a golden era. On the one hand, the number of D2C brands has grown.
It is caused by digital natives who have accepted online shopping and have reached the age where they can make their own purchasing decisions, and on the other hand, the influence of the Covid-19 pandemic’s effect on shopping practice.
Traditional businesses that sell through distributors are also creating their own sales channels and employing digital channels to implement a D2C strategy. Because generation Y’s and Z’s shopping habits include investigating and discovering the producer of a product before purchasing directly from them, it can be claimed that D2C companies are on the rise again.
4 Advantages of D2C Brands
- D2C businesses have more control over their products:
In comparison to other business models, a D2C brand can handle its production, marketing, and distribution processes from a single center. D2C businesses have greater flexibility in adjusting to changes. They have more control over their digital workflow because of this.
- D2C businesses can create better customer relations easier:
Since D2C brands are directly in touch with the end customers, it’s easier to develop a better understanding of customers’ demands, shopping patterns, and consumer journeys with the first-party data. As a result, D2C businesses have more advantages than other businesses, especially when it comes to building personalized digital experiences and creating loyal communities.
- D2C businesses can constantly improve themself with the first-party data:
Aside from the benefits of being in touch with the end consumer at the time of sale, being in touch with them also allows you to get greater feedback and insights into the product. Being able to communicate with the end-user all of the time allows for more direct observation of consumer behavior and easier collection of first-party data.
- D2C businesses can be more competitive with prices:
It is achievable to offer the same product at a lower price and become price competitive without paying intermediary costs. D2C brands, despite their lower prices, generate more revenue than most other strategies due to the cost savings.
3 Disadvantages of D2C Brands
- D2C businesses also incur costs that traditional businesses do not:
When a single brand oversees all processes from sourcing through delivery, a cost is incurred. Profits might be affected when additional costs such as stock, shipping, and advertising are not properly managed.
- D2C strategy requires gaining experience and expertise in multiple fields:
D2C businesses must make decisions and implement them across the board, from product design to packaging. This usually covers topics in which they are not experts.
- D2C businesses may have problems with logistics:
It’s complex and costly to compete with top companies and the expectations they’ve set for most D2C brands who don’t have logistical experience, especially in the last-mile delivery stage.
The D2C model stands out because of its numerous benefits and has become increasingly popular. D2C businesses have a significant advantage over traditional enterprises, particularly in terms of getting first-party customer data and gaining deeper insights into consumer behavior through direct interaction. If they take advantage of the opportunity to acquire data effectively, profit margins are larger.