What is D2C?
Direct to consumer (D2C/DTC) brands sell products and services directly to their customers through owned distribution channels rather than through third-party retailers and wholesale channels. This new distribution channel for DTC brands enables them to deliver better customer experiences, own the customer relationship and capture more customer data.
Starting in 2007, direct to consumer brands began to take advantage of the unprecedented consumer access the internet offered them. The internet immediately became a brand new, highly profitable sales channel for DTC brands and allowed them to cut out the traditional retail and wholesale middlemen.
The first direct to consumer brands like Warby Parker, Bonobos, Away, Dollar Shave Club and more were able to quickly scale their brands through digital channels and capture immense amounts of first party customer data. This ability to capture customer data allowed them to rapidly innovate and adapt their products, customer experiences and brand positioning.
The direct-to-consumer (D2C/DTC) market is expected to grow beyond $200 billion by 2024, a massive increase from $128 billion in 2021. Research from the International Trade Associationalso shows that 55% of consumers prefer to shop directly from brands rather than retailers.
Nowadays, more and more shoppers are making the switch to online, direct to consumer brands. Consumers are seeking out real, authentic connections with brands for personalized experiences and even personalized products. This rapid consumer adoption of DTC has given rise to major competition and endless choices for consumers.
Why Is Direct To Consumer Becoming So Important?
While the direct to consumer business model isn’t exactly a transformational discovery, it still is driving significant change in the retail industry. The model existed all the back in the 1920s when apparel brands created an opportunity to sell products directly to their customers through their own retail locations.
In 2007, Bonobos, one of the original DTC brands, built an entire business focused on selling just one product directly to their customers through the internet and owned retail stores. The concept of direct to consumer has grown rapidly in recent years for two reasons: ecommerce growth and consumer behavior changes.
The direct to consumer model removes multiple steps and friction from the traditional buying cycle for the customer. This allows brands to provide better and faster customer experiences for loyal customers.
- The traditional wholesale model for brands: manufacturer > wholesaler > distributor > retail location > customer (5 total steps).
- The direct to consumer model for brands: manufacturer > website > end customer (3 total steps)
Originally, the direct to consumer business model was pioneered by early DTC brands like Warby Parker, Dollar Shave Club, Allbirds, Glossier and more.
The first DTC brands served a digitally savvy customer base initially and expanded to much broader audiences as direct to consumer become more adopted.
D2C Growth Across The World
According to the International Trade Administration, ecommerce sales are expected to reach over $5.5 trillion by 2027. Retail locations and wholesalers are beginning to feel the pressure of ecommerce. Shoppers are slowly starting to no longer venture to physical locations to discover products and shop.
Brands are also ditching the retail and wholesale channel in favor of the direct to consumer model. It’s difficult for brands to stand out in-store when their products are surrounded by hundreds, if not thousands, of similar products. This drives brands to quickly adopt the direct to consumer business model to grow and stand out.
Nike, a traditional wholesale and retail-focused brand, saw 15% of their total revenue coming from the direct to consumer model in 2010. But in 2023, Nike’s overall direct to consumer revenue grew to 43.7% and is predicted to scale beyond 60% by 2025.
Consumer Behaviorin D2C
Nowadays, consumer expectations are higherS and harder to meet than ever before. If retailers are not able to deliver exceptional customer experiences, then customers will not shop with them anymore. The competition has grown rapidly and the barriers to entry have become significantly less in recent years.
Consumers are now craving personalized experiences, messages and products. Consumers also want to feel personally connected to brands and feel like they’re buying from another human – not a big retail store. This is partly why DTC brands have been so successful in recent years and taken market share from legacy retailers.
How Does The Direct To Consumer Business Model Work?
The direct to consumer business model works exactly as it seems: DTC brands sell products directly to their customers through their website, digital channels or owned retail locations. Then, customers will receive the product directly from the brand - no intermediaries involved.
The whole process is owned by the brand and the customer, with the brand taking full control over the customer experience and the fulfillment process for orders. The direct to consumer business model relies on building strong customer relationships and creating personalized experiences that prioritize the customer.
DTC brands show a true understanding of shopper pain points and consumer preferences. Many brands use discounts, loyalty programs, robust product reviews, and user-generated content to build customer relationships and drive long-term customer loyalty.
Benefits of Direct To Consumer (D2C/DTC) For Stores
The shift towards a direct to consumer (D2C) business model for many brands is driven by several compelling reasons:
Direct Customer Relationships via D2C
The direct to consumer business model allows brands to build direct relationships with their customers. This direct engagement leads to a better understanding of customer preferences, enabling brands to tailor their products, services, and marketing strategies more effectively.
Control Over Brand Image and Customer Experience
By selling directly, brands have complete control over their branding and customer experience. This control is vital in maintaining consistency in messaging, presentation, and customer service quality, which can strengthen brand identity and loyalty.
Data Collection and Personalization in D2C
D2C models enable brands to collect first party customer data. This data is invaluable for personalizing marketing efforts, optimizing product development, and improving customer experiences based on real insights.
D2C Enables Higher Profit Margins
Eliminating intermediaries in the supply chain can reduce costs and increase profit margins. Brands can save on retailer or distributor margins and invest more in product development, marketing, and customer service.
Brands Can Be Agile to Market Changes
D2C brands can be more agile and responsive to market trends and consumer feedback. They can quickly implement changes in products, pricing, and marketing strategies without the need to coordinate with third-party retailers or distributors.
Opportunity for Subscriptions and Memberships
The direct to consumer model facilitates innovative add-on models like subscriptions, memberships and product customization. DTC brands that offer these benefits are able to strengthen customer loyalty and relationships.
Ecommerce Digital Marketing Advancements
The growth of e-commerce and digital marketing tools has made it easier for brands to reach consumers directly. Online platforms like Meta, Google, TikTok and Snapchat offer scalable and efficient channels for marketing, sales, and distribution.
A lot of top brands use a wide range of different Shopify apps to power their tech stacks. You can browse the best 500 Shopify Apps right here (and see what brands use them).
Key Areas To Focus on To Grow a Direct To Consumer Brand
Growing a direct to consumer (DTC) brand requires a strategic approach that leverages digital marketing effectively and builds strong customer relationships from the start. Key areas to focus on when first building a brand include:
Leverage Influencer Collaborations
Partnering with social media influencers like YouTubers, TikTokers, and Instagrammers is an effective way to reach new audiences - especially when you link to customized landing pages or shops. Influencers in your product space can provide a significant boost in visibility and credibility, introducing your products to their followers. This approach is akin to a media buy but aligns well with the DTC ethos of cutting out middlemen.
D2C Referral Marketing Program
Utilize your loyal customer base as brand evangelists. Referral programs incentivize existing customers to spread the word about your products, creating a powerful word-of-mouth marketing campaign. This strategy can organically grow your customer base and enhance brand loyalty.
Flexible Shipping and Payment Options
Flexibility in shipping and payment methods is crucial. Provide various shipping options, from express to standard, and consider offering free shipping where viable. Ensure your payment system accommodates all common methods, including credit cards, ACH payments, and foreign currencies, to cater to a diverse customer base.
Leveraging Customer Feedback and Reviews
Displaying transparent customer feedback and reviews, including negative ones, on your ecommerce platform and product pages builds trust and authenticity. Respond to negative reviews to provide context and manage customer expectations. Honest feedback helps set realistic perceptions of your products and can guide future improvements.
Staying on Top of New D2C Trends
Stay informed about the latest trends in ecommerce, from data privacy and sustainability to new technologies like AI and machine learning. Understanding and adapting to these trends can position your DTC brand at the forefront of the rapidly changing direct to consumer landscape.
How Is The Direct To Consumer Landscape Evolving?
The direct to consumer (DTC) industry is experiencing several big changes in recent years, largely driven by evolving consumer preferences, technological advancements, and shifts in the marketing landscape.
Increased Focus on Customer Experience
DTC brands are placing a greater emphasis on enhancing the customer experience. This includes everything from improving website design and functionality to offering personalized customer service. Brands are leveraging data to understand customer preferences and behaviors, enabling them to tailor their offerings and communication strategies.
Adoption of Omnichannel Strategies
While the DTC model inherently focuses on selling directly to consumers online, many brands are expanding their presence through omnichannel strategies. This includes pop-up shops, permanent brick-and-mortar stores, and partnerships with major retailers. These strategies help brands increase their visibility, reach a wider audience, and provide consumers with more ways to interact with and purchase their products.
Emphasis on Sustainability and Ethical Practices
Consumers are increasingly concerned about the environmental impact and ethical practices of the brands they support. DTC brands are responding by incorporating sustainability into their products, packaging, and supply chains. This includes using eco-friendly materials, minimizing waste, and ensuring fair labor practices. Brands that prioritize sustainability and transparency are building stronger connections with their customers.
Leveraging Advanced Ecommerce Technologies
Technological advancements are playing a crucial role in the evolution of the DTC industry. Brands are using artificial intelligence (AI) and machine learning to enhance personalization, from product recommendations to customized marketing messages. Augmented reality (AR) is being used to create immersive shopping experiences, allowing customers to visualize products in their own space before making a purchase.
Shift in Marketing Strategies
The digital advertising landscape is changing, with increased scrutiny on data privacy and changes to tracking technologies. DTC brands are adapting by exploring alternative marketing channels and strategies, such as content marketing, influencer partnerships, and community building. These approaches help brands engage with their audience in more authentic and meaningful ways.
Product Innovation and Diversification
To stand out in a crowded market, DTC brands are continuously innovating and diversifying their product offerings. This includes limited edition releases, collaborations with influencers or other brands, and expanding into new categories. Brands are also focusing on creating high-quality, unique products that meet specific consumer needs and preferences.
Data-Driven Decision Making
Data is at the heart of the DTC model, enabling brands to make informed decisions about everything from product development to marketing strategies. Brands are investing in data analysis tools and expertise to gain insights into customer behavior, market trends, and operational efficiency.
Community and Brand Loyalty
DTC brands are focusing on building communities and fostering brand loyalty through engaging content, exclusive offers, and personalized experiences. By creating a sense of belonging and connection, brands can encourage repeat purchases, positive word-of-mouth, and a strong brand advocacy among their customer base.
Who Are The Best DTC Brands?
Several direct to consumer (D2C) brands have made significant impacts in various categories and built themselves into global brands. Some of the biggest and most well-known D2C brands include:
Warby Parker
Revolutionizing the eyewear industry, Warby Parker offers stylish, affordable eyeglasses and sunglasses, providing a home try-on option for customers.
Casper
Casper has gained popularity in the mattress industry by selling high-quality mattresses directly to consumers, simplifying the mattress shopping experience.
Dollar Shave Club
Known for its subscription-based razor delivery service, Dollar Shave Club expanded its product line to include other grooming products, appealing to a broad customer base.
Glossier
A beauty brand that grew out of a beauty blog, Glossier sells skincare and makeup products directly to consumers, focusing on simplicity and user experience.
Everlane
Specializing in clothing, Everlane emphasizes transparent pricing and ethical manufacturing practices, resonating with consumers who value sustainability.
Away
A travel and lifestyle brand known for its stylish and functional luggage, Away has expanded its product line to include other travel accessories.
These brands have successfully leveraged the D2C model to build strong customer relationships, offer unique value propositions, and disrupt traditional retail in their respective markets.
