What is Direct-to-Consumer (D2C)?

Updated: May 31, 2024

What is Direct-to-Consumer (D2C)?

Direct-to-consumer is shipping products directly to customers, bypassing any middlemen such as third party retailers or wholesalers.

Some facts about Direct-to-consumer:

• Direct-to-consumer brands are usually sold online only. However,  limited number of physical retail spaces are opened by some direct-to-consumer brands in adjunct to their main e-commerce platform in a clicks and mortar business model.
• The control of the buying process back is put into the hands of the manufacturers in Direct-to-consumer marketing.
• Only the company is responsible for creating a fine product, marketing it to their target audience, delivering the product or service to their customers and establishing a relationship with them as there is no involvement of any middle man.
• The retailer may not even own the item when the order is placed in Direct-to-consumer brands. This is known as eCommerce drop shipping, in which the retailers are allowed to order from suppliers when orders come in, rather than storing inventory in advance.
• Retailer may also store inventory that are in demand in rented warehouse space so that they can move stock nearer to the areas with the highest demand. So, paying for unnecessary storage space can be avoided.
• D2C retailer takes care of all the necessary steps from packaging to delivery, straight to the door when an order is placed by a consumer.
• The savings earned because of no involvement of any middlemen or third parties can be passed to the customer or used to accelerate business growth.

Benefits of Direct-to-consumer:

• The focus on customers is the principal advantage of Direct-to-consumer, which provides stronger brand loyalty.
• The necessity of Direct-to-consumer is good relations with the customers that can bring more loyal customers and keep a high retention rate.
• Direct-to-consumer has lower costs compared to physical retail, as the number of different business components like employees, purchasing cost, mailing confirmation, renting or establishing a physical store can be reduced.
• A huge worldwide audience can be reached more easily and the advantage of an unlimited marketplace can be taken by a Direct-to-consumer model.
• Third party clients in the middle of the process can be removed as the products can be sold directly to the customers without the need for intermediaries.
• The business administration can be made easier as there is no need for complicated recording of inventory, shipments or business transactions.
• Smaller companies can grow faster through this model by becoming competitive with successful and large companies in terms of price, availability of the products and quality since costs are lower.
• It is faster to market a product with D2C compared to the traditional way as new products can be quickly and easily tested within a specific demographic, feedback can be collected and then the product can be tailored to the needs of the customer before putting it on the market.
• More control over reputation, brand and product can be provided with D2C as the manufacturer is allowed to take full control of all stages of product and brand development.
• A distinct and streamlined brand identity can be provided with D2C which in turn provides a superior customer experience.
• The relationships with the customers can be improved and controlled by business that surpass traditional retail channels. Therefore the access to all customer information at every touchpoint, from geography, demographics and psychographics to social profiles and email addresses can be provided.
• The personal needs of customers can be better served as an accurate picture of the target audience can be provided by D2C.
• Consumers can click from website to website and compare products instead of traveling from store to store. They can make intelligent buying decisions on the spot by reading reviews of other buyers to find out what they are saying about the product and comparing the prices.
• The time of customers can be saved by D2C shopping.
• The product can be delivered to either the place of employment, house of a relative or any location that is most convenient to the customer because of flexible delivery option.

Limitations and Risk of Direct-to-consumer:

• It requires significant skills and resources to set up cross-platform payments, order processing, marketing, and fulfillment to drive traffic to an eCommerce site from scratch which can be expensive too.
• Expanding liability risk, cyber risk and more complex supply chain are the  main risks in the online Direct-to-consumer.
• Cybersecurity is one of the main risks of running a Direct-to-consumer ecommerce firm, due to the sensitivity of handling data o consumers.
• One of the priorities in online businesses is data privacy and security.
• Not only the higher exposure to security breaches is the main concern but problems such as selling personal data etc also lies.
• The complexity of the supply chain increases by conducting e-commerce Direct-to-consumer business.
• The complexity of the distribution chain increases and poses additional risks as the products will be delivered to the doorsteps of the customers by the company.

Tips for Building a D2C Brand:

• It takes focused effort and determination to build a D2C brand. You should have a specific strategy in place to get the attention of your target market.
• The most effective strategies for your business can be developed by using a business plan as it will give you a deeper insight into your target market.
• A CRM tool that is capable of finding useful customer information and interpreting it in a way that will most benefit your company is necessary to understand your customers. This is one of the keys to success for any business.
• A strong relationship with customers can be build by handling transactions properly and accurately.
• The insight into your level of commitment to your customer is provided by your shipping and delivery style. Delivery options and returns process is essential for a successful business.
• The defining features of your brand, and how are they superior to your competitors are important for your brand to flourish.
• A unique experience should be provided to the customer to keep them coming back for more.
• A seamless and personalized customer experience can be created by utilizing customer information.