Direct-to-consumer e-commerce, usually abbreviated as D2C eCommerce an eCommerce strategy where traditional business-to-business (B2B) organizations sell directly to consumers via an eCommerce site thus cutting out middlemen such as retailers and wholesalers. For instance, mattress manufacturers can sell their products directly to families on their website instead of sending them to a mattress store.
Is the D2C Revolution a New Thing?
D2C is not a new concept and has been around for several hundred years. In 15th century Venice, customers were offered mail-order catalogues of products they could then order directly from a merchant. Direct-to-consumer marketing is thus just an improved and innovative way of doing the mail order catalog. Consumers now purchase directly from an online supplier and get their merchandise in the mail, rather than having to head out to a physical store to get it.
The biggest draw of D2C eCommerce over traditional B2C is that customers of the new model do not have to choose between several options. At a physical retailer such as Wal-Mart, the manufacturer can’t control whether the consumer goes with their product or that of the competition. This lack of control also extends to brand positioning, engagement, and customer experience that is delegated to the retailer. Under the D2C model, the manufacturer has control over most aspects of the customer journey and experience with the product.
Characteristics of D2C Brands
While D2C is relatively new in the market, there are several pioneering brands such as Dollar Shave Club, Casper and Soylent that have made a success of the model. Dollar Shave Club is the most famous as it took a relatively inexpensive product that had been made too expensive with top-ups from middlemen and made it cheaper with a subscription model. Casper did the same with mattresses while Soylent reinvented meal replacement under the low-cost subscription method.
D2C brands are usually characterized by:
1. A single product or several in a narrow category.
2. Selling online from their website
3. Direct selling to consumers
4. Heavy Brand focus
What are the Benefits of D2C E-commerce?
• An Omnichannel experience – manufacturers get to enjoy full control over the product journey from packaging to marketing. This makes it possible to create an Omnichannel experience that is best for their consumers.
• Better Control Over Brand Reputation – The traditional B2C model meant the manufacturer had very little control once they delivered their merchandise to the retailer. With a D2C strategy, a manufacturer can control sales strategy, marketing and is also in direct contact with the end consumer. The manufacturer can thus be more dynamic as they control the customer experience right from the product research phase right until the consumer takes ownership of the product.
• Better Understanding of the Consumer – It is very rare for manufactures under the B2C model to interact with the end-user of their products. As such, most will not get the opportunity to know their end consumer’s feelings about the product unless they conduct market research.
What are the Cons of Direct to Consumer Marketing?
• Coordinating Supply Chain Issues Maybe Complicated – Brands that employ D2C strategies can struggle to manage their supply chains as compared to traditional retailers who have years of experience and the logistics muscle to do it. For instance, Glossier has often struggled to ensure that its products are always in stock.
• Conversions may be a Challenge – Free trials and exceptionally low costs are what make direct-to-consumer brands different from the competition. While free trials are a very effective way of getting potential customers to sign up, a significant number of customers cancel at the end of the trial or a few months after signing up.
• Companies Need to Develop Expertise in Several Areas – D2C companies not only have to deal with researching and creating a product but also have to go out and acquire the customers. They will also need to understand the logistics of shipping and spend resources and time on processes that could have been transferred to retailers.
Why Businesses are Adopting D2C Strategies
Data is showing that using direct-to-consumer strategies in marketing can boost manufacturer business in the following ways.
- More Sales – According to a Forrester Research study that was done for Digital River, more than half of customers typically visit the website of the product manufacturer looking to make a purchase. A third of these customers would prefer if the manufacturer had the item in stock.
- Greater Margin – Manufacturers that have adopted the D2C marketing approach could see their net margin profits double depending on the product category. Given how much markup can be added on top of the price by retailers, manufacturers can see margins increase from 50% with some going as high as 400%.
- Reduced Dependence on Retail Partners – Manufacturer margins are usually constrained by big-box retailers such as Wal-Mart and online giants such as Amazon. With more physical stores closing, brands have less physical space to showcase their products which reduces their reach. To reduce this dependence and take back control, D2C offers a very good alternative.
- The Opportunity to Offer a Wider Assortment of Products – Most retailers will not carry the entire product catalog of a brand. Most prefer to only stock products that are fast-moving. By having their own website, manufacturers can provide the widest product assortment they have available to their customers. They can also improve sales by providing videos, photos, and detailed product descriptions which retailers may omit from their catalogs.
- Improved Customer Loyalty and Engagement – Direct-to-Consumer strategies provide an alternative channel that allows consumers to reduce price competition. They can collect data on purchasing habits of their customers and customize promotions and product assortments accordingly.
- Access to More Customers – With website localization, website translation, online marketplaces, and cross-border software services that handle payments, taxes, duties, and customs, manufacturers can gain access to consumers in new geographies that may not be reached through traditional retail.
Customs City offers products that allow customs brokers and 3PL’s to clear shipments under a D2C model. Clearing Air shipments will include the submission of ACE Air eManifest and a Section 321 declaration known as “Type 86” Ocean shipments require an ACE Ocean eManifest, Importer Security Filing submission and the Section 321 declaration known as “Type 86”
