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eCommerce Tips & Trends

Will a Direct-To-Consumer Model Work For Your Online Business?

Curious about direct-to-consumer? Learn how this model has become an integral part of the eCommerce industry and if it can work for your online store.
Will a Direct-To-Consumer Model Work For Your Online Business?
Jules

By Jules

 

January 23, 2020

As an eCommerce merchant, you will certainly have heard of the direct-to-consumer model. Whether you’re selling groceries, fashion accessories, or technology, you will have, at some point, considered whether this type of selling model will work for you. Because these models can be so useful for online retailers, it has become an integral part of the eCommerce industry. In fact, a new study by IAB titled “The Rise of the 21st Century Brand Economy”, points out that the future of retail growth now hinges on the ability of brands to sell directly to their customers.

Manufacturers and distributors of Consumer Packaged Goods (CPG) are now selling their products themselves, without the services of a middle man. This article will explain what a D2C model is, what its benefits are, and if it might work for you.

Direct-to-Consumer Business Model

What is a Direct-to-Consumer Model?

This is simply a model where manufacturers (or brands) sell their products directly to the end users. This removes the need for wholesalers, third-party retailers, or other middle men. For example, a fashion designer might decide to sell their clothes directly to customers through an online store, without the need to find placement in a department store or create a physical boutique.

How Does a Direct-to-Consumer Model Work?

It’s a rather simple process, actually. Manufacturers and CPG brands set up an online store using platforms like Shopify or Etsy and sell their inventory directly to consumers through these stores. By doing this, manufacturers and brands don’t have to depend on retailers and third-party stores who may have competing interests.

Who Can Use This Retail Model?

There is no restriction on who can use a D2C model. The only caveat is that it must make sense for your business. A recent study showed that some 59% of consumers go to the manufacturer’s websites to research their products, while 55% prefer to buy directly from the manufacturer’s website. These statistics show that a direct-to-consumer model can be very useful if you’re the kind of business that sells consumer products.

The most important thing, though, is to make sure that your business has the means to implement and maintain a D2C model properly. This means that you must manage the inventory appropriately and maintain your store(s) well. In addition, you will have to take full control of the customers’ post-purchase experience - but at least with this, Easyship can help with a full suite of tools for streamlined, customizable delivery options

What are the Advantages of Using Direct Distribution?

Before you dive into implementing a business model that allows you to sell directly to your customers, you should understand the benefits of doing so. Several research studies have made the benefits of these models very clear:

  • Increased Sales: A study carried out by Forrester Research on behalf of Digital River showed that more than 52% of consumers visit manufacturer’s websites with the intention of making purchases directly from them.
  • Improved Profit Margins: With a direct-to-consumer model, manufacturers can increase their sales - and therefore, their bottom line. And, really, isn’t that the end goal of any business? Though your margins might be impacted by your product category, you might be able to benefit from increases of up to 400%!
  • More Control: When manufacturers sell directly to consumers, they’re able to have more control over the customer experience. Creating a more personalized experience will allow each customer to feel more connected to the brand - and, more likely to make repeat purchases.
  • Less Dependence on Middlemen: For manufacturers, it can be a real trial to know that your sales are essentially reliant on the bounty of others. Third-party retailers - like department stores - will only allocate a certain amount of space, which could, in turn, limit your sales potential. Using a D2C model means the only limit on your sales potential is your inventory.
  • Improved Product Offering: Because online retailers don’t need physical space to sell their products, manufacturers can display a wider range of their products on their online store. In addition, they can provide more useful information such as detailed product descriptions and images, fun videos, and more.

Other benefits of selling directly to consumers include the ability to generate and retain customer information for marketing, improved customer loyalty, and access to more markets around the world.

Benefits of Direct-to-Consumer Models
Photo via Instagram @allbirds

10 Tips for Reaching Your Customers Directly: Things to Consider

One of the end goals of reaching your customers directly is to build a strong relationship so that they have a positive brand experience and are encouraged to make repeat purchases. In order to successfully implement a direct-to-consumer model, here are 10 things you should consider:

  • Does your product type work for a large number of people, and is it easy to ship from one place to another?
  • Will you be able to use social media influencers to put your brand in front of a larger audience?
  • Is your business able to make effective use of subscription models?
  • Do your products have the potential to improve your profit margin?
  • Will you be able to achieve two-way value - for both yourself and your customers?
  • Are you willing to invest in a good inventory management software to efficiently integrate your systems to support a D2C model?
  • Are you prepared to offer your customers quick, easy, and free returns on fault, damaged, or wrong products?
  • Are there cost-effective steps you can take to steadily drive traffic to your online store?
  • Have you checked out the best sales strategies to help you make the most of this model?
  • What are the gaps in your current business that you need to address in order to benefit from selling directly to your customers?

In addition to all the above, you should also be able to offer products that address your customers’ difficulties, gives them more choice, and incentivizes them to spread the word about your business. The more memorable their visits to your website are, the higher the probability of them returning will be.

Direct-to-Consumer Brands
Photo via Instagram @glossier

Our Favorite Direct to Consumers Brands

There are a number of great direct to consumers brands that have used these direct selling models with great success. It all comes down to finding a unique feature that works. Here are a few examples:

  • The Honest Company - Started by actress Jessica Alba, this company launched with 17 different natural household and childcare products; they made $14 million in their first year. (It’s also a great example of social media use in marketing!).
  • Harry’s - they might be producing razors, but this brand found success by taking a regular consumer good and delivering a great product at an attractive price by cutting out the middlemen.
  • Glossier - this chic skincare and makeup brand has created a great D2C model by using augmented reality to allow customers to “try” stuff on before they buy.
  • Away - This Insta-famous luggage brand found success by building a lifestyle around their brand and selling products straight to their consumers.
  • Allbirds - This smart, eco-friendly range of sneakers operates solely on a D2C model. The secret to their success? Limiting their range of options.

To Go Direct or Not? That is the Question

If you’ve taken all the above into consideration, then you’ll now know whether implementing a direct-to-consumer model for your business can help you grow your sales. Easyship can help you succeed with a D2C model by connecting you with smart, affordable shipping solutions and tools to help you create a branded post-purchase experience. Sign up for a free account now to see how we can help your brand grow in 2020!