There are several ways businesses across the globe drive their sales. One model that has shown promise in getting a customer hooked to a brand is the Direct-to-Consumer model, popularly known as the D2C business model. A D2C business is unlike a conventional B2B (Business to Business) or B2C (Business to Customer) model.
A D2C business is where the transaction occurs directly between the manufacturer and the end user. They eliminate the “middlemen” such as distributors, agencies and resellers to tap the customer now. This is most evident in online sales, with D2C brands pushing their products and services through social media and websites.
The direct-to-consumer marketing has become a disruptive market strategy post-pandemic allowing several startups and newer entrants a competitive playing field. No wonder the D2C market was projected to grow by 19% in the year ending 2021.
The short answer to this query is no. Online marketplaces such as Amazon, Flipkart or Etsy are not direct-to-consumer business models. These are more like a B2C model where businesses reach out to the customer through a platform. There are resellers and middlemen still involved in the process.
Consider this: Warby Parker, a glasses and lense-manufacturing company, and California-based Allbirds (which sells goods made from merino wool) are examples of pure D2C brands. They removed the middlemen, cut down on costs, and disrupted the market segment by creating a loyal customer base. Apple, the trillion-dollar mobile electronics company, has made its fortune on a D2C model which includes offline stores.
Both pure D2C brands, which move their products only through online websites, storefronts, and social media apps, and legacy brands such as Levi’s and Apple are optimising their sales with the direct-to-consumer business model. Here is how these D2C brands are galvanising their sales.
The biggest play with D2C selling is the control over the brand and its metrics. The management is flexible in improvising its brand positioning and product margin at short notice. This allows them to make very effective decisions as they can bypass the hierarchy of middlemen to take a sales call at short notice.
Customer Lifetime Value, also known as CLTV or simply CLV, is the association with an end user, which is not limited to a transactional sale but to the period of the use and servicing of a product creating a lifetime of association. D2C brands such as the Dollar Shave Club cannibalised their competition and even hurt giants like Gillette in sales by focusing on customer retention techniques such as subscription models.
One of the experiences that D2C brands offer their customers is an all-in-one immersive experience. Companies provide products backed by services and a range of accessories and options for a wholesome experience so that the customer remains loyal to the brand.
With the middlemen like resellers, agencies and distributors out of the equation, the territorial battles and share in the gross revenue are gone—direct selling results in higher productivity and profit margins. The brands get to keep a bigger share of the sales and can pass a part of the benefit onto the customer.
D2C brands are no longer just restricted to sales through their online storefronts. Having leveraged their position through app-based sales and footfalls on the website, companies such as Warby Parker opened exclusive brick-and-mortar stores to strengthen their brand presence and boost sales.
Access to mobile data has powered D2C brands to make targeted sales through efficient customer tracking and retention. D2C shipping increased the conversation rate of customers while enabling them to make timely and reliable sales possible.
Whether it is a startup like Dollar Shave Club or a behemoth like Apple inc, D2C brands are now making aggressive sales with innovative marketing strategies. They eliminate the middlemen to approach the customers directly with their products. In the process, they focus on quality products and brand loyalty for customer retention.
The elimination of the middlemen also results in better gross profit margins and a consumer-inclusive flexible pricing policy. With targeted advertising and consumer data, d2C brands are becoming a success story in a market driven by eCommerce.
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