The COVID-19 pandemic has been tough for a whole lot of industries, and in fact, some have yet to recover from the hurt inflicted. However, the previous year has unexpectedly accelerated the growth of some sectors, including the direct-to-consumer (D2C) markets.
2020 witnessed a sudden shift in the consumers’ behaviors, preferences, and purchasing patterns, compelling brands to implement major changes in their marketing strategies to cater to their unique needs. E-Commerce has been growing rapidly in recent years, especially in 2020, and the trajectory shows no sign of dropping, at least for the next few years.
A majority of the e-Commerce market is occupied by the D2C sector, mostly in response to the need for maintaining social distancing norms. For example, D2C brands like Casper and Warby Parker have been flourishing continually for quite some time now.
What is the D2C Business Model?
As opposed to the B2C (business-to-consumer) model, D2C companies manufacture and deliver their products directly to the end-user without involving any middleman or traditional stores.
B2C companies manufacture the goods and pass them over to a retailer who then delivers them to the customers. In B2C models, there is typically an intermediary retailer, such as Walmart or Amazon, who sell the products of various manufacturers.
The best part about D2C models is that buyers can enjoy a more simplified and streamlined shopping experience. Moreover, retailers no longer need to worry about meeting another company’s policies and standards or stocking up their shelves.
As a result, D2C merchants can develop more meaningful relationships with their customers and build a stronger brand image. This new business model also enables retailers to receive instant feedback on their products and services, thus creating more positive reviews and testimonials.
The Rising Popularity of Online Shopping
The pandemic has greatly accelerated growth in online sales and the D2C movement. After the WHO declared COVID-19 a global pandemic in March 2020, e-Commerce stores and retailers have witnessed a surge in online shopping.
In May, some businesses started reopening, which further gave a significant boost to page views and order counts. The next month saw a steady growth with order count and page view up by 57% and 75% respectively over the previous year.
Since people avoided stepping out, and most of them were working from home, they were ordering their daily essentials online. Since consumers were shopping online and didn’t have to worry about limited cash issues, they were spending more while purchasing online. And this was a huge plus point for retailers, especially the D2C businesses.
Why 2020 Was a Year for D2C Brands
The obvious answer to this is that brands are realizing the benefits of creating direct sales channels to connect with their consumers better. D2C strategies focus on enhancing customer relationships by offering more personalized solutions.
Further, the new business model is encouraging the development of more advanced recurring revenue systems, such as through subscription payments. Some of the key reason behind the success of D2C include:
- Creating customized experiences. Direct-to-consumer business models are flexible enough to offer more personalized services to buyers. One can have complete control over the entire experience chain, be it product delivery, sending personalized messages, or offering a seamless website browsing experience. In short, D2C brands aim at providing more value-added services by building an emotional appeal around them.
- Improvement of profit margins. D2C brands are now able to cut down distribution costs by eliminating all intermediaries. This further enables them to have greater control over their profit margins.
- Taking control of data. If you are maintaining an excellent customer relationship, then you probably have access to all your buyers’ data in real-time. For example, tracking and analyzing vital consumer data like purchase histories, patterns, behaviors, trends, unique needs and preferences, etc., allow you to understand your shoppers better.
Since you know your customers’ tastes and have an idea about what they are likely to purchase next, you can explore new strategies to address their requirements at the right time. For instance, you can implement new marketing automation tools and workflows or try clustering new audiences.
- Digital-first marketing opportunities. D2C brands are exploring various opportunities and possibilities of the digital world, getting global control over all their channels. They are working on regulating their brand and merging all their conversion efforts under one funnel. The journey towards D2C models might be through the development of more intelligent workflows throughout the product cycle.
Some Tips for a Better Future!
Now that D2C is going to take center stage for at least the next few months, here are some tips you can try to grow your D2C brand.
1. Don’t Close Your Physical Doors Entirely
Although online portals have a stronger presence within your target group, there are ways you need to improve your customer relationships. Offering efficient services and quality products at your brick-and-mortar store is among them. In fact, some brands are also providing the option of order pick-ups from a nearby retail store.
2. Cultivate the Right Talent
Adopting the new D2C model might mean a shift to a new business environment, mindset, and even talents. Whatever your strategies and upgrades, make sure each of your plans is centered around your customers. Use the right talent and hire the right teams to create engaging customer experiences.
3. Look Beyond SEM and Social Media
No, we are not saying that you must abandon special media marketing and SEM strategies altogether. In fact, try to look for better ways to promote your brand side-by-side, making social media strategies.
For instance, try to tie up with the latest streaming and smart TV services to attract your audience better and in more engaging ways. These advertisers are able to reach wider audiences than expected due to the pandemic.
4. Have a Specific Purpose
The pandemic crisis and lockdown restrictions have forced people to explore new hobbies and talents, which is why the previous year has seen a drastic change in customers’ behaviors and buying trends. Also, people have started to go for less expensive options and alternatives.
So, try to have a specific purpose, a unique value proposition, and a stronger way to engage your consumers.
Frequently Asked Questions
Are direct-to-consumer (DTC) brands growing?
Yes, DTC brands have experienced significant growth in recent years and continue to thrive. In 2020, they witnessed a surge in popularity, and the trend is expected to continue in 2021 and beyond. This growth can be attributed to various factors such as changing consumer preferences, advancements in e-commerce, and the ability of DTC brands to establish direct connections with customers.
Why are direct-to-consumer brands growing?
DTC brands are witnessing a surge in their expansion for various compelling reasons. Firstly, they provide customers with a seamless and tailor-made shopping journey, cutting out the middlemen typically found in conventional retail channels. Secondly, DTC brands prioritize delivering superior products at pocket-friendly prices, striking a chord with budget-conscious consumers. Lastly, the advent of social media and digital advertising has empowered DTC brands to efficiently connect with and captivate their desired customer base, cultivating brand allegiance and propelling revenue.
What are direct-to-consumer (DTC) brands?
DTC brands are enterprises that directly sell their goods or services to consumers, circumventing the involvement of middle entities such as wholesalers, retailers, or third-party distributors. By eliminating intermediaries, DTC brands have full command over the entire customer experience, encompassing production, distribution, and marketing. They predominantly operate through online platforms, harnessing the power of e-commerce and digital promotional tactics to connect with their intended clientele. DTC brands encompass diverse sectors, including fashion, cosmetics, culinary delights, household items, and beyond.
What are the benefits of direct-to-consumer (DTC) brands?
DTC brands offer several advantages both for businesses and consumers. For businesses, DTC eliminates the need for costly distribution networks and allows for direct customer feedback, enabling faster product iteration and improvement. It also provides greater control over brand messaging, customer experience, and data insights. For consumers, DTC brands often offer competitive pricing, unique product offerings, and personalized shopping experiences. Additionally, the direct relationship between DTC brands and customers fosters a sense of trust, transparency, and community engagement.
How do direct-to-consumer (DTC) brands benefit consumers?
DTC brands bring numerous advantages to consumers. Firstly, they help save money by cutting out the extra costs typically associated with traditional retail channels. This enables DTC brands to offer top-notch products at more reasonable prices. Secondly, DTC brands prioritize enhancing the customer experience by providing personalized recommendations, hassle-free returns, and prompt customer support. Thirdly, DTC brands often place a strong emphasis on sustainable and ethical practices, allowing consumers to make informed choices that are transparent and mindful. In summary, DTC brands empower consumers by offering greater convenience, value, and alignment with their preferences.
Are direct-to-consumer (DTC) brands limited to specific industries?
No, DTC brands are not limited to specific industries. While they gained initial popularity in sectors like fashion and beauty, the DTC model has expanded into various industries, including health and wellness, home goods, food and beverages, electronics, and more. The DTC approach is adaptable and can be applied to almost any consumer product or service. As long as there is a demand for direct purchasing and a brand can establish an online presence, DTC brands have the potential to succeed in different market segments.
