Why Brands Are Increasingly Preferring Direct to Consumer (D2C) eCommerce?

Direct to consumer (D2C) e-commerce is when a brand sells directly to the end consumer instead of adopting the traditional way of selling: manufacturer to wholesaler to distributor to retailer and then the end customer. 

In other words, retailers own the entire journey from manufacturing until the final product reaches the customer instead of depending on third parties. 

There are multiple ways of “owning the journey”. The simplest is to have your own website but other ways include via a mobile application or even by being a direct seller on a marketplace and carrying out all operations yourself, including the fulfilment process. 

So what’s prompting brands to adopt this new way of reaching out to customers?  

One of the obvious reasons for direct selling is higher profit margins, but there is a lot more to it. For example, Nike grew its direct to consumer sales to 35% of its total revenue by May 2020. In 2011, the percentage was a mere 16%.

So let’s have a look at the fundamentals of the D2C model, its advantages and how your brand can implement it successfully.

Advantages of D2C eCommerce

1. Create an omnichannel experience

When you are selling directly to customers, you have full control over everything: packaging, marketing message, customer service etc. 

Using this control, you can create an omnichannel experience for your customers, increasing the chances of building a loyal customer base, among other advantages. 

Pro Tip: Make sure your brand message is consistent across all the channels. 

2. Get complete insights into customer data

eCommerce has made the business world fiercely competitive. Therefore, to remain relevant and climb ahead of the competition, one of the pertinent things is to have complete control over customer data. 

There is a reason data is considered the new oil.

It allows you to analyze the customer preferences, buying habits, perform A/B testing, and then fine tune your marketing message as well as offerings accordingly. 

Without direct to consumer selling, you cannot get access to this important data which is a goldmine even if you are in the B2B space.  

Pro Tip: Make sure you have the right team and the right set of tools to gather the data and make sense of it.  

3. Be more innovative

The majority of small to medium-sized retailers are not willing to stock innovative products as they fear lack of sales. With the D2C model, you let go of such fears.  

Not only can you carry out almost infinite product innovations, but you can also test out different variations of a new product before finalizing one of them. 

No more spending countless days convincing distributors, wholesalers and retailers that your new product is worth their time.  

Pro Tip: A D2C model shouldn’t be an excuse for random innovation. Make sure whatever you do is backed by solid market research. 

4. Make competition irrelevant 

According to research conducted by Professor Richard Foster from Yale University, the average lifespan of a company has decreased by a whopping 50 years.

The reason is that many small brands and startups are beating the incumbent who are not willing to adopt new ways of selling. D2C selling is one of those new ways. 

In September 2018 Harry Lab, an online startup, was all over the news for taking on razor giants Gillette and Schick. And guess what Harry Lab did differently? Did they come up with new razors never seen by mankind? Not at all! They just adopted a direct to consumer (D2C) and subscription-based model and made the competition irrelevant. 

Therefore, the sooner big brands work on adopting a D2C model, the better it is. Otherwise, they should be prepared to be disrupted by startups who are hungry to fill the gap. 

Getting started - Answering the three WHAT’S

Getting started with a D2C model doesn't just entail having an e-commerce store. There are a lot of decisions that should be made. Answering the three WHAT’s will give you a good starting point.  

1. What to offer? If you are dealing with distributors and wholesalers, it wouldn't be wise to offer all your products and services via your online store. You don’t want to wage a war with your intermediaries. Therefore, think about what to offer and what not to. 

Instead, what you can launch exclusive online-only offers, or go the Pepsico way which in November 2020 launched a direct to consumer online store and offered its products in bundles, something not available at any retail outlet.  

Whatever option you opt for, make sure you carefully select your offerings without diluting the sales of third-party sellers.

2. What will be the price? Here again, don't make the mistake of setting your price lower than the retail price, or else it will adversely impact your cash cows i.e. all the third-party sellers. 

However, you can offer some incentives to attract buyers to your D2C store. 

For example, free shipping for an order of a certain value, giving loyalty price to regular customers, and discounts from time to time. 

3. What is the purpose? 

The purpose is one of the most significant things to ponder before adopting a D2C model. Do you want to increase your revenue, enhance brand awareness, provide a customized experience to customers or have some other purpose?

Defining the purpose will help you plan marketing campaigns, set pricing for your products, and help in other business-related things.   

Success with D2C requires careful planning

Brands are used to selling through intermediaries as that is what they have been doing since inception. 

Consequently, the mere thought of selling directly rings alarm bells: How will we manage the supply chain? What if we fail, will it permanently damage our brand? Do we have enough resources to build a D2C channel etc, these are some of the common fears.

The first step in letting go of the fear is to understand that D2C selling is not to be considered as a luxury, rather a necessity to survive in the post-pandemic era. 

Once you consider it a necessity, things will automatically start getting in place and fears will vanish. 

Furthermore, many brands in the past, like Nike, Pepsico, and Heinz, among others have successfully managed to build a D2C model. 

If they can, why can’t you? 

The start of anything new is difficult. We at Emerce Consulting understand this due to our 16 years of experience working with top retailers all over the GCC, helping them in their digital transformation journey. 

That is why we are here to help you!

Whether you want to launch your D2C ecommerce store, need help with a value proposition, need support with digital marketing activities, want support with setting up ecommerce or omnichannel operations, we have the solution.

Please get in touch with me directly and I will be more than happy to help.