Nowadays, numerous manufacturers still do business the traditional way, thanks to wholesalers and retailers. D2C is finally changing things, and is giving suppliers direct access to customers. D2C has a great potential to become a trend for both retail and e-commerce brands. With D2C, companies produce, pack and ship their products, while keeping their margins and cutting the middleman. Do you think that the D2C model suits your business? We have prepared for you an article that discusses D2C, the benefits and the challenges of D2C e-commerce.
What Is D2C?
The acronym D2C stands for direct-to-consumer. It means that a company sells its products directly to the consumers. In the case of D2C e-commerce, the sales take place on the company’s online shop. In a traditional business model, a product goes from the manufacturer to a wholesaler, then to a distributor (or multiple), then to a retailer, and then finally it reaches the final customer. With the D2C e-commerce model, there is no middleman. According to research (source), 55% of consumers prefer the brand manufacturer over a retailer when it comes to shopping.
What Are the Benefits of D2C E-commerce?
1. Maximization of Profit & Omnichannel Experience
One of the most essential benefits of D2C e-commerce is that it is cutting out the middlemen. This means that your company is in charge of the production, selling, distribution and promotion of a product. When manufacturers take care of everything, this gives a huge opportunity to create an omnichannel experience for customers. (In this article, we explain why omnichannel is one of the most important e-commerce trends in 2022).
2. More Control Over Brand Reputation
In a traditional retailer business model, a manufacturer has little control when it comes to their products and how they are sold by retailers. A D2C e-commerce strategy gives manufacturers full control over marketing and sales efforts and strategies. Also, D2C e-commerce gives manufacturers total control of their customers’ experience from the research phase to purchase.
3. Better Understanding of Customers
Because in a traditional business model, manufacturers never interact with customers, they don’t have a lot of opportunities to get to know them.
4. Gaining Access to More Targeted Data
When you control all the steps of production and distribution, you gather a huge amount of data about your customers. Also, now you don’t need to share first-party data with retailers. You get more accurate, real-time insights about your customers, with the help of advanced technology. With this data, you can not only create better forecasts, but you can improve the journey and overall experience of your customers.
5. More Personalized Approach
After you gather more extensive and accurate data about your customers, you have the power to create a more personalized customer journey. According to Statista, the global retail e-commerce sales reached 4.9 trillion dollars, and they are projected to grow by 50% over the next four years to 7.4 trillion dollars in 2025. In order to stay relevant in such a competitive market, it is essential to stay relevant according to your customers. Here personalization plays a huge role. You need to offer a unique, personalized experience and to have a strong brand voice, and it is more essential now than ever before.
6. Better Prices
When you cut out intermediaries, automatically you can sell for less. This means that D2C e-commerce manufacturers can offer better deals to shoppers.
7. Nurture Direct Relationships With Customers
D2C e-commerce brands respond to customers at all touchpoints, which means that they can develop a closer bond and a stronger brand-customer relationship.
8. Ease of Browsing
Manufacturers can make complete online product catalogs for their customers. In this case, they have more control over which products these catalogs will display because when it comes to retailers, in the end it is their decision if they want to promote a certain product, keep it in stock, or even push it out of stock.
9. Expanded Market Opportunities
D2C e-commerce companies are no longer restricted geographically by local retailers. They can go international by selling to the right market and right customer segments.
10. More Opportunities to Innovate
The D2C model allows you to test new products and innovate more regularly. While most retailers follow a set standard with selling, this means that they might be reluctant to selling new products. Manufacturers can launch new products in a smaller batch, and test them with selected demographics and gather feedback.
What Are the Challenges of D2C E-commerce?
1. Sales, Marketing and Customer Service
D2C e-commerce companies need a separate team that will take care of the sales and marketing strategies, and of customer service. We have an article that shows you 5 ways to improve e-commerce customer experience.
2. Order Fulfillment
Sometimes D2C e-commerce companies struggle with order fulfillment because they lack previous experience. Also, they compete with retailers that offer next-day shipping.
3. Competing With Retailers
Retailers already have experience with selling to consumers, and also they have a good understanding of the retail market. This makes the situation a bit more difficult for manufacturers who are interacting directly with the consumers for the first time, but with a good strategy in place, this disadvantage is minimized.
4. Complex Internal Management
Having full control over operations is a positive aspect, but, at the same time, it is a great responsibility because you need to have in place strong management. This means that your company needs a strong organizational structure that will take care of everything, from sales to regulating inventory levels.
5. Increased Liability
D2C e-commerce gives you full control over operations, but this also means an increased liability for aspects that usually are shared with third parties, such as shipping, data collection and protection, security breaches.
D2C e-commerce is going to play a big role in the future. Especially thinking of the disruption across supply chains that have happened in the past two years. More manufacturers will turn to D2C e-commerce, so they will be able to sell to end-consumers directly. It is the perfect time to jump in this wagon!