The direct-to-consumer or DTC business model has taken off in recent years, especially since the influence of the pandemic last year. Many brands find that offering products directly to the public is the best way to increase their market share, while others find it something they can’t ignore. The trend started with easy-to-ship items like makeup and fashion and is now spreading to higher-priced, complex products. There is no sign of this trend slowing down as e-commerce sales continue to rise. Let’s look at DTC in more detail.
What Is DTC (Direct to Consumer) Retail?
DTC retail is a relatively new retail sales model where brands sell their products directly to their customers instead of a retailer, distributor, wholesaler, or other sales outlet.
Customers are buying more items online and making fewer purchases at traditional physical retailers like Macy’s or Dillards. DTC allows retailers to build relationships with customers during their online shopping experience instead of through a third party.
Many well-known brands have already embraced the DTC trend and launched their own e-commerce stores. Let’s look at why this is newly popular and profitable.
3 Reasons Why Retail Is Jumping on the DTC Bandwagon
Brands both large and small can’t ignore what creating their own store can do for them. Here are some benefits a direct-to-consumer retail model can bring to your business.
Save Costs by Cutting Out the Middleman
With the traditional retail model, everyone between your business and the customer takes a cut of the profits. By eliminating the middleman, you can increase your profits and offer your products to customers at lower prices.
Own Customer Relationships & Build on Them
Selling products directly to a customer allows a business to build a relationship directly with them. Instead of worrying about sales reps being educated on your product or relying on third parties to present it correctly, you can take control of the conversation and nurture a lasting relationship.
Offer Products Based on Direct Customer Feedback
Feedback is key to growing your business. By interacting directly with your customers and collecting their feedback, you will improve your existing services and products and create new products based on customers’ needs.
10 DTC Trends for Ecommerce Growth
Direct-to-consumer is on the rise due to pandemic-induced shopping trends. As traditional retailers are slowly transitioning toward selling directly to customers online instead of at brick-and-mortar stores, other brands are launching their business using only the DTC retail model. Here are some trends driving this growth in DTC brands.
1. Brands Are Selling Online and Offline
Direct-to-consumer may be an online sales trend, but it is not just happening there. Many companies have discovered that opening DTC brick-and-mortar stores helps them build communities with their customers.
2. DTC Is All About Long-Term Customer Relationships
The DTC model allows you to build a relationship directly with your customers. Your product is not just one of the five they have to choose from at a traditional retailer. By building that relationship, your brand could be their favorite for many years to come.
3. Retailers are Offering Subscriptions
Many DTC companies are embracing the subscription model as a key to growth. Why offer only a one-off purchase when you can have a customer for months or longer. Many DTC brands base their complete business model on subscriptions by offering them exclusively.
4. Customer Experience Is Part of the Package Deal
When a customer buys your product from a retail store or another online retailer, you have no control over that customer’s experience. If they bought Brand X instead of your product, they would have the same experience. DTC allows a brand to provide customer service that fits the quality of your product.
5. Social Media as a Sales Channel
Social shopping can no longer be ignored. It is quickly integrating e-commerce with social media platforms. Consumers can buy products instantly without going through a complicated sales process. A DTC model allows businesses to take advantage of social shopping.
6. Brands Are Offering Complementary Products
By offering a related product to customers at checkout, businesses can maximize product purchases and provide added value for the customer. DTC retailers discover that as they learn more about their customer’s needs, they can offer complementary products that they might not have discovered using a traditional retail model.
7. Influencers Are on the Rise
Influencer marketing is a DTC mainstay. Influencers can get your brand in front of new customers more effectively than any other method because of the relationship influencers build with their followers. Your business can also nurture this kind of relationship by interacting directly with consumers.
8. Brands Are Tapping Into the Gen-Z Market
Gen-Z is a tech-savvy and socially-minded demographic. They grew up with the internet and are more likely to buy from consumer brands that state their values clearly and have a strong online presence. Competitive pricing isn’t enough since they prefer brands that have personality and create their own image too. Thus, DTC brands and Gen-Z are a perfect match.
9. Food and Beverage Brands Are a Growing Category
Foods and beverages are the fastest-growing e-commerce category. Many brands like Magic Spoon have noticed this and have launched products in the DTC space. We will see many more DTC food products in the future.
10. Sellers Are Diversifying Their Marketplaces
A DTC retail model gives a business complete control over its sales channels. This means they can expand to new online platforms and display their products to a wider range of customers. Multichannel inventory management software makes moving to new platforms and managing the orders from diverse channels a simple process.
How to get DTC Right?
Direct-to-consumer e-commerce is on the rise. Launching a DTC program may be the right move for your business, but it is not something you can do without planning. Are you prepared? Here are some points to consider.
Pick the Right Omnichannel Partner
The key to success in DTC is to make sure your products are available wherever your customers may be, which means being on multiple sales channels. Executing a multichannel sales strategy can be difficult without the right software. Software like Skubana offers innovative multichannel inventory management that will keep track of all inventory, make sure it is present on all sales channels, and manage orders, so customers get your products in their hands quickly. With native integrations into Shopify, BigCommerce, Amazon, Walmart, eBay, and more, Skubana enables DTC brands and retailers to grow beyond their primary storefront.
Think About Long Term Profitability
Being in control of your sales and getting insights directly from those customers can be a huge advantage for your business. However, you also need e-commerce to be a profit center rather than a loss leader if you are going to be in it for the long run. That means considering your revenue goals for DTC before you get started. You must also consider the costs of marketing, fulfillment, delivery, and customer acquisition.
Consider Your Audience and Adapt to Their Changing Tastes
One benefit of being a DTC brand is that you have the opportunity to listen to your customers, but first, you must take advantage of it. This could involve changing an existing product based on customer feedback, creating a new product that customers can now directly ask for, or customizing the shopping experience based on user preferences.
DTC Trends FAQ
What Is a DTC Strategy?
A DTC or direct-to-consumer strategy is a relatively new way for manufacturers or brands to do business. This sales channel strategy removes traditional distribution bottlenecks that may involve traditional retailers, distributors, wholesalers, and other sales channels. DTC allows businesses to sell their products directly to customers.
Is a DTC Brand Sustainable In the Long Run?
With the right tools and business plan, a DTC brand can be even more sustainable than a traditional retail model. Cutting out the middlemen will keep your costs low, which will translate to higher profits and savings you can pass on to your customers.
What Do I Need to Start a DTC Ecommerce Business?
To start your own DTC e-commerce business, you need to make your products easy to find. This means listing them on sales channels like Amazon, Shopify, Walmart, and others, as well as creating your e-commerce store. To manage the complexity of inventory and orders from multiple sales channels, you will need multichannel inventory management software. And, finally, provide a customer experience that makes new customers want to return.
Ashley Brown is the Partner Marketing Manager at Skubana. She’s passionate about people, thinking outside of the box, and e-commerce!