The traditional supply chain consists of four or five entities: supplier, manufacturer, wholesaler, retailer, and consumer. With the advent of eCommerce and globalized retail, however, more customer-facing businesses are cutting out the middlemen by turning to a Direct to Consumer (D2C) model where they manage every aspect of the supply chain – from manufacturing to distribution, marketing, and fulfillment.
In fact, it’s estimated that there are more than 400 D2C brands on the market today, while online trends suggest web traffic for D2C brands has approximately doubled in the past two years. Likewise, a survey by PA Consulting found that 84% of consumer goods companies have seen increased D2C sales in the past 18 to 36 months, and 88% expect their direct sales to increase further by 2020.
For a growing number of forward-thinking businesses, leveraging a D2C model means being able to sell a product that’s high-quality, affordable, and innovative.
There are a number of significant advantages to the D2C model:
1. The opportunity to better understand and cater to customers
Providing an end-to-end brand experience, complete with direct-to-consumer online sales, allows businesses to control and cultivate relationships with customers that go above and beyond traditional retail channels.
The ability to collect key customer data at every touchpoints – from email addresses and social profiles to psychographics and demographics, geography, etc. – also allows businesses to build a full picture of their target customer and craft personalized experiences that are tailored to those buyers.
2. More control over brand, product, and reputation
In a traditional manufacturing-retailer relationship, there is a disconnect between different stages of brand and product development, with the manufacturer handling operations like packaging and product design and the retailer handling end-consumer marketing.
Operating under a D2C model allows businesses to maintain complete control over their brand from initial design, to the moment a customer makes their initial engagement, right up until a product has been purchased. This not only ensures a streamlined and distinct brand identity, but also helps provide a smoother customer experience.
3. Be faster to market
Traditionally, a new product launch takes between 18 to 36 months from the point of inception to the point when the product reaches the shop floor. In this environment, decision-makers tend to be risk-averse about launching products that may be costly, time-consuming, and not ready to go to market for years.
With D2C, businesses aren’t beholden to the interests of external manufacturers and can more quickly and easily develop and test new product lines. Testing a product within a specific demographic and collecting feedback also enables D2C businesses to be more reactive to customers’ preferences and provide a better end product.
Dollar Shave Club
Dollar Shave Club is a subscription-based grooming brand that was launched in 2011 and received more than 12,000 orders in its first two days of operation thanks to a viral marketing video starring the brand’s founder.
Although its refreshing brand personality is undoubtedly a huge factor in Dollar Shave Club’s success, Dubin and Levine’s online direct to consumer business model gave them the freedom to offer razor blades at a much lower price (just a dollar a month plus a two-dollar shipping and handling fee) and provide customers with the convenience of new razors arriving on their doorstep every month.
Consumer goods company Unilever saw the writing on the wall, and in July 2016 purchased Dollar Shave Club for $1 billion. Today, the company has 3.2 million subscribers in the US, Canada, the UK and Australia, with plans to expand its footprint in Europe and Asia.
In early 2016, friends Jen Rubio and Stephanie Korey launched Away, a range of lightweight luggage with features like an in-built USB charger, durable hard case, and 360° wheels. Luggage of this calibre would normally set customers back more than $500, but Away’s direct to consumer eCommerce model allowed them to skip the intermediary markup and offer suitcases ranging between around $200 and $300.
Away reached profitability within its first two years – no easy feat for a business that sells luggage produced with 100 different parts. The brand’s luggage is complex, but what allows the company to invest in high-quality products is that its products aren’t sold to other retailers.
Players in the D2C eCommerce space are inundated with new opportunities to transcend the traditional supply chain and provide a superior customer experience and better products, all while maintaining a more sustainable business model.
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