The Resurgence of Direct to Consumer businesses
Why is the Direct to Consumer (D2C) model coming back into fashion? The concept has indeed existed for a long time, at the manufacturer Dell for example.
Some brands are proud to call themselves D2C, or even direct brands. These companies have a distribution model that directly serves the end consumer without going through intermediaries and/or points of sale, in areas where brands usually go through distribution channels.
These are some examples of direct brands:
This model has been around for a long time, but it has gained ground in recent years. Indeed, D2C brands are rising in popularity thanks to the direct distribution enabled by e-commerce. D2C brands also tend to rely heavily on social networks for promotion and selling their products and services.
With the D2C business model, brands can avoid incurring the costs associated with traditional distribution models. It is not uncommon to see them using the e-commerce subscription model in their offers.
D2C: the new rebels?
The D2C (direct to consumer) market has been experiencing rapid, double-digit growth for several years. In 2021, the market is projected to grow 19.2%.
Within the context of the Covid-19 pandemic, the willingness of companies to go direct to consumer is also accelerating due to the uncertainty hanging over supply chains.
Everyday consumer brands such as Allbirds (shoes), Casper (mattresses), Harry’s (brioche breads, pastries) or Barkbox (monthly gift boxes for dogs) generate annual revenues of several million dollars thanks to business models that are entirely digital-based. These very lucrative strategic choices have not gone unnoticed, and classic brands such as Heinz and PepsiCo have also shown an interest in trying their hand at the power of digital levers. These brands have entered into direct contact with consumers through digital for the first time in their histories.
2021 will be Direct-to-Consumer
Facebook has also launched its new store functionality on Facebook or Facebook Shop. It is now possible for anyone to create a store on Facebook and provide end consumers with a personalized digital storefront. Stores are easy to set up and configure. They have the important advantage of loading very quickly on mobile and being accessible worldwide.
Adidas for example has made a deal with a social selling app called Storr. Through this, Adidas fans can have their own store from their mobile and sell Adidas products, earning a 6% commission on each direct sale.
In China, the Douyin app (also known as Tik Tok) is a real hit phenomenon. In the field of streaming shopping, major brands have sold products live via live videos, offering real-time discounts. Direct to consumer sales via apps already exceeded $ 6 billion in transactions in 2019 alone.
Consumer expectations have never been higher
Consumers are now setting the bar very high and many brands have already understood this well.
Consumer expectations of brands will never be the same. Brands will have to keep their promises in the face of very demanding consumers, all within a highly competitive environment.
To grasp the extent of this, just look at the revealing data from Scalefast on the subject.
Scalefast is a Californian company founded by 3 French entrepreneurs, which helps brands to develop their own online stores.
Scalefast sourced the following data:
- 61% of consumers would be willing to share more information with brands if it gave them a better shopping experience.
- 54% of consumers expect to receive a personalized discount within 24 hours of first contact with a brand.
- 51% of consumers consider it vital to receive a personalized experience throughout the brand’s various digital channels.
- 26% of consumers believe that improved security and user experience on the payment platform makes purchasing easier with D2Cs.
- For at least 22% of consumers, having the option of same day delivery becomes an important buying decision.
- Over 80% of end consumers are expected to make at least one purchase through a D2C brand in the next five years.
The pandemic has set in motion an unprecedented process of e-commerce acceleration around the world.
What are the success levers of D2C?
D2C means owning and controlling the entire customer relationship. D2C brands must harness all the data they collect to create unique, personalized, more effective and premium experiences. These brands base their strategies on experience gained over time.
D2C brands are built on experience.
D2C strategies help to institute new recurring revenue streams through:
- Mew product launches,
- Personalized tactics that drive user retention much more effectively than is possible with other channels.
The 4 major characteristics of a D2C model
Improved profit margins
By eliminating middlemen, brands are able to reduce their distribution costs and gain better control over their profit margins.
The ability to create customizable experiences
The brand is 100% responsible for its relationship with its customers, and those relationships are entirely its responsibility. This allows companies to control the entire customer experience chain: from website to personalized messages to product delivery. Far from a value proposition based purely on price, brands are starting to build emotional and high value-added reasons to buy such as:
- Possibility of free returns
- Free delivery
- Same-day delivery
- Refunds within 30 days if not satisfied
- And more…
Full control of data
Maintaining a first-rate customer relationship means having access to all data in real time. This allows brands to identify models, trends, needs and preferences, and to understand the tastes of their users better. Full control over customer data is also facilitating new ways to leverage it: from bringing new audiences together, to including smart feeds through Marketing Automation. And of course, this also presents new ways to innovate products and services from a CRM that is 100% yours.
The possibility of digital-first marketing.
Brands are entering the digital realm in force, and are starting to take overall control of all channels, focusing their branding and conversion efforts under one funnel and ultimately closing the circle on their 360 ° communication once and for all.
The journey to new D2C models is being made possible through new development technologies, the creation of intelligent flows throughout sales processes, or with the selection of a good MarTech (set of technologies related to digital marketing) to realize it. However, the real essence and unique value proposition will always remain found in the “C” of customer experience.
We can help you develop the specific web or mobile application that will allow you to sell your products directly to your end consumers.