What is direct-to-consumer (D2C) eCommerce?
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The direct-to-consumer business model has completely eliminated the need for middlemen, enabling merchants to interact directly and build a relationship with their customers. This model also gives businesses the opportunity to improve their products or services based on real-time feedback from customers.
Traditional business models typically would have a producer selling to wholesalers or retailers, making the products available to the consumers. The Direct to consumer model on the other hand differs because it allows the producer to sell directly to the end user without the need for middlemen.
The D2C model is quickly gaining popularity for several reasons, mostly because it increases interaction between the producer and consumer, which in turn helps increase customer retention and brand loyalty. It also allows the product owner to exercise full control over all activities from production to marketing and sales.
Perks & Risks of D2C.
Every business model comes with its benefits and disadvantages. As a business owner, it is essential to know the merits and demerits of whichever business model you decide to work with. The success of your business depends on this act of due diligence.
Benefits of D2C.
One outstanding advantage of using a D2C business model is that you can offer your products directly to customers at reasonable prices and interact with them to know how customers feel about your products.
Below are some of the advantages of adopting the D2C business model.:
- build a database of customer information
Running a business with a D2C model gives you access to customer data such as addresses, phone numbers, and emails.
In order to stay in touch with their customers, brands can use the contact information and details of customers that are gathered during the buying and selling process, to stay connected to their customers. Some brands have utilized this to grow customer relationships and keep their customers engaged.
- run focused and highly effective marketing campaigns
When there is enough personalized data to reach your desired target audience running marketing campaigns becomes more efficient. If you utilize social media marketing tools or send out cold emails to potential clients, simplifying your campaigns to your chosen target demographic will increase the effectiveness and profitability of whatever marketing strategy you decide to use.
- Interact directly with customers
One thing a traditional business model can’t give is direct customer interaction, which allows brands to learn important information about consumer behavior and what will appeal to their target market. The D2C business model, on the other hand, enables you to give your customers the best shopping experience and satisfaction based on analysis of customer data and behavioral statistics.
- build a relationship with returning customers
An advantage of the D2C business model that cannot be overemphasized is the allowance it gives businesses to nurture relationships with the end-users of their products and services. Unlike the traditional business model where there is no direct link between producers and customers. Both you and your customers will benefit from this model, especially if you offer subscription plans.
- Oversee both production and sales processes
With the elimination of middlemen from the production and supply chain, the D2C model gives the producer total control of the product design, how end users get to hear about their products, and the methods via which customers can purchase these products. You decide how to make your products stand out in the minds of consumers and how you want your brand to be perceived.
A brand using this model is in complete control of everything!
Disadvantages of D2C.
The D2C model comes with its own limitations. Here are a few to consider when making a choice on whether or not to go with this model over the other business models:
- You cannot successfully run a D2C business model without a solid operations plan or team
This business model thrives on a round-the-clock support and operations plan. With the D2C model, you no longer have retailers or wholesalers to rely on to market your products, sort orders, deliver them to customers, and everything in between. You are now solely in charge of all your processes, and therefore need to be swift at delivering so you don’t keep customers waiting for their orders. This is why D2C brands need to set up a solid operation plan to manage everything from marketing, sales, inventory, logistics, and every else until it gets to the end user. On the contrary, other business models only require the merchant to produce the items and the middlemen take responsibility for everything else.
- You are still in charge of your production process
Managing sales and logistics does not exclude the merchants from production or putting effort into product improvement to improve customers' ever-growing demand. You still need to put effort into creating products that are appealing enough to boost sales and meet the needs of customers.
- Technology
If you choose to run your business using a D2C business model, you will need the appropriate technological infrastructure to manage and operate it. The tech stack required for your business processes is largely determined by your brand and how you would like to configure your customer experience. Since the goal beyond making money is to add value to customers, you will need to set up an online store that will make your customers thank you. And if you sell subscriptions, Shopify and Chargezen are a duo - a good place to start with technology and can provide you all the data and information you require on the back end in order to do direct sales.
Why choose D2C?
The common reason why most D2C brands choose this model is because of the complete autonomy it gives them in determining how their customers experience their products. It gives them the freedom to fulfill customer expectations while building a community of committed customers.
Popular brands that use the D2C model.
Many companies using the direct-to-customer model are dominating the eCommerce market, and they can serve as an example for those who want to adopt this strategy. The businesses in the list below are all excellent examples of direct-to-consumer businesses that have benefited from this strategy.
Summary
The D2C model ensures the quality of your product, packaging, and pricing is up to your standards. Selling directly to your customers from your website also allows you to manage the image of your brand and build a relationship with your customers through direct communication.
If you are considering setting up your business with the D2C business model, ensure that you have the necessary marketing, sales, tech, operations, and data analytic competence required to smoothly run a successful business utilizing this model.