D2C or direct-to-customer sales is a business model based on the sale of a manufacturer’s products to the end customer reducing the intermediates, since in the digital world a marketplace doesn’t take the control over the 5 P’s.
Both in offline channels and ecommerce, the traditional model has been one that includes more agents in the sales chain, such as the distributors, wholesalers, and retailers that support the most popular retail companies as we know them today.
Until recently, few manufacturers had in place a direct online model or a network of physical stores that only showcase samples from their inventory.
In the last two years many manufacturers have come to see the importance of digital adaptation. They are now taking advantage of tools that have traditionally been the domain of the retail sector and online marketplaces. Some have also started trying out D2C as a possible alternative for the future.
So why is D2C becoming an increasingly important model for B2B and B2C brands?
Advantages of the D2C model for brands
Ease of browsing:
Through their own website, manufacturers can make complete online catalogs available to the end customer. With retail websites, brands have no control over which products in their catalog are being offered or will remain temporarily out of stock.
Some ventures are designed to make it easy for customers to “assemble” their own product packs and kits. This saves them the hassle of having to scan through a supermarket’s entire catalog and helps them to quickly identify what they need: a selection of basic products or items most commonly purchased together. D2C also supports the subscription box marketing model, which has become increasingly popular in recent years as a sales strategy. It allows for the customization of orders and can link online shoppers to marketing resources on social media, such as unboxing videos and influencer endorsements
A flexible supply chain:
A D2C manufacturer is responsible for manufacturing, marketing, distribution, sales, and customer support. This level of control is a major plus for brands, allowing them to obtain market information directly and quickly as well as adapt and implement changes more flexibly.
Having your own website or an Amazon Shop gives you full control over your brand image. Manufacturers can create product pages with as much information and details as they want, attractive photos, and quality copy and design that aligns with the impression they would like to give their customers. Product Information Management has become the most sought-after solution during this time of dire need for digital adaptation and improvement. On many retail ecommerce websites, the same brand’s product can have information and photos that are inconsistent or even outright inaccurate. Being able to manage product information is another one of the great advantages of D2C that can help companies win over their customers.
Direct contact with customers:
The most popular brands in the market are also the most distant from their target audience. How many consumers have the opportunity to chat with Coca Cola or Philips? Manufacturing companies that develop a D2C system will grow closer to their customers and be able to get to know them better, since it’s their work teams who are now in charge of managing orders, queries, complaints, and reviews.
Higher profit margins:
As they say, if the cake is not shared, it means more slices for the manufacturer. A direct sales model involves bypassing the expenses and headaches associated with managing supplier and distributor warehouses, transport and inventory insurance, and contracts and profit sharing with wholesalers, retailers, and marketplaces. However, manufacturers also have to pause to consider how cutting costs from one area could mean spending more money in another.
Challenges for D2C companies
The complexities of positioning:
Many manufacturers of products that are in demand during the current health crisis have been met with the realization that consumers are simply not able to find them online. The reality is that SEO is very new and search behaviors are still largely unknown territory, even for marketers. Today, manufacturers are rushing to compete with retailers who have spent a much longer time building up a solid online presence with good product content.
The hurdles of management:
Manufacturers can avoid having to deal with a lot of external intermediaries, but this in turn means they must adapt to manage many internal processes. These include orders and shipments, agreements with transport agencies, online payments, returns and exchanges, and 24/7 customer support, not to mention each of their associated costs. To manage all this, manufacturers will have to invest in good resources and logistical experience so that they can measure up to the level of service offered by retailers to their customers.
Is the D2C model really profitable?
As online sales soar, many brands have become convinced of the importance of ecommerce and digital integration for the future. However, this does not mean that retail is on the verge of extinction. Many buyers still prefer being able to compare different brands and prices, which they cannot do on a website that only sells one product. Both retailers and manufacturers can emerge stronger from these challenging circumstances, especially if they adopt digital platforms and automated catalog management software.
A D2C model is certainly an option for brands to consider, one which carries with it advantages and risks. What’s important to remember is that, in the current landscape, success will come to those businesses who care about their end consumers and offer them quality content and shopping experiences.
DAILY&CO – helping you transform your business model
The biggest challenge for every D2C company is the shift of responsibility in distribution.
Without large resellers to support your brand, you have to work harder on making your brand stand out. You are responsible for fulfilment, packaging, returns and warehousing. But you already know that selling online isn't always easy. Building your online presence is difficult and it requires a lot of dedication.
DAILY&CO provides all the necessary services to establish a D2C approach. That includes: supply chain and logistics, marketplace integration and sales activation, catalog management, and customer relationship management.