Companies and customers are separated by many levels along the traditional supply chains. Direct-to-customer (DTC) cuts out the middleman, speeding up sales processes and improving customer experience.
When you visit a weekend market and buy fresh produce from a farmer, you are experiencing DTC in action. Nowadays, DTC also exists online, where buyers and sellers look for each other and transact directly.
Launching a DTC company is now easier than ever. Even emergent DTC startups can compete with large, omnichannel chain brands. This increase in diversity gives consumers more choices, which means it's more important than ever for brands on any scale to optimize their DTC strategy. This article will outline some strategies you can apply as a DTC business.
DTC brands start by selling online via a single sales channel. Usually, this involves a single product with a heavy brand focus—although it can also be a single category with just a few select items.
Over time, DTC brands need to diversify their products and services to improve customer engagement. This can reduce your damages in cases of industry turndown and help protect your business from competitors. The two main methods used by DTC brands are:
A leading example of the "related diversification" model is TomboyX, initially an underwear company whose product range has since expanded into swim and loungewear.
A socially-conscious approach (including ethically-sourced fabrics) and an innovative digital marketing strategy have contributed to TomboyX's success, with a solid social media presence on Twitter, Facebook, and Instagram.
Subscription e-commerce companies like Dollar Shave Club (launched in 2011 as a monthly men's razor subscription service) continue to flourish with growth in DTC subscription-based products of over 17% per year.
Ease of contact between manufacturers and end-users and an increased desire to buy directly have contributed to the brand's rise in popularity. Analysts predict that by 2023, up to 75% of DTC brands will offer subscriptions to their customers.
The three main types of subscription models include:
One example of the personalization model comes from Birchbox. Beauty Box subscription sales remained high, especially during the pandemic, with manufacturers incorporating more health and wellness items into their packages. In contrast, traditional sales of beauty products were not that positive. According to a McKinsey report, beauty product sales at known retailers dipped even if these retailers remained open during the pandemic.
Collaboration, which was only seasonal in the past, now becomes more commonplace for brands to join forces. Brands collaborate to expand their markets, share marketing costs, or create competitive products.
A collaboration typically occurs between two complementary brands on a single co-branded product. However, collaborations between brands in seemingly unrelated niches are also becoming popular, as with Pizza Hut and Gravity Blankets' sell-out line of pizza-themed weighted blankets.
After changing how we communicate and learn, social media is now changing how we shop. More people are now purchasing directly from a brand through social media. As a result, brands must ensure their presence on these platforms to reach their target customers.
A mere presence on the platforms, however, is not enough. Brands should post relevant content frequently and launch advertising campaigns to build and nurture customer relationships.
To a lesser (yet powerful) extent, parasocial relationships have also influenced purchase decisions as consumers in the 18-56 bracket seek recommendations from influencers and peers.
To choose the right platforms, consider your target age group(s): those aged 18-24 are more likely to use newer platforms like Tiktok and Instagram, while Facebook tends to be preferred by older audiences. Other demographic factors, such as generations, should also be considered when using social media for sales. For instance, Gen Z and Millennial consumers seek companies with diverse representation. The written copy and images used by the brand in its social media posts and paid ads targeting these segments should consider this fact.
Increased in-category competition lowers the barrier to entry for companies at all levels. The increased in-category competition is mainly due to a wide array of tools that make it easier for anyone to launch and manage their own DTC company. For instance, Shopify now makes it easy for anyone to create their eCommerce site. In addition, Floship, a cross-border fulfillment platform, can also help new DTC company owners manage the logistics of their business.
In addition, lockdowns further accelerated eCommerce rates, as companies like Amazon made logistics easier to navigate.
DTC brands must be proactive and focus on enhancing the consumer experience for "always online" shoppers to stay ahead of the game. One method has been to include features such as shoppable images and posts, as with this example from Instagram.
Additionally, pop-up shops allow DTC brands to generate greater awareness and scale business strategically while offering customers an omnichannel experience.
In addition to the convenience and speed of online shopping, consumers also can make in-person purchases. This way, DTC brands can show their business acumen by maintaining a flexible, agile model that embraces consumers' varied habits and preferences.
Generational factors are a significant driver of the increase in global DTC sales. Across the world, Millennials and Gen Z shoppers tend to purchase using DTC more than any other generation.
During pandemic lockdowns, over half of Millennials made online purchases from international brands - three times the rate of consumers aged 57-75.
Key selling points for Millennial and Gen Z include fast, affordable shipping, home currency pricing, and a solid global inventory catalog.
Since the COVID-19 pandemic, the demand for contactless payment methods has risen, with mobile wallets, buy-now-pay-later, and crypto becoming more popular.
DTC businesses need to adopt new payment methods to reach customers who prefer using them. In addition, optimizing online payment and return strategies helps improve the customer experience.
Additionally, by building sturdy financial models, accounting teams can mitigate any risk arising from issues presented by online payments, such as chargebacks.
Advancing tech and high demand levels have increased global consumers' appetite for faster, more convenient DTC products and services. As a result, DTC brands are now the fastest-growing form of e-commerce, charging less while taking advantage of the latest developments in large-scale shopping platforms.
Through greater accessibility and choice, brands can maximize their chances of success—even more so if they can present their ideas freshly and engagingly.
To stay ahead of the competition, DTC brands need to remain agile and flexible, allowing them to grow with rapidly changing developments.