What Is a Direct-To-Consumer Business In The World of E-commerce?
Businesses have various means of supplying their goods to the public. Of these is "direct-to-consumer," or DTC. So what exactly is DTC business and how does it work?
The direct-to-consumer model has instigated a dramatic shift in the evolution of the retail industry. Driven by accessible digital marketing and consumer demand, more businesses are cutting out the retailer and distributor intermediary and engaging with consumers directly.
There are more small businesses and startups all over the internet now than we’ve ever seen in prior years—even including the “small business era” in the early 1900s. For the past several decades, big box stores have reigned supreme.
But now, those distribution and department stores are hurting. Those stores that once carried every brand under the sun are losing a lot of business to the direct-to-consumer model, where businesses—both small and large— are starting to take control over their own customer base.
What’s causing this shift, what are the benefits, and what does DTC mean for you?
What is Creating the Direct-to-Consumer Shift?
1. Customers demand enhanced service.
Department stores used to be considered a high-end experience. Sales associates would provide one-on-one service from the moment you stepped in the store.
Today’s customers are more interested in the convenience and service that comes with buying directly from the brand itself rather than the attention of the sales associate. E-commerce business itself has become one of the most personalized forms of service out there. Although not face-to-face, e-commerce allows businesses to customize content and sales based on a user’s data. So the benefits customers got in-store are being replicated (and amplified) by.
Consumers want a different kind of service based on convenience, speed, and engagement. Direct-to-consumer puts the customer at the center of all of your business decisions.
2. Digital Channels Allow for Interaction.
Advertising and consumer interaction used to be much less accessible to small businesses. Marketing costs were so high for television and billboards that only the biggest companies and retailers could compete. Real estate for brick and mortar stores barricaded smaller businesses from getting a foothold in face-to-face interactions.
But the ease and low-cost of setting up an online store have completely changed all that. A beautiful website, aesthetic app, and social media marketing can help to effectively connect businesses to consumers without all of the expensive advertising “fluff.”
Benefits for Consumers
Customers love the DTC model. Consumer preferences are changing, and they’re frequently buying directly from brands as opposed to retailers.
The key reason for this is because consumers want a connection with their brands. Today’s customers are focused more on buying brands, as opposed to products. They want to have direct interaction with those brands that fit their lifestyle and self-purpose. For example, innovators are drawn to Apple’s inventive mission, health gurus are loyalists to Whole Foods, and biohackers are drawn to Bulletproof. This has really always been the way; dress and cars have always been a status symbol, but now purchasing is beyond just a symbol of status to a symbol of personality.
People like associating with specific brands that “say” something about who they are. So consumers are cutting out the middlemen and buying directly from those brands that they associate with. Consumers label themselves by the labels they own. So they want that one-on-one interaction with the brand.
Going directly to the source (like the brand’s e-commerce website) also gives consumers more security and variety:
They don’t have to worry about counterfeit goods.
They have access to the brand’s entire product line, not just what a retail distributor has purchased and chosen to carry.
The product info is most likely to be updated, accurate, and descriptive.
They have direct contact with the brand itself in the case they need assistance with their order.
This connection between consumer and brand is ever-deepening, and it’s changing the way small businesses are able to interact with consumers and vice versa.
Benefits for Businesses
Why should your business consider a direct-to-consumer model?
1. Maintain Control
With DTC, you are the sole operator of your brand voice. You’re not putting marketing or sales (aka all front-end interactions) into the hands of another retailer. You maintain complete control over design, marketing, SEO, and brand narrative. It also allows you to control your customer service and experience from A to Z—from the first touchpoint until after checkout. In such a brand-driven economy, this is critical for generating brand loyalty and establishing long-term success.
2. Communicate Directly with Consumers
Customers are demanding to speak directly to brands—and that’s what DTC offers. By maintaining control of your brand, you also maintain control of the customer experience. You can create a more seamless experience throughout all channels and avenues, so your brand voice is always consistent and prevalent.
This kind of service transforms you from a product into a business. In turn, this allows you to build a relationship with your consumers that can lead to trust, loyalty, and repeat purchases. Personalization is especially critical to reaching customers today. In fact, 94% of senior-level executives acknowledge that personalization is the key to connecting with customers.
If you sell through a retailer, they control the experience. When you sell direct, you can personalize everything from the website to email drip campaigns to packaging and beyond. This personalization is the most effective way to win over today’s online customer, especially the millennial and Gen Z customers.
You can even use social media to build a brand experience—and sell to customers. A 2018 study found that 55% of people made a purchase through a social media channel this past year, especially Facebook and Instagram. This tells us that social media marketing is not only spreading brand awareness and engagement, but it’s also converting into sales.
3. Collect Customer Data to Grow.
If you work with a retailer, you let them find and take the customers for themselves. DTC allows you to grab customer information directly. A website or e-platform not only allows you to interact with your consumer, but it also allows you to capture them as a lead for future marketing. You control your customers’ data, which means you preserve their future interactions with your business as well. They’re your customers—and yours to turn into repeat buyers.
Plus, you can collect valuable customer data to consistently improve your operations. You can see which marketing is and isn’t working, how people are responding to your products, who your customers are, etc. This allows you to better understand what your customers want, so you can provide them with the best possible experience.
4. You can grow faster.
Direct-to-consumer allows you to grow and expand as fast as your business can handle—even across the globe. You’re not bound to the constraints of your retailers or distributors. You don’t have to wait for them to break into a new market or to “okay” your products for sale in a new store.
When you’re direct-to-consumer, you control the scale of expansion. This means you are solely responsible for how well you do, and you can control your own product development, marketing, sales, and operations.
5. You’re the Star of the Show.
With a retailer, your products are side-by-side with competitors’ products (both in-store and on their website). You’re directly up against other brands—which is hard to match if your brand awareness isn’t as strong yet.
On your website, customers see your products—and your products only. They get engrossed in your brand (if you know how to make an effective website and social media page), which means they’re more likely to buy. You can show them product reviews and testimonials, and you can have as much space on your own site to share your brand story, mission, and product details. Your competition isn’t on the same page, so you have a stronger opportunity to convert.
Should my Business be Direct-to-Consumer?
How are you doing business now? How’s it working out?
If you primarily run through a distributor, you’ll want to consider how quickly direct to consumer is taking hold of the retail space. Major retailers are being forced to transform the way they do business, and you’re likely to see a lot of changes in the coming years with big box stores. This isn’t necessarily a bad thing, as long as you’re open to change and willing to pivot as necessary.
Regardless, it might be time for most businesses to start looking at the direct-to-consumer route. It’s never been easier and more desirable for your brand to connect one on one with your customers, especially through digital channels. With DTC, you can maintain control, raise your revenue, and build a more loyal fan base.
It’s definitely worth looking into privatizing your label. Not sure how to get your business in the eyes of your consumers? Seller’s Choice is a digital marketing solution provider dedicated to the interests, growth, and profitability of e-commerce brands. For more updates, industry news, and e-commerce expertise, visit our site or get in touch.