Direct-to-consumer (DTC) commerce is not a new concept. However, due to disruptor businesses and changing consumer purchasing behaviors, it is developing at a rapid pace.
It is not easy for distributors to switch from selling business-to-business (B2B) to selling directly to consumers and most of them are still skeptical about making this investment.
That’s why we have created this comprehensive guide on DTC business model to make it easier for you to understand why as a B2B eCommerce company you need to embrace this business model and what it has to offer.
So without any further ado, let’s begin.
With the rise of digital commerce, it is now faster than ever for consumers to purchase a product directly from a brand’s website. And new digitally native companies are taking full advantage of this unconventional path to purchase.
In its 2021 DTC research report, Diffusion, an international, independent PR agency, reported that two in five Americans (43%) are familiar with DTC native brands, and of those with DTC familiarity, 69% have made at least one purchase within the last year.
The study also points out that certain industries (wellness, apparel, big retail and tech) are
experiencing the biggest shift of consumers moving from traditional retail to direct to consumer.
This makes DTC competitors one of the biggest challenges many brands are facing right now.
Of course, digitally native brands aren’t the only obstacle. Counterfeit goods marketed by third party sellers are popping up on global third-party marketplaces — and consumers are becoming more frustrated. As many as 52% of U.S. consumers report losing trust in a brand after unintentionally purchasing counterfeit products online.
The DTC Opportunity for Manufacturers
However, these same challenges also present new opportunities for manufacturers to launch a DTC eCommerce website.
For instance, consumers are already visiting brand websites, and they’re ready to make a purchase.
According to BrandShop’s 2018 Consumer Preferences Survey, 87 percent of customers would buy items directly from a brand online if given the choice.
Consumer packaged goods (CPG) companies like Nestle, Ben & Jerry, and Clorox, are now leading the industry with DTC initiatives, and they’re having a lot of success.
According to an August 2020 report, DTC And The New Brand Loyalty Opportunity, approximately 55 percent of consumers had utilised DTC channels to acquire non-perishable items and CPG products they use on a regular basis in the previous year.
While some manufacturers have pushed through with the establishment of DTC websites (undoubtedly boosted by the pandemic), others are still reluctant to make this investment. In reality, just 54% of manufacturers prefer to sell directly to customers online right now.
The need to embrace DTC business model
Brands interact with your consumers directly, regardless of who they are or what your business is. Everyone from business buyers to end consumers consider direct channels as table stakes.
So, how are you interacting with your consumers in order to grow and transform your business? And if you haven’t gone direct yet, this is the day. And here’s why you should do it.
Many old company models have been affected by direct-to-consumer (DTC) enterprises.
With new competitors entering the market at a rapid pace, especially in commercial areas such as manufacturing and energy, legacy enterprises must comprehend the problems of DTC brands.
Then, they must consider applying a DTC model to a large-scale, operationally smart firm. Applying DTC ideas and strategies to your business might be the revolutionary growth secret sauce you’ve been waiting for.
Here are some of the reasons why B2B organisations should adopt a DTC strategy.
Customers are consumers too
With the tremendous growth of digital-native enterprises such as DoorDash, Uber, and Amazon, customer expectations have evolved.
The digital customer experience includes transparency, ease of use, availability, and high accessibility. So, why should the same individual who follows the progress of their KFC order delivery not have the same expectation of updates and openness with essential business transactions?
Innovate or perish, but at the very least go down fighting
The next generation of DTC enterprises will reach a point of development and maturity in the near future because they will have out-innovated incumbents enterprises. They will catch up on brand portfolio management, distribution and operational scale optimization, and strategic inorganic expansion. These new entrants will compete in areas where long-standing enterprises will no longer have much clout.
Nonetheless, incumbents still have a window of opportunity to act: however, quick innovation must be the ultimate goal. There are no fancy tactics in invention, but adopting a design-thinking and strategic-testing gut will be required to flip a large ship.
How much money are you willing to invest in innovation? What criteria do you use to select firms to monitor, collaborate with, invest in, or buy?
Significance of first-party data
There is no party like a first-party data.
One of the most significant advantages of going direct is the ability to own, control, and learn from direct consumers data. Learning is essential. The accessibility of publicly available data is critical. Customer insights must be used, tested, rinse and repeat.
It enables you to expedite the learning process by reducing the feedback loop, to monitor and listen to your consumers, and to make crucial business choices quicker and earlier. Annual consumer insight reports are interesting, but they are sometimes too late. It provides information about the past. You want your data to work for you and help you decide what to do next.
Adopting a DTC business model allows you to analyse your data on a daily, if not hourly, basis.
Advantages of investing in a DTC business model
If you’re still skeptical about investing in a DTC eCommerce website, take a look at some of the advantages of investing in a DTC business model.
Add a new revenue stream
Manufacturers are increasingly facing stiff competition for limited shelf space as retailers scale back physical locations — which has been compounded by the ongoing pandemic.
And as brick-and-mortar retailers temporarily or permanently close, consumers are going online to buy products they would normally purchase in store. A trend that will continue even after the pandemic ends.
Jason Nadaf, founder of SureDone, stresses,
“Part of what’s driving the direct-to-consumer surge today for manufacturers is that pallets of products are collecting dust in their warehouses, and they need a way to get them out the door.”
Right now, manufacturers are in a unique position to help meet these consumer demands while making up lost sales due to shrinking retailer space.
Even if your company is not suffering these issues, you may still reach out to potential clients who are browsing for your product online.
A Retail TouchPoints survey, for example, discovered that 33 percent of customers demand a brand manufacturer’s website to be the most significant resource when researching a possible purchase.
Capture customer behaviour data
Access to first-party data on customer behaviors isn’t something that manufacturers typically have. In most instances, feedback is filtered through dealers and retailers, and maybe social media channels if you have an active presence.
Even yet, the vast bulk of data is transactional in nature. When you sell directly to customers, on the other hand, you may gain a wealth of first-party data about their activity.
You’ll now have a better insight of your consumers thanks to the combination of transactional data from shops and your own website. You can make critical business decisions based on this data on everything from product development to packaging and pricing.
For instance, you might want to test a new luxury brand or launch a product in a new market. By testing these initiatives through a DTC eCommerce channel first, you can utilize the first-party data you collect to determine how to roll out these offerings to your retail partners.
Build customer loyalty and trust
Selling DTC allows you to manage the whole customer journey, from the minute someone visits your website to the moment the product is delivered – and beyond.
You may develop customer-centric experiences on your website by using the data you collect, such as recommending things based on recently viewed items. You may also send emails to solicit comments on how they enjoy the goods or to provide recommendations on how to use the products they bought.
If your target market is millennials, a generation that represents 30% of total retail sales in the U.S., these types of customer-centric experiences are even more important. Research shows that their loyalty is directly related to their feelings on how brands treat them.
Plus, you’re building trust with customers who want to be assured they’re making a purchase from an official source — which is especially important if you’re planning to sell on third-party marketplaces like Amazon.
Start your DTC channel right away
Creating a direct-to-consumer channel does not have to be a daunting endeavour for manufacturers.
If you have a clear strategy for dealing with your merchants, adaptable technology for eCommerce operations, and a plan for back-office logistics, you can handle any challenges you face throughout this journey.