E-commerce recorded another record year. Long before the pandemic, e-commerce was developing at an impressive speed. This is nothing new, and you have been reading reports like this for years.
Because e-commerce seems to know only one direction – upwards, this applies to B2C and B2B, as well as the D2C model. But what is it exactly? Let’s detail this technical aspect in this article. Good reading!
What is D2C?
The abbreviation D2C stands for “Direct-to-Customer” or “Direct-to-Consumer. It means a modern type of distribution in which manufacturers sell their products online directly to the end customer without intermediaries.
What is the difference between D2C and B2C?
Any D2C model can be considered B2C, but not all B2C models can be considered D2C. The traditional B2C model is generally based on a retailer who intervenes between the manufacturer and the customers.
Here, the intermediary retailers can sell several manufacturers’ products, which confronts the customers with several purchasing possibilities, allowing perfectly fair competition between the different merchants. In this model, the retailers mainly govern the overall customer experience, engagement, and positioning of the selling brands.
For example, we can say that companies like Warby Parker or Away are cataloged in the D2C field since they sell eyewear and luggage, respectively, online and in their shops, rather than through third-party chain stores. Brands such as Amazon or Walmart, for their part, adopt a model considered to be that of B2C since they source their products from manufacturers and other retailers.
How does the D2C model work?
Essentially, D2C means a producer sells goods to end customers without intermediation. With this direct sale, there is a direct manufacturer-consumer relationship, for example, via your own web-shop.
Marketplaces like Amazon can also be counted in the direct-to-consumer domain if the manufacturer uses them to bring its offers to the man or woman without an intermediary.
As soon as a marketplace appears as a trustworthy third party, as a reseller in the middle, it is no longer a D2C company but a B2B2C company (“business-to-business-to-consumer ”) or a B2C company.
Two examples of D2C in e-commerce
Previously, you could only buy new cars from certified branded dealerships. There was advice on the purchase process and the subsequent service.
Example No 1 is Tesla:- The American electric car manufacturer offers its vehicles on its website and in its flagship stores. More and more car manufacturers are now adopting this sales concept.
Another online pioneer is AdoreMe:- Subscription-based services, implying buyers pay monthly fees to supply goods directly to their doorstep.
Significant advantages of D2C
There are several significant advantages to convert your business into a D2C model through digital channels. Here we consult the top five.
More authority over your brands and your products
One of the common characteristics of many businesses who follow the D2C model, is that they focus their energy on storytelling and building their brand perception to appeal to consumers. When you’re the only brand involved in selling to customers, you don’t have to rely on other retailers to market your brand effectively.
It’s up to you to tell your story, and with the D2C model, you can create a compelling brand identity, safe in the knowledge that consumers will get their information straight from the source.
Stronger relationships with your customers
By using a D2C model, you interact directly with your consumers. That means you can collect high-value-added data about customers who have purchased your products (purchasing trends, demographic data, changes in behavior and browsing history within your E-Commerce site, etc.). This better knowledge of your consumers allows you to:
- Better control and optimize each stage of the customer journey,
- Have a clear image of your buyer personas and adapt them according to the different purchasing behaviors you observe,
- Target customers more effectively to offer them unique and personalized experiences,
- Build a base of loyal customers who will become true ambassadors of your brand,
- Evolve in a so-called “data-driven” logic,
- Generate more conversions by producing personalized content to offer qualitative experiences to users based on the behavioral data you collect,
- Offer a unified buying journey across all your sales channels.
Omnichannel has always been a significant growth lever for E-Merchants, and the year 2020 and 2021 underlined its importance like never before. Indeed, the health crisis has forced many physical stores to invest massively in digital channels, at the risk of being left behind by the competition.
Today, consumers wish to be capable of reaching brands to order products across multiple troughs. The D2C model represents an ideal opportunity to meet this need since it allows customers to buy your products directly from the source, at any time and place. D2C benefits you from more excellent pricing, promotions, product range, and marketing flexibility.
More efficient time-to-market
Direct selling avoids the traditional negotiation procedure with a distributor to reach your product to demand. Traditionally, launching a product involved finding a distributor willing to give them shelf space. The marketing process could therefore be long and full of pitfalls. The D2C eradicates your dependency on third parties to reach your product fast to demand.
Many established brands are even using the D2C model to bring experimental products to market without hurting their partnerships with retailers. Rather than questioning for shelf room for a shot, D2C lets these labels experiment with a fixed impact for constant viability.
Reduce your costs and make more profits!
As part of a D2C strategy, you can own warehouses and manage the entire end-to-end supply chain. The costs incurred vary greatly depending on how your brand chooses to execute purchases. Connected with mechanization strategies, D2C model lets brands to decrease expenses, besides it also withdraws dependencies.
Dependency on distributors and retail partners can sometimes put companies in a complex situation. The less your brand depends on external suppliers, the more predictable your company’s results are!
What are the disadvantages of D2C?
Manufacturers are usually very focused on production. They invest their energy and budget in purchasing cheap raw materials, inefficient production, and developing new products.
With the entry into the direct-to-consumer business, companies need to learn new skills in marketing, sales, and customer service. For example, marketing concepts, new sales structures, and a hotline must be implemented. Such challenges cost time and money – and distract from core competence, among other things.
A D2C strategy that is not sufficiently implemented consumes the expected profit. And a poor relationship with the end customer can damage the brand.
What are the D2C trends in e-commerce?
Direct-to-consumer is a massive trend in itself. Especially one that has experienced a boost from the corona pandemic. When many stores were closed for weeks, an important sales channel for manufacturers quickly disappeared. This gap does not exist in D2C since products can be sold to the end customer via e-commerce.
Manufacturers who initially acted only through intermediary trade set up a D2C channel to drive on two lanes. This duality also manifests in the other direction: Pure D2C e-merchants expand their business by adding retail sales to open up new groups of buyers.
During this period, producers realized they had to invest more money in building a brand and a relationship with the end customer. With this so-called customer orientation, the focus is more on the consumer.
This makes it possible to intervene in the customer journey. For example, if an end customer first buys his products from resellers and is satisfied, the manufacturer with a demanding D2C strategy can submit offers to him without intermediaries.