D2C Ecommerce: The Pros, Cons and Trends in 2021D2C Ecommerce: The Pros, Cons and Trends in 2021
Online selling, e-commerce, social commerce, e-retail, m-commerce and many additional, similar terms, have probably long been added to our everyday vocabulary, describing different strategies of selling online. Recently, more and more brands are exploring the option of d2c ecommerce (Direct-to-Consumer) as a way to own the consumer journey, reach out to more potential customers and increase sales. With a total of $17.75 Billion in US sales over 2020, the d2c ecommerce sector is expected to grow by 19% and hit $21.25 Billion by the end of 2021.
What is d2c ecommerce?
So what exactly is dtc ecommerce, and how can you leverage its benefits to grow your business?
The D2C business model explained
D2C is an e-commerce model by which manufacturers sell their products through their online store directly to end consumers, without the hassle of working with ‘middlemen’; this means that contrary to other ecommerce strategies, dtc ecommerce requires sellers to handle almost every aspect of their business by their own, from production to marketing, selling, shipping and more.
This type of e commerce model relies on a distribution network to get the manufacturer’s goods or services delivered to consumers. For many brands, making the switch from the traditional model of distribution (using wholesalers and retailers) to D2C ecommerce can be complicated, as they need to adapt to fulfilling larger numbers of orders containing significantly smaller quantities of products, rather than simply selling in bulk.
How do I build a DTC brand?
- Create a great product. As obvious as it may sound, your product is the core of your business and should provide real value to your potential customers. Investing a great deal of effort into other aspects of your business, from marketing to sales, support and more, probably won’t make a real difference if the items you offer aren’t attractive enough.
- Build your online store. Even if you’re not a tech-savvy person, fear not. There’s a variety of website builders designed and developed especially to help the majority of us who lack knowledge in coding; simple ‘drag and drop’ tools will help you set up your online store a lot faster than you think. Having a hard time choosing the right platform? Check out the top 5 eCommerce website builders for SMBs in 2021.
- Develop and execute a marketing strategy. So your products are all set and your online store is ready to go. What now? You get to create your business’ secret marketing sauce! boost your organic exposure with SEO, social media activity, engagement in relevant communities, influencer marketing and more. Invest a part of your budget into paid marketing and use online advertising to reach your target audience.
- Keep track of your business metrics. One of the most important yet challenging tasks online store owners struggle with is tracking and analyzing their business metrics, from costs of production to shipping, marketing, taxes, different fees and more. Luckily, there are tools to help you make sense of your data and make the best of it to optimize your store and profits. The BeProfit Shopify profit calculator does just that, helping merchants keep track of their numbers and stay on top of their business.
D2C vs B2C
What’s really between d2c and b2c? As mentioned before, the first is an online selling model in which manufacturers sell their products directly to consumers. In standart B2C models, manufacturers usually sell their products to retailers in bulk, who later resell these products in much smaller quantities as part of long-term deals; usually, retailers have a wide target audience and offer their customers more than one brand of the same product, which means higher competition for manufacturers and a real fight over the attention of potential clients.
The pros of the D2C business model
- Retain control over brand reputation. “If you want something done right, you better do it yourself”. Manufacturers who sell their goods through retailers often realize they have little or even no control over their brand reputation. Selling directly to consumers solves that issue and gives you total control over your brand’s messaging and customer care. This is an opportunity to develop a proactive, personal approach to customer service and develop a close relationship with your customers.
- Leverage customer data. They say “content is king”, but the truth is, data is no less important. Direct to Consumer ecommerce holds one of the top advantages for brands – having complete access to business data; this means that you get to know everything about your customers’ behavior (even those who did not make a purchase): the source that led them to your website, the pages they visited or products they’ve shown interest in, the items added to their shopping cart and these which have been removed, and much, much more. All of these put you in the drivers’ seat of your business, allowing you to take actions on highly valuable insights your data provides and optimize your store accordingly.
- Enjoy increased customer engagement and loyalty. Dtc e-commerce brands enjoy the freedom to run their business as they see fit, without having to fear a third-party seller will mismanage their image. This is a great opportunity for store owners to develop a communication strategy that will keep their audience engaged; creating personalized, quality content to be shared across your channels, offering special deals, asking for feedback, responding for each new interaction, and more, are great ways to earn your customers’ trust and get them coming for more.
The cons of the D2C business model
- Increased competition. D2C e commerce sure has its benefits, but it also comes with a fair share of drawbacks. Depending on your business niche, selling directly to consumers has the potential to involve high competition, as it’s not only small businesses that follow this approach; as ecommerce is on the rise, many large corporations (like Walmart and Amazon) are offering their products directly to their customers on their online assets; this means an extra challenge for a relatively small business trying to make its way to success, as fighting for the attention of your audience gets harder, more expensive and might take some time to achieve.
- Higher costs. The good news? Selling directly to consumers means higher profit margins for your business, as expenses that would otherwise go to third party distributors are cut off. The bad news is that you’ll have to bear all costs of other business operations, from advertising campaigns to product promotions, different fees and more.
- Complex business operations. D2C ecommerce comes with a sense of freedom to run your business as you like, but the truth is, it also comes with great responsibility in the shape of running complex operations. Direct-to-consumer business owners often find themselves juggling multiple tasks, from order fulfillments to payments, shipping, returns, customer support, and a lot more.
3 D2C Trends to Look For in 2021
- Ad spends are going up. The demand for digital advertising is growing by the day. As online advertising platforms constantly evolve and offer businesses the opportunity to reach their audience with detailed targeting, every direct-to-consumer store owner will tell you how important online ads are to the success of their business. As your marketing spend probably represents a large slice of your total business budget, that’s why tracking your ROAS (Return on Advertising Spend) is crucial for business optimization.
- Retailers are going d2c. Up until not so long ago, many established brands have focused their efforts on selling through marketplaces, rather than selling online. Lately, we see more and more large brands shifting to, or adding d2c ecommerce to their selling strategies, despite the required efforts involved in such a transition, like adjusting manufacturing, marketing, supply chains, and more.
- Voice shopping is booming. Smart wearables, speakers, voice assistants and more are everywhere, and d2c companies should adapt accordingly to stay ahead of competition. A 2019 survey reveals that almost 35% of respondents said they’ve enjoyed the experience of voice shopping, and another 27% said they are interested in making an online purchase via voice shopping in the future.
The ecommerce industry has experienced a year of remarkable growth. More and more brick and mortar stores as well as online retailers are making the shift to d2c ecommerce in an attempt to grow and increase profits. While there are challenges to consider when thinking about going D2C, the opportunities are endless; it’s one of the most popular ecommerce models, allowing you to get closer to your customers, reduce the dependency on distributors and get full control over your brand.