What is direct-to-consumer 
(DTC or D2C)

Benefits of direct-to-customer

From lower operating costs to offering stellar customer experiences, the benefits of direct to customer (D2C or DTC) business model are numerous.

Let’s look at them individually:

1. Higher profit margin

In a traditional retail model, manufacturers share their profits with middlemen. They also overspend to get visibility over competitors. The D2C business model, however, saves brands from financial hurdles like these — positively impacting the bottom line.

In fact, these cost savings give DTC stores more control over pricing and promotions. It’s why offering free products and bundled offers are becoming common in D2C.
 

  

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2. In-depth access to customer data

Because DTC brands have full control of the selling process, they don’t have to rely on third parties to curate data.

Instead, manufacturers can proactively gather and study customer data to understand their target buyers better and plan more audience-engaging promotional campaigns.

This data also offers a goldmine of insights for product improvement.
 

3. More control over the experience you offer

Since D2C has more control over everything from brand messaging to product packaging, brands can offer exceptional experiences to their customers.

In fact, 60% of Gen Z and millennials (the buyer segments with the highest purchasing power) say a better buying experience is one of their top reasons for buying from DTC brands.

4. More opportunities to engage with customers and grow sales

When selling through an intermediary, manufacturers have no control over retaining customers. For all you know, a customer may end up picking a competitor’s product the next time they shop.

DTC, however, gives more control over engaging shoppers post-purchase. Brand loyalty programs, for example, are an effective way to encourage customers to continue interacting with brands and placing repeat orders.

Case in point: Menswear brand, Mizzen + Main’s loyalty program gives customers points for actions such as taking their quizzes and engaging on the company’s social media pages.

DTC also gives more opportunities to upsell and cross-sell products. A simple but effective tactic that brands use is recommending related products consumers can shop for.

Brands can also nurture their relationships with existing customers by keeping in touch with them using different channels like email, WhatsApp, and SMS marketing.

Building a community of shoppers to encourage repeat orders is just one way of leveraging the community though. You can use the community to create new products too as Obvi, a collagen supplements store does.
 

1. Difficultly attracting the right customers

The biggest challenge in DTC e-commerce is understanding who your target audience is.

Without a strong grip on who you’re selling to, you likely won’t be able to create personalized marketing campaigns, product messaging, and a brand voice that resonates with your audience.

As a result, converting site visitors into repeat customers also becomes tough.

This challenge grows if you’re targeting a wider audience — for example Gen Z as well as millennials. Because each generation of shoppers has widely different characteristics and expectations, speaking to your audience becomes harder still. In the case of coffee, for instance, Gen Zers and millennials look at it as more than just a beverage. They tie coffee to experiences and hence you need to create those experiences to appeal to Gen Zers and millennials. In contrast, baby boomers don’t associate the beverage with experience. So while the product remains the same, your marketing strategy has to vary based on who you’re targeting.

2. Creating personalized engagement

Personalization is a surefire way to stand out to your customers. It’s also what helps you effectively attract, nurture, and retain customers across all your marketing channels.

However, personalization is easier said than done. It requires getting to know your customers in-depth to plan campaigns that resonate with them and using the right tools to segment and nurture your audience with relevant messaging. Not to mention, acquiring first-party data to create personalized experiences can be tough — thanks to data inaccuracy, challenges in organizing and studying data, and data silos that make information inaccessible.

3. Solving for abandoned carts

About 69.82% of online shopping carts are abandoned, which makes cart abandonment another leading challenge in the direct-to-consumer space.

To add, addressing cart abandonment isn’t as simple as reminding customers to complete their purchases.

Instead, you need personalized discounts and offers relevant to shoppers. What’s more, your email, WhatsApp, and SMS communication around encouraging buyers to checkout has to be creative. If by any way your communication ends up becoming pushy or spammy, you run the risk of losing those customers forever.

4. Customer retention and driving repeat purchases

Lastly, driving repeat purchases and building customer loyalty are also difficult considering customers today have a lot of choices to buy from any store that attracts them.

However, 60% of revenue for DTC e-commerce comes from old customers as opposed to new ones. It’s why you can’t push creating a customer retention strategy to the back burner.

Fortunately, providing an exceptional customer experience, proactive support, and launching a loyalty program are some proven ways to retain customers better.

1. Identify and serve the right target audience

Stiff competition and legacy players like Nike embracing the online shopping model are making it nearly impossible to penetrate the DTC market.

The solution? Instead of targeting the broad market, niche down.

Identify and solve a submarket’s pain point. “Create new categories, find new or less used marketing channels, and target niche audiences,” advises SupplyDrop’s Founder, Danavir Sarria.

For modern pet portraits shop, Izzy & Otis too, niching down — paired with social proof and user-generated content — has worked well. The store’s founder, Ítalo Mendonça shares, “We’re proud to make a product that people absolutely love — it’s 10x easier to get our customers to showcase our products than us. We’re also in a large, extremely competitive market, so identifying sub-niches and getting to know those customers has really paid off for us.”

2. Keep learning about your target buyer

The better you know your target buyers, the better you can meet their needs. In fact, refining your buyer persona is a continuous, never-ending process for a successful D2C brand.

Learning about your ideal customers helps you:

 

To add, understanding what your customers value helps you speak their language and build a brand that resonates with them.

So keep talking to your customers — gather data on who is interacting with your DTC across multiple channels and how, and schedule regular interview calls.

Creating an engaged community is yet another way to learn about your customers and source product feedback. Glossier, for example, learned a pump bottle was a better packaging option for their moisturizer instead of jars as originally planned. They gathered this data from 500+ comments on their blog post requesting feedback.

3. Meet your buyers where they are

Think of the last time you made a major purchase. Where did you first find out about the product or service you bought? You may have already heard of it through word of mouth, or perhaps you learned about it through the company’s ads and marketing.

Being present and engaging with your audience on multiple channels attract customers and encourage sales (a strategy known as multichannel marketing). In fact, the more your buyers see you and interact with your brand across multiple channels that they use such as WhatsApp, SMS, and email, the more they’ll trust you.  Nearly two-thirds of Gen Z and millennials agree that branded social media content encourages them to shop on social.

And don’t be afraid of experimenting with new channels to test their potential. Jones Road Beauty, for example, leveraged TikTok.

The brand’s founder, Bobbi Brown started sharing simple how-to makeup tips while talking about embracing yourself and body positivity. The brand also ran some Spark campaigns. The results were incredible: the brand started selling so fast that it ran into inventory issues and order delays.

Speaking of TikTok, it’s smart not to ignore it. “It seems to be the place for new store owners to grow successful businesses like Instagram did for new brands years ago,” writes Sarria.

But why TikTok? For one, more and more people are spending time on the platform. Over half of Gen Z consumers use TikTok, for example. This generation has a disposable income of $360 billion and is expected to be the most digitally connected generation by 2024.

And two, TikTok lets brand show their personality. As Nano Stasiak, the brain behind marketing & digital sales at TEAMLTD observes, “Long gone are the days of super-produced content. TikTok removed the stigma of high-quality content. They paved the way for in-house staff to have fun in front camera.”