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What is DTC e-commerce and what are the benefits of this model?
Direct-to-Consumer (DTC) explained
What is dtc e-commerce? Put simply, the Direct-to-Consumer business model, gives you a clear channel of communication and activity between you and your consumers. There’s no dependence on the manufacturer, wholesaler and retailer. Your business owns the process and importantly, the communication with your consumers.
Add ecommerce to the DTC business model and potentially, your profits just multiplied further. This model of business maximizes the use of digital platforms and particularly e-commerce websites, to reach and engage with consumers directly. It’s a model where a business designs, creates, and sells its products to the end consumer. Your business sells directly to your target market anywhere, at any time.
The Rise of DTC E-commerce
E-commerce statistics show that Direct-to-Consumer e-commerce is growing. And growing fast. More than 58% of supply chain professionals believe it will account for more than half of overall sales by 2026.
According to ChannelSight, the U.S. DTC market has gone from being worth $128 billion in 2021, to a projection of $213 billion for the end of 2024. For a quarter of businesses, DTC already makes up more than half of its income. And two-thirds of businesses have increased their investments in DTC fulfillment over the past three years. Fit Small Business shows that for 25% of businesses, DTC already makes up more than half of its income. That’s a bus you can’t afford to miss.
There are good reasons supporting the significant increase in the DTC model whose popularity over the last 10 years has helped to redefine the way we do business, so how can your business benefit from this model?
Credit: Fit Small BusinessNew DTC brands are lagging behind more established names in terms of sales,
but DTC sales are growing overall. (Source: eMarketer)
The Benefits of a DTC E-commerce Business Model
There are many advantages of operating a DTC e-commerce model, which enables your business to reach more customers – and not only more, but DTC enables you to reach your bespoke target customer base in a way in which you simply cannot, using the traditional retail model. DTC enables your brand to connect with your audiences and drive sustainable growth.
The Middleman is Removed
One of the key benefits of taking the Direct-to-Consumer approach is that it removes the middleman, allowing your products to move faster through the sales and purchasing process. You own the entire process or journey, from product design through to the point of sale, and this gives you complete control over the products, quality, customer experience and branding. This should decrease your costs and produce a more targeted and strategic approach to identifying and winning your market. This cost efficiency also translates into higher profit margins.
Enhanced Customer Engagement
DTC offers great advantages when it comes to customer engagement. It’s a bit like running an obstacle course without the obstacles – you have a clear line of sight to your customer and can tailor your (digital) marketing accordingly. You can engage directly with your audience to tell them what you want, when you want, and how you want to. You can develop a clear portfolio of messaging, keeping your brand consistent.
Data is King
One of the best ways to win and develop your audience is through listening. A direct to consumer commerce model enables you to interact with your customer base and to respond according by, for example, changing delivery options which is one of the key drivers of cart abandonment. Because of the speed of feedback which you can acquire from your customers, you can offer an agile response, responding to needs and preferences of your customers. This enables you to segment your audience based on various criteria such as demographics, purchasing behavior, and interests. This results in a better-defined market and enhanced solutions to meet the identified needs and wants. The winners? You win a loyal and customer base whose persona is increasingly known and understood and the customer gets great service which is finely tuned and personalized to their preferences and wants, based on data analysis.
Own it
Once you’ve got your data, you can own it – email addresses, purchase history, interactions, etc. This is the golden thread which brings all of your DTC operation together. Your brand can be developed for your market, based on data around customer behaviour and demands. You can create personalized marketing campaigns developing customer loyalty.
Scalability
Talking of ownership – you can scale your operation far more easily and quickly with a DTC e-commerce strategy, given that you are not reliant on the manufacturing process and supply chain. You are the supply chain! You can take an agile approach to scaling new product lines and higher product volumes, and adapting to market changes.
DTC e-commerce at its best
The notable companies which have adopted the DTC approach and maximized its benefits include the Dollar Shave Club, who revolutionized the shaving industry with its subscription-based model. By delivering high-quality razors and grooming products directly to consumers, the company offered convenience and affordability. Personalized communication and targeted marketing helped build a robust subscriber base. After only four years in operation, Dollar Shave Club received an astounding $1 billion all-cash offer from Unilever. That’s more than a close shave, when it comes to profitability!
Join the Community
DTC bands often focus on creating a community around their brand. This presents a great opportunity which can’t be replicated by the traditional retail model. DTC ecommerce places the consumers at the center of the story, as they share their experiences, questions and – most important of all – their recommendations. Add influencers to this heady demographic and you’ve got yourself a live and everchanging pool of customers who are happy (even want) to be seen to share their experience of your product. FOMO (fear of missing out) never looked so bad! The impact of influencers is a gift to customer loyalty.
Our DTC E-commerce Solutions Can Expand Your Business
At ExpandNow we are global ecommerce experts in supporting all the functions you need to expand your business when you sell direct-to-consumer. As your official seller, we will manage the complexities of international activity and transactions, including managing your tax and fiscal activity, payments, compliance and fraud management. The benefits of a Direct to Consumer Commerce model are substantial – don’t miss out!
