Before ecommerce made it possible to buy just about anything you need online, shopping experiences often involved buying a number of different kinds of goods from one store — like a grocery store, traditional retail or big-box store like Walmart.
But for the past 10+ years, ecommerce sales have continued to grow worldwide.
Looking at the chart below, retail ecommerce sales reached $1.3 trillion USD globally in 2014. By 2019, that number was $3.35 trillion and — thanks in part to Covid — in 2020 it shot up to $4.28 trillion.
eMarketer estimates that by 2024, ecommerce sales worldwide could hit more than $6 trillion dollars USD.
As that evolution of ecommerce continues to change the way people buy, more and more brands are going direct-to-consumer — in part to build deeper customer relationships. But what does that mean, exactly? And what are the advantages (and disadvantages) of selling DTC?
In this post, we’ll discuss these questions as well as the challenges and advantages of selling direct to consumers. We’ll also go through a list of best practices for getting started with your DTC strategy.
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A direct-to-consumer business sells its own product directly to its end customers, without the help of third-party wholesalers or retailers. Though much more common now, the DTC trend was initially a big departure from the traditional model.
The easiest way to describe the differences is to describe the product distribution process.
In the typical retail model, manufacturers sell their product to wholesalers to distribute to retail stores. They work with those retailers to get the right amount of product in the right places, and the customer gets the traditional brick-and-mortar shopping experience.
The direct-to-consumer model skips the wholesaler and the retailer to connect the manufacturer directly to the customer. This deepens manufacturers’ feedback loop and, if done well, creates direct relationships with your products’ biggest advocates.
A DTC business model’s arguably greatest feature also has some bugs, though. Even if you’re selling DTC, every step of that typical retail model still usually has to happen — but without the help of a wholesaler or a retailer.
The role of traditional retailers is changing fast in the age of online shopping.
Customers are buying more and more items online, and they’re more frequently going straight to the source: for instance, visiting Chanel’s website to research their makeup options versus walking into or visiting the online property for Neiman Marcus or other department stores.
Leveraging a direct-to-consumer model can help businesses better control their profitability by controlling the entire process, from manufacturing to shipping and delivery. Many DTCs also offer more competitive pricing because their margins are higher.
But it’s not just for already-well known brands. In fact, many legacy brands are still clamouring to keep up with the innovation and movement among digitally native vertical brands (DNVBs).
“In DTC retailing, technology has forever lowered the barrier to entry,” writes Lawrence Ingrassia, author of Billion Dollar Brand Club. “Entrepreneurs no longer need retail shelf space, or a huge ad budget, or their own factory to take on corporate giants.”
The downside of implementing a DTC business model is that the manufacturer has to take on all aspects related to retail. The upside, however, is a marked increase in customer loyalty and retention rates as well as an increased number of options for new customers who are looking for something different than what they’ve been used to — which traditionally was found only at brick-and-mortar stores.
In 2019, direct-to-consumer ecommerce sales reached $14.28 billion in the U.S. eMarketer estimated that number would reach $17.75 billion in 2020 and $21.15 billion in 2021.
The advantage of getting in front of your customers online is real, and growth doesn’t show any signs of slowing. But there are several more specific advantages you should be familiar with as well.
When you sell your products wholesale to a retailer, you have limited feedback on how that retailer’s customers are buying your products. Selling DTC means that you bring that data into your line of sight.
A couple of examples:
Data is power, and the more you know about your customers, the more accurately you’ll be able to map the customer journey, develop new products to meet consumer demand and follow trends relevant to your shoppers.
Selling directly to your consumer, you’ll have more control over the customer experience because you are in charge of the entire buyer journey. Taking all the insights from your customer data, you can build a shopping experience that appeals to your ideal customer profile. Do they want to shop on Instagram? Do they prefer one-click checkout?
You’ll also have more flexibility to be more targeted with your marketing strategy. Where do they discover products like yours? Plus, it's easier for customers to reach out when they need help. A great customer support experience can be the difference between creating an advocate or a detractor in your customers.
More direct customer feedback can also help you improve the customer experience, allowing you to respond more quickly to trends, changes in shopper demand or shifting consumer behavior.
When a brand doesn’t have a direct-to-consumer presence, the retail middle-man acts almost like a veil between the manufacturer and the customer. With DTC, you can create direct relationships with your customers.
For one thing, you’ll have the opportunity to collect shoppers’ email addresses and phone numbers and market directly to them (including SMS marketing). You can also leverage social media channels to build brand awareness and community, encourage user-generated content and word of mouth. “Brands that connect with customers by building a better total experience — ease of purchase, speed of delivery, seamless returns, responsiveness to complaints — improve their odds of becoming lasting brands,” says Ingrassia.
Selling direct-to-consumer has its challenges, too. It adds a completely new set of business processes on top of an already-complex wholesaler-retailer relationship.
On top of that, DTC brands are expected to be more creative and innovative than your typical manufacturer. As ecommerce expert Web Smithwrites, “There is no playbook. DNVB growth must be a malleable and agile operation. Brands must find opportunities where there were none. They must seek to do what hasn’t yet been done.”
Removing the middlemen involved in a traditional manufacturer-distributor-retailer relationship is part of the value of selling direct-to-consumer, but it’s also the source of one of the biggest challenges.
Before, your end customer-facing interactions were limited, and your operations were all based on bulk sales. Selling DTC means you’ll have much closer, more personal interactions with your shoppers — and all the complexity that comes along with it, like managing almost the entire supply chain. Your business will be in charge of:
One of the biggest things manufacturers are missing when they decide to sell DTC? The technology to underpin their ecommerce program. You’ll have to reconfigure your online presence across digital channels to provide a rich brand experience to shoppers. This may also mean overhauling your back-office tech stack.
If you don’t already sell products on your website, it pays to leverage a SaaS ecommerce platform like BigCommerce to give you capabilities to accept customer-friendly payment methods online, run discounts and promotions and integrate with partners that make the shipping process seamless.
One of the common threads among many direct-to-consumer brands today is that they purport to solve a long-term challenge that people just took for granted.
In fact, many of the brands Ingrassia writes about in Billion Dollar Brand Club had relatively little knowledge of the products they wanted to sell. “But they knew that they felt they were being gouged by the big players, and they figured there had to be a better way,” he said. “So they reset the terms of the competition.”
Let’s take a look at five DTC innovators who wouldn’t take “That’s just the way it is,” for an answer.
Burrow sells modern, modular furniture that lives and moves the way we do. While shopping for furniture, the brand’s founders realized there was little in the way of middle ground between “cheap and flimsy” and “heavy and expensive.”
So they created a high quality modular couch that separates into pieces small enough for you to actually pick up and move — and if your next living room is bigger or smaller, you add or remove sections to fit.
Plus, the cost savings: “By delivering our couch directly to you, we’re able to remove all retail markups and over 70% of standard shipping costs.”
Solo Stove creates fire pits, camp stoves and other similar outdoor products. How does one innovate on something as simple as a fire pit? This one burns efficiently, without fuel and best of all — their Signature 360-degree Airflow Design (™) means “nearly no smoke and minimal ash left to clean.”
Glossier has been a resounding success story in the world of cosmetics. Founder Emily Weiss grew the business out of a beauty blog — demonstrating one of the more magical opportunities in DTC. Traditional business creates a product, then builds an audience. Weiss did the opposite.
By developing deep relationships with her audience and building a community among them, she’s been able to forgo selling through traditional cosmetics retailers altogether.
“Glossier is so successful because they leverage Intothegloss.com and their various social media channels to truly make products for their audience,” said Alison Gaither, analyst for Mintel’s US Beauty and Personal Care Reports. “Intothegloss.com is essentially Glossier’s focus group, and they can find out exactly what their followers want by simply asking, ‘what is your favorite scent?’”
Picking up razors at the grocery store used to add quite a bit to the final bill. Then, the founders of Dollar Shave Club decided to do something about it, posing that you didn’t have to spend that much money to get a “f**cking great” blade (co-founder Michael Dubin’s words).
As Ingrassia writes, “The idea of $1 razors seemed a little crazy. But in 2016, Unilever spent $1 billion — crazy money — to buy the company.”
Mattress-in-a-box company Casper says they’re “setting a new standard in sleep innovation,” creating innovative sleep products that you can order online for delivery straight to your door.
The best part is skipping the traditional furniture store purchase experience that typically involves, as Harrison Weber wrote for Venture Beat back in 2014, “haggling with a commissioned salesperson at a tacky, ‘80s-carpeted brick and mortar.”
With the annual growth in DTC sales, it’s no surprise that enterprising manufacturers — or anyone with a great product idea — are leveraging this opportunity. Not to say that it’s always easy, but the barrier to entry is lower than ever.
One opportunity DTC brands grabbed was disrupting what was traditionally a complex shopping experience. Burrow, the furniture brand mentioned earlier, turned the process of choosing and purchasing furniture on its head by providing just a couple of basic styles that can be configured and reconfigured. This means you won’t have to buy a new couch if you move into a new living room, and you’ll pay a lower total cost because of less markup.
Selling an everyday product versus a novelty item can really pay off in DTC. The need for the product has already been established — and that gives you the freedom to innovate on that product or disrupt the purchasing process instead of build a new idea from scratch.
That’s why consumer packaged goods (CPG) brands have been one vertical to really benefit from adding DTC to their business model. Packaged snacks, skincare, vitamins, even sodas and other beverages are exploding in popularity.
These companies made buying razors cheaper and more convenient, and they reinforced their value with strong, effective branding.
One of the challenges of ecommerce is communicating the value of your products to consumers who can’t see, touch or try them. This can create conversion problems, particularly in categories like home furnishings and apparel. Offering a customer-friendly return policy can alleviate customer concerns around buying a mattress sight unseen. They’ll have the peace of mind to know that if the product isn’t what they wanted, they could return it easily.
Leveraging influencers is a great way to get your brand in front of your target audience. When you’re just jumping into the DTC world, you don’t yet have an audience… but influencers do. Just take care that this influencer will resonate with your target audience.
Jeni’s Splendid Ice Creams recently released an ice cream flavor in partnership with Dolly Parton — and it sold out in just hours after its first launch. The partnership was also featured in very high-trafficked media sites like Delish, Thrillist and even Good Morning America.
Source: Jeni’s Splendid Ice Creams
Several reporters have written about the homogenous nature of much DTC design today. If you want to stand out, create a memorable shopping experience on your website. What you do will depend on what will resonate with your ideal customer, but the bottom line is this: you need to make an impact.
On their homepage, Natori uses bright, vivid imagery that immerses you in the atmosphere that they’ve created. That plus thoughtful merchandising across the website makes the browsing experience more enticing and more rewarding.
First things first: you need a concise and powerful value proposition. Then tell that story clearly and succinctly across channels — but remember, creative doesn’t mean “not strategic.” Let’s look at some of the most frequently used marketing channels and how to determine their fit.
Social media marketing: The number of platforms seems to grow every year, but you don’t have to be everywhere. Think about two things: what best serves your product, and where do your ideal new customers spend their time? Then choose the platform or platforms that make the most sense based on your answers.
People typically don’t make high-dollar purchase decisions based simply on marketing messages. Typically, customers put far more trust in the recommendations of family and friends. But reviews can be a close second. People want to see real opinions and experiences with the product so they can better understand if it fits their needs as expected.
In certain verticals, like apparel, cosmetics and homewares, you can encourage buyers to submit pictures and describe how the product worked (or didn’t) for them. That’s the kind of high-ROI content you can add to your site when you make customer feedback work for you. Here’s an example: Renting a gown for a black tie event is a great idea, but there are challenges — the way a size just fits differently from one size to another, or not having an opportunity to have the dress’ length adjusted. So Revelry encourages customers to submit photos of themselves in their rental pieces, including their size and how it fit. It’s smart because it’s genuinely helpful.
Brand community is a little tough to describe without sounding like a jingle made of marketing jargon. But these examples should give you an idea of where we’re going. You know how lots of Harley Davidson customers are always wearing HD gear and would never buy another brand of motorcycle?
That’s amazing brand advocacy, but community goes a step further: these customers, in their advocacy, have a way to identify each other and a thing to connect over. There are even some motorcycle clubs specifically for Harley Davidson riders!
Vertically integrated brands have become a popular trend in commerce today. Selling your products directly to consumers without going through an intermediary distributor like wholesalers and retailers has advantages and its disadvantages.
There’s no denying the power of personally connecting with your customers and having the agility to respond quickly to their feedback. But it does require a lot of processes and technology that are typically handled by distributors and/or retailers.
DTC refers to the process of delivering a product directly to a consumer instead of using wholesalers as middlemen or aiming to sell products only in retail stores.
A DTC brand is one that controls all portions of the selling experience, from manufacturing the product to marketing and selling it online directly to their target end users. A few great examples are Warby Parker, Burrow, and Glossier.
COVID-19 lit a fire under ecommerce sales, and at the time of their survey, they estimated that U.S. ecommerce sales would reach a full 14.5% in 2020 — making their estimate for 2021 a full percentage point higher than originally anticipated.
It’s hard to say exactly, but it’s likely that the impact of COVID-19 was positive for DTC brands. The pandemic forced more shoppers to make purchases online. While online, many shoppers took the extra time they had to search for new alternatives to old products, leaving brand loyalty in question much of the year. The pandemic also changed people’s habits, activities and routines, so that created opportunity for any business that could pivot quickly to meet the times.
A lot goes into selling across borders, but it’s a great way to scale your business if you have the back-end infrastructure to support it. Check with your ecommerce platform to see what kind of support you can expect. Then, consider if you’ll need multi-site functionality and if anything special will be needed to ship your products internationally.
Many CPG brands have tried out the DTC approach so they could build a closer relationship with their customers. DTC gives them access to more first-person data about their customers and makes them better able to deliver the experience customers want.
Burrow and Jeni’s Splendid Ice Creams are some of our favourites.
Well, there did seem to be a spate of similar looking brands in the late 2010s. But that’s being shaken up, now. The time has come for DTC brands to really find their own voices and identities and fly them proudly. The opportunity for differentiation is now.
Solo Stove and Outer is a great collaboration, focusing on two different products whose audiences likely have a wide overlap. And Burrow features some of its partnerships in its physical showroom in NYC.
It’s the ultimate customer retention method. As long as your customers stay satisfied, it’s guaranteed sales each month — easy for both the shopper and for your business.