A new methodology of business has shaken up retail sales by shifting the relationship between brands and customers.
Direct-to-customer (D2C) retail is a business tactic where the brand sells directly to the customer, cutting out the retailer, distributor, and wholesaler. Everything from shaving products to mattresses can be bought online without talking to a retailer and shipped straight to your home address.
Around 40 percent of U.S. internet users have said that 40 percent of their home products are purchased through direct-to-customer companies, which means, even with their target audience restrictions toward younger consumers, D2C brands are thriving.
The rise of D2C brands is due to their innovative, product quality, and intimate customer-brand relationship. These companies drive revenue by specializing in more areas and focusing on subscriptions, e-commerce, data, and customer service.
Rising Investments in D2C Businesses
Before the internet, consumer companies would have to rely on distributors to sell their products. Distributors kept strict guidelines, setting their own prices and controlling supply ”if companies could prove to distributors their product was worth the effort to sell, then they were in. If you couldn’t get a distributor’s approval, you were out of luck.
Then came the internet, forever altering the traditional marketing process with the rise of D2C brands. Some of the more recent D2C launchings are DNVB or digital native vertical brand ”brands born online with an intense focus on customer service.
If you compare DNVB companies, you’ll find many have similar attention pullers, including color, fonts, and photography. DNVBs use specific strategies to increase their customer growth.
Successful D2C brands, such as Amerisleep, Dollar Shave Club, and Bonobos, launch their businesses using a series of stages in two phases.
Phase One: Test the Waters
First, D2C companies collect first-party data based on their target consumers. This information is cookie-cutter based and is the most valuable data you collect about your audience. First-party data gives you specific information on your existing customers, so you can recommend products based on interest, age of audience, and user’s lifestyle.
After the first-party information has been collected, D2C brands create a great product with subscription offerings and backed with digital and influencer (business collaborates with an influential person to promote a product) marketing. These subscription offerings and advertising strategies are all based on first-party data and geared towards a specific audience.
Phase Two: Expanding Limitations
Brands discover limitations imposed by their product or audience focus and use additional options to increase growth. For example, Amerisleep specializes in memory foam mattresses designed to improve sleep, but the mattress is only part of the perfect sleep environment. In response, Amerisleep also created a line of bedding, including pillow, sheets, mattress protectors, and foundations, all to draw customers in as their go-to for sleep products.
The company has recently expanded its mattress line to include hybrid models for customers who prefer more bounce to their beds.
Another method to expand limitations is through advertising. Rather than stick with one method of communication, D2C companies branch to other forms, including TV, radio, social media, and physical storefronts. Companies recognize the need to build awareness of their product, so they use available resources as a means to grow.
Social media plays a large role in today’s tech-savvy world in raising customer awareness in D2C brands:
â— 44% of UK consumers cite Facebook as a platform that has raised their awareness of DTC brands
â— 31% say YouTube
â— 28% say Instagram
The company will also look for more effective distribution options, build on their knowledge of supply chain effectiveness, and gain relationships with large retailers.
Other D2C companies will diversify to a new launch and different brands with the same product model. For example, Amerisleep has two sister companies ”Zoma and Vaya. Zoma is a mattress geared towards athletes and those with an active lifestyle, while Vaya is a budget-friendly mattress for those with limited funds.
Impact On Outsource Agencies
D2C brands prefer to take control of their digital and social campaigns, turning towards in-house talent instead of outsourcing to agencies.
Bringing top talent in-house and seeking strategic partners to help them in weaker areas allows D2C brands to build their own brand with clear propositions and a strong voice. Plus, they save money by cutting out the middlemen and keeping their focus in-house for more effective propaganda.
Older agencies are having to adapt to attract business by taking a more iterative approach where they are more responsive and flexible to the needs of D2Cs. New agencies are also emerging that specialize in services required by DNVBs
Since D2C business models are growing, companies need to create new opportunities for innovation and expansion into new areas of the business to distinguish themselves from other companies and continue to grow.
Conclusion
Today, more consumers are turning to D2C brands, with their appealing marketing strategies, quality products, and lower costs. D2C companies who increase and take ownership of customer-brand relationships have the potential to increase net profits. To adjust to evolving customer expectations, D2C companies need to focus on promoting customer experiences, optimizing operations, and fostering customer-brand relationships.
