CEO at JLB USA. My agency helps businesses succeed by creating an authentic brand.
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Today, more and more customers are buying products online, and they tend to visit the source directly. For instance, buyers will visit a direct brand’s website to compare products instead of walking into a department store or outlet.
As a response to rapidly changing customer trends, more businesses are leveraging a direct-to-consumer (DTC) business model—selling products directly to their buyers and controlling manufacturing, shipping and delivery. A DTC business model lacks third-party wholesalers and retailers.
Most brands today are switching to a DTC business model to meet customer demand. As many as 60% of shoppers prefer shopping directly with brand manufacturers, according to a 2020 Kelton Global study.
Going from a traditional retail sales model to DTC can be challenging. Based on my experience with helping brands create a DTC channel, in this article I’ll go over some of the benefits of this business model and how you can build a robust DTC business.
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What are the benefits of DTC?
In 2020, DTC e-commerce sales reached $111.5 billion; forecasters expect it to grow to $174 billion by 2023. This e-commerce market isn’t showing any signs of slowing. Specific benefits of DTC include:
• Higher Customer Lifetime Value
A high customer lifetime value (CLV) reflects a good profit and a prospering business. A business with more intermediaries is unlikely to experience a high CLV since they gain part of your profit.
• Better Control Over The Customer Experience
DTC models skip wholesalers and retailers, allowing you to sell directly to your customers. You can collect insights from real-time customer data to build an engaging shopping experience that attracts your target audience. You’ll also have more flexibility for your targeted marketing strategy. In addition, customers can connect with you directly whenever they have a query.
Switching to a DTC model also enables you to optimize your order management processes. For instance, you can choose an experienced partner for your warehousing and distribution needs. It gives you more control over how you pack and deliver your orders and how your customers receive notifications about their orders and updates.
• Cost Savings
A DTC model is an excellent way of saving on overhead costs. DTC brands save more on operational costs and logistics, pricing structures, etc. For instance, you can remove the costs of price negotiations and profit-sharing with wholesalers and retailers.
Building A DTC Brand
Unfortunately, not every brand can switch to a DTC model or launch a DTC storefront. The question here is: How do you set up a successful, profitable and sustainable DTC business? Here are a few steps to get started:
• Assess product-market fit.
Product-market fit is essential for companies to capitalize on their target audience. No matter how innovative or thoughtful your products are, if there is no demand in the market, they will not sell. When launching products, most DTC brand founders omit demand testing. Conduct different ad campaigns and landing page tests. Analyze which groups or demographics engage with your ads, and which content better converts visitors to buyers. When you notice winning campaigns, test market demand by turning up ad spend.
• Find potential customers.
One of the biggest challenges of a DTC business is looking for potential customers to try their product before purchasing it. Creating innovative ad campaigns on social channels to create buzz is a good first step to getting customers and gaining fans. This also creates a great base for further campaigns to target offers at segments of this cohort of fans.
• Create an intuitive online experience.
DTC brands need to create an incredible online experience for customers. From a highly responsive website to engaging product descriptions and collateral, everything counts. Since websites and online channels are primary sources to drive customers, they need to be consistent in messaging and tone.
A great way to engage in conversation with your customers is by responding to their reviews. This can be done by setting up Google Alerts for any mentions of your business, which you can then look at and respond to if appropriate.
Also, AI-based marketing automation can help DTC brands in the initial push for sustainable growth. This can be done through software that integrates with your website and responds to signals about user intent by, for example, giving a user on the verge of abandoning their purchase a custom offer that can convert them to a buyer.
• Use high-quality visuals.
Visuals typically attract customers more than text. Websites with appealing ads, visuals and images with engaging content will manage to grab customers’ attention and often convert more. Therefore, it is essential to plan your visuals strategically to attract more traffic to your web pages.
• Focus on specific user journeys.
DTC brands do a lot—they have to pay attention to their product, upfront marketing, inventory management and back-end operations. They sometimes miss the critical element of why their product is being bought by users. In other words, they don’t always know the reasons and values that a user buys their product for. An example would be a very famous brand of yoga pants that ended up becoming a fashion statement and is now marketed as such.
Audience cohorts—sets of users with a common identifier—are where you can extract these learnings. They are crucial for every e-commerce business. Cohorts make it easier to look for causes of purchase decisions and run effective online marketing campaigns.
• Leverage social media and marketplaces.
Launching a DTC business enables you to connect with customers through different mediums and channels that you own. Third-party channels, including your brand’s social media accounts or an online retail store at a marketplace, can help reach your target audience by sending out your brand’s messages.
The Bottom Line
Moving to a DTC model can be complex, confusing and stressful. If you want to do this the right way, I’d recommend bringing in skilled advisors to assess your company and ensure that you’re ready to make this transition. They will help you adopt the right tools and processes to move to DTC.
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Author: Jayant Chaudhary, Forbes Councils Member
