Digitalization, the steady rise in e-commerce sales, and increasing competitive pressure make it ever more important for companies to convince customers of their products and services. One way of achieving a competitive advantage in ecommerce is through the D2C Ecommerce or direct-to-consumer model. In this business model, direct contact with a company’s customers is central, allowing brands to sell directly to consumers, bypassing traditional retail stores and leveraging e-commerce platforms.
The advantage of direct to consumer model is that products are not made more expensive by various intermediaries, and the manufacturer does not lose control over the product and marketing.
A manufacturer using D2C in eCommerce can market its products directly to the target group and retain control over the entire value and supply chain. This approach enables brands to drive e-commerce growth, optimize the customer experience, and gain valuable insights through customer data.
In order to establish direct contact with potential buyers and customers, the D2C approach usually uses the company’s own branded web stores or marketplaces as the means of choice. Especially marketplaces offer a lot of opportunities in the fast-growing marketplace environment.
Successful D2C brands often leverage social commerce and focus on building strong customer relationships.
By choosing the D2C model, brands can differentiate themselves from traditional B2B and B2C models and gain a competitive edge in the electronic commerce space.
The D2C Commerce business model – simply explained!
The abbreviation D2C stands for “Direct to Consumer”.
In d2c companies, products or services are sold directly to the customer.
While traditional sales models work with several intermediaries and rely on wholesalers and retailers, a company that deals directly with the consumer in ecommerce, takes over the entire value chain.
This approach allows brands to leverage digital commerce platforms and technology to drive sales and growth in the direct-to-customer market.
One of the advantages of the D2C model in ecommerce is that it significantly increases the margin for the manufacturer. This is because the price of a product normally increases with every intermediary involved in the value chain.
At the same time, the margin, or profit, for the manufacturer decreases in the process. In addition, the manufacturer retains control over the product.
Thus, the company itself can determine the marketing strategy, packaging, or selling price. Brands can maximize their e-commerce business and avoid traditional retail by opting for the D2C plan.
Probably the greatest advantage of the D2C technique, however, is the amount of data that can be collected about customers for sales and marketing.
Especially in data-driven ecommerce, the customer understanding gained in this way can be the decisive advantage. D2C provides brands with complete control over the user experience, from the electronic commerce site to the product delivery.
This lets brands to launch new products or services, test different marketing strategies, and continuously improve their D2C offerings based on the voice of the customer and data insights.
Benefits of D2C Electronic Commerce Strategy
In addition to increased margins and complete control over a company’s products, the Direct to Consumer Model in e-commerce has the advantage that the manufacturer has direct contact with its customers.
This contact makes it possible to respond directly to the criticisms and needs of the target customers. This can increase customer satisfaction and improve consumer engagement and brand messaging.
D2C allows businesses to increase sales and forge closer bonds with their customers by implementing the D2C approach.
With the increasing use of social media, such as Instagram, Facebook, or TikTok, direct contact with the target audience is becoming more central to the commercial success of companies.
Due to the increasing turnover through social media, mainly caused by millennials, contact with the target group via social networks becomes increasingly a lucrative sales opportunity.
D2C commerce brands are able to capitalize on these trends and reach their target audience more effectively.
Due to the easy and quick contact with the potential target group, products can be tested extensively before they go into mass production, causing high marketing expenses.
Products can be tested in small batches and their potential assessed. This reduces the risk of a sales flop, and expenditure on sales and marketing can be invested in a targeted and efficient manner. Many digitally native D2C brands leverage this approach to launch new products and grow electronic commerce.
Another interesting aspect of D2C for companies is that they can sell the products regardless of location. This makes it possible to trade nationally as well as internationally. This allows companies to expand their sales market and target group. This is also the reason why many people want to launch a D2C brand.
This circumstance can have a direct positive impact on sales. Established brands may reach a larger audience and boost their income potential by entering a D2C market.
The crucial advantage of Consumers in the data-driven electronic commerce world is that direct customer contact creates countless touchpoints with prospective buyers or customers.
Thus, there are a lot of opportunities to gain valuable data from customers (e.g., buying behaviour or opinions) for sales, marketing, and product teams. The data gained here can be the decisive competitive advantage in electronic commerce.
D2C technology and commerce solutions help brands to collect and analyze customer data, giving them complete control over the customer journey and allowing them to optimize their ecommerce experiences.
As ecommerce statistics continue to show significant growth, the future of D2C looks promising for brands that can effectively use the power of this sales model and deliver exceptional customer experiences.
Advantages of Direct-to-Consumer:
- The digital target group is reached
- Brand awareness is increased
- Independence from retail
- Long-term customer retention & loyalty
- More sales via digital channels
- Internet as a test channel and for quick customer feedback
Braun Büffel – award-winning retail case with the D2C approach
The medium-sized leather goods manufacturer Braun Büffel has done its digital homework and successfully initiated the transformation. The digital offensive was so successful that the case won 1st place in the Best Retail Case Award in September 2021.
The main success factor was the overall cultural change in the company. Through the customer journey analysis, Braun Büffel got to know its target group better and could optimally align online sales to it. At the same time, the employees were brought on board and participated in the restructuring from the very beginning. The success is very clear:
The share of D2C e-commerce sales rose to 30% within 2 years.
Challenges of Successful D2C Ecommerce Strategy
Companies have more control over the value chain in the D2C, which can be both an advantage and a disadvantage.
If a company lacks marketing, sales, or customer service competencies, it may be better to outsource these steps or use a platform to support their efforts. However, acquiring these competencies or outsourcing processes will likely cost money. If a company masters distribution and marketing, it can be a major advantage, as they know their products best.
Another challenge of a direct-to-customer approach is that retail is a strong competitor.
This is because retail companies know best about their target customers’ local characteristics and needs. In addition, these companies already have experiential knowledge and data about which products are profitable and sell well.
This knowledge can be an advantage over companies that are just starting to choose D2C as their only strategic plan. However, by entering this market and utilizing electronic commerce statistics and data, brands can gain valuable insights into their target audience and optimize their offerings accordingly.
Probably the biggest challenge is that when you start selling directly to customers without intermediaries, you are confronted with a completely new area.
We are talking about order management, returns, and the associated management.
Technically and, above all, logistically, this is a huge challenge because, as a manufacturer or brand without previous direct sales, you have to set up the returns process for the first time. This is where the differences between D2C e-commerce and traditional retail become apparent.
While traditional retailers have established processes for handling returns, D2C brands need to build these capabilities from scratch.
Despite these challenges, this model offers significant opportunities for brands looking to drive growth and connect with customers directly.
Top brands in the D2C space have demonstrated the potential for success, with many achieving significant electronic commerce growth and building loyal customer bases.
As more brands enter the D2C market and invest in their electronic commerce capabilities, the future of retail will likely see a continued shift towards direct-to-consumer sales and novel commerce models.
More and Happier Customers with D2C Commerce in Electronic World
Improved customer contact through a direct-to-consumer strategy leads to higher customer satisfaction, repeat purchases, and loyal customers. This reduces the effort required to acquire new customers and generates trust through good reviews and word of mouth.
Brands can sell without an intermediate, enhance their customer interactions and achieve sustainable growth by utilizing digital commerce platforms and the D2C master plan.
Offering optimal returns management, including uncomplicated and fast returns processing and friendly customer service, is crucial for increasing customer satisfaction in a D2C ecommerce model.
D2C brands can differentiate themselves from traditional retailers by providing exceptional customer service and a seamless returns process, creating a more personalized customer experience.
Through direct contact with the target customer via marketplaces or their own brand webshop, companies also have the opportunity to respond to feedback and requests for improvement. As a result, customers’ wishes and needs can be better understood and met. D2C, therefore, helps companies to focus more on the target customer.
With the help of review management, the feedback gained can be efficiently managed and evaluated.
A decisive success factor here is the topic of customer experience management. Those who actively accompany their customers during the customer journey can influence buying behaviour and build brand loyalty. After a purchase has been made, analyzing customer reviews is increasingly important.
The founder of the direct-to-consumer brand Wiesemann 1893, Manuel Siskowski told us in an interview that, review data is much more meaningful and of higher quality than market research data. He, therefore, advises all companies to monitor customer reviews actively and, in the event of a negative review, to contact the customer directly.
Focusing on customers’ needs enables companies to grow sustainably and in the long term, thus successfully competing with rival companies. Brands can maintain an advantage over competitors by venturing into the D2C sector and use customer feedback to enhance their products over time.
Through direct consumer sales via their ecommerce website or marketplace, companies can obtain important information and understand consumer behaviour and preferences.
This data can be used to optimize marketing campaigns, product offerings, and the overall customer experience. As more brands enter the D2C space and invest in their electronic commerce capabilities, the future of retail will likely see a continued shift towards direct-to-consumer sales and novel commerce models.
Conclusion: Why Does D2C Commerce Matter?
Through the application of D2C in ecommerce, a business can establish a lasting relationship with customers.
Proper strategy implementation leads to greater customer satisfaction, more frequent repeat purchases and improved control over the company’s products. As a result, marketing expenditures can be invested more efficiently and used in a more targeted manner.
Brands can maximize their commerce business and boost D2C ecommerce sales by selecting the D2C model and utilizing an e-commerce platform.
Tipp: Find out more about current trends and drivers of the marketplace world in our marketplace study “The Marketplace World 2022”!
Due to the current trend towards social media and electronic commerce, companies should try to profit from the change and adapt. Direct contact with the target group can be an existential advantage over competitor companies and influence the economic success of a company.
Enterprises can embrace ecommerce tactics like direct-to-consumer to partake in the growing sales of virtual marketplaces.
D2C ecommerce enables brands to differentiate themselves from traditional retailers and capitalize on such a growing market.
Now is a good time to make the most of the benefits of D2C techniques. Most companies can grow and compete against other market players through such a strategy with their own brand webshops or marketplaces.
Brands may create considerable development and cultivate a devoted customer base by utilizing ecommerce platforms, prioritizing customer pleasure, and harnessing the distinct advantages of D2C marketing.
Entering the D2C market and investing in a D2C website or ecommerce site can help brands sell through novel channels and increase their D2C sales.
As electronic commerce statistics continue to show significant growth, the future looks promising for direct-to-consumer brands that can effectively navigate the D2C channel and deliver exceptional customer experiences. The D2C model offers a compelling alternative to traditional retail, and companies that embrace this approach will be well-positioned for success in the ever-evolving ecommerce landscape.