Direct to consumer brands and models that are killing it
Discover some of the best direct to consumer brands and how can you up your e-commerce game to compete in the digital landscape.
COVID-19 forced businesses to adapt, change, and innovate like never before. With the acceleration of e-commerce, direct-to-consumer (DTC) business models are taking center stage. And while they may’ve been a mystery before the pandemic, now you can find DTC examples everywhere – often via the brands that are thriving the most.
Direct-to-consumer business models allow brands to maintain control over the entire sales process and to build the direct, trusted, and value-driven relationships with customers they may not have had in the past.
By becoming customer-centric companies unburdened by an exclusive dependence on the channel, they can benefit from greater control over the margin of operations and gain better understanding of the end consumer. This allows them to personalize the entire buying journey for consumers and meet the individual needs of each one.
DTC examples: Models that help brands shine
Let’s look at five DTC examples of business models that can be adopted by consumer brands developing a direct-to-consumer (D2C) strategy, and explore their differences and benefits:
- Direct sales
- D2C with redirection to the channel
- Marketplaces
- Social commerce
- D2C with retailer support
Direct to consumer business model: Direct sales
This is perhaps the most widespread D2C model worldwide. It’s especially popular in Spain.
On one hand, the benefits of this DTC example are tangible: increased profit margins, access to consumer information, and the ability to optimize the brand experience for each customer.
On the other hand, it also introduces more complexity for brands that must develop direct demand-generation strategies, create supply channels, and an immediate delivery process, as well as manage returns and payment gateways. Nike is a top example of this D2C model.
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DTC model with redirection to the channel
Some brands, however, want to avoid disrupting their existing distribution channels since it can significantly alter their business and operating mode and endanger their classic business posture and connection with customers.
In this direct-to-consumer business model, customer engagement is almost tangential. The business engages buyers in essentially the same way as the direct sales model but, in the final stages, hands off the lead to the traditional channel.
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For example, the Pikolin bedding brand conducts the entire sales process on its digital platform before referring customers to specific distributors predefined by the company to complete the sale. This way, the company can still build a relationship with the customer and gain deeper insights about them without disrupting its established partner and channel relationships.
Direct sales through a marketplace
Marketplaces continue to cement their function as search engines for consumer products. According to multiple studies, 66% of consumers now search for products on Amazon rather than Google. Marketplaces offer the advantage of allowing companies of virtually any size to establish a market presence and reach more customers than they can on their own.
However, competition can be fierce and the marketplace platform, not the brand, controls the customer’s journey and owns the relationship. Also, each marketplace has specific tools that must be understood and effectively employed. Profitability relies on often highly specialized techniques, and appropriate logistics must be defined. Finally, both paid and organic search must be continuously optimized in these sales channels.
Social commerce and live shopping
Social networks have become increasingly important in consumers’ lives and they using them to shop. According to Kantar Media’s e-commerce ON 2020 study, 18% of online purchases were made on Facebook, Instagram, and WhatsApp, particularly in the case of beauty, diaper, and fresh food categories.
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Another popular recent trend is live shopping: the creation of live broadcasts that use popular influencers or media streamers to showcase a company’s products. This trend is especially emergent in China on platforms such as Taobao, Douyin or Kuaishou.
D2C business model with retailer support
In many cases, brands devote a significant part of their marketing budgets to support marketing and advertising for the distribution chain. Traditionally, these budgets were allocated to trade marketing or joint above-the-line (ATL) marketing spend.
The evolution and consolidation of retailers’ e-commerce platforms has meant that some of the budget brands used to allocate to the channel are applied to supporting visibility of their brands on retailers’ platforms.
Making the move
The decision to adopt a direct-to-consumer business model is not a simple one. Multiple factors that affect different parts of the business must be taken into account and the most effective model will depend on a brand’s maturity in its category.
But time is of the essence for brands to remain relevant in this climate. Hundreds of digital native “pure plays” with a narrow vertical focus continue to challenge the hegemony of traditional brands in the marketplace by bypassing intermediary channels altogether and gaining increasingly larger share of market.
Are you ready to evolve your business to meet this challenge?
