D2C is a brand new concept in the era of internet that has stirred up the retail scenario. It has become a hot new trend, and everyone wants to implement it in their business model successfully. The Direct-to-Consumers route involves eliminating the middleman out of the picture of eCommerce. This then becomes an excellent opportunity for D2C businesses to earn a significantly high margin and gain direct access to their customers and their data.
However, going the D2C or Direct-to-Consumers route comes with its own set of challenges and makes it nearly impossible for even the established manufacturers to implement it successfully. Startups usually have even more problems such as constrained resources and limited experience regarding navigating existing distributor relationships.
This article will not only help startups understand how to overcome these hurdles but will also help them build a successful Direct-to-Consumer model. However, before we share our insights about building a successful D2C startup, it is essential to have a deeper understanding of this concept.
What is Direct to Consumer (D2C)?
The conventional method of retail includes many parties between the manufacturer and the consumers. These parties include a wholesaler, a distributor and a retailer. D2C bypasses all these involved parties connecting the manufacturers and CPG brands directly to consumers through an online medium.
The upside of this is it allows D2C brands to experiment with their distribution models by shipping directly to customers. Moreover, they can also form partnerships with physical retailers, start pop-up shops and much more. These brands do not need to rely on traditional retail store for exposure anymore, thanks to this business model. The D2C model, along with helping brands and manufacturers earn a high margin, offers other mentionable benefits that are discussed below.
Benefits of D2C
As mentioned before, the d2c model helps businesses gain direct access to the consumers and their data along with high margins. Along with this, the following are some more benefits of this business model.
Lower Distribution Costs
By eliminating the middleman, D2C brands can earn more by lowering their business expenses. This, in turn, leads to higher margins due to lower distribution costs.
Faster Entry and Better Control Of the Product
Since middlemen such as a wholesaler, distributor, and retailer are eliminated, manufacturers and CPG brands gain direct access to the consumers. A traditional manufacturing route would take on an average of 18-36 months to launch a new product. Along with this, many CPG firms tend to be publicly traded companies. Hence, they need to consider the needs of their shareholders before their own. This translates into a lot of time and effort, along with producing a thorough sales history before launching a new product.
The D2C model allows the manufacturer to launch a new product and test it within a tight demographic and then gain feedback. This helps manufacturers understand what their consumers like and dislike about their new product, thus enabling them to make the necessary adjustments sooner and more appropriately.
The internet is an open playground allowing manufacturers to choose from a wide variety of channels. Brands can set up their online stores on a wide range of commerce platforms.
This enables users to browse and purchase products from across multiple channels and choose from a variety of delivery options. A recent report has shown that 5 per cent of customers makes purchases through a voice assistant device, and this number is expected to grow by almost 50 per cent by 2022.
A Deeper Understanding of Consumer Behaviour
The interaction between the manufacturer and the consumer was minimal before the introduction of the D2C model. Since D2C encourages communication with the customer at every stage of the sale process, observing and understanding consumer’s dislikes and preferences becomes a more natural process.
In short, brands get direct insights into their consumer preferences and can gather data that accurately portrays their behaviour.
This model is not only beneficial for manufacturers and CPG brands but also for consumers. Consumers can establish a direct relationship with the brand and also choose a better product for themselves, thus making it an ideal model for businesses and consumers. While the benefits may tempt many startups to choose this business model, it is also essential to understand the challenges that come with adopting this method.
Challenges of D2C and How to Overcome Them
The D2C industry comes with its own set of problems that include being found online, increasing sign-ups, controlling CRM data and handling transactions. Read the following to have a deeper understanding of the challenges and knowing how to overcome them.
Today, the internet has become a platform flooded with information, traffic, and contains loads of meaningless content. In all this hustle and bustle, it is essential to make your presence felt with your target audience. For big brands such as Amazon, Netflix and others, remaining visible online is barely any problem, while for startups, a brand is their biggest asset.
Hence, to become visible, it is imperative to establish their brand first. Branded products, events and shareable content are some great ways to reinforce the value of their brand.
One problem faced by many businesses is that various consumers subscribe and avail first free services and then quit before a month or two of the service. This behaviour has become a severe hurdle for many D2C services.
The trick to overcoming this according to Alexander von Woikovsky, Managing Director of 7TV, a German joint venture between Discovery and Prosiebensat, “With the combination of different business models that we have in our service, we may lose the customer as a subscriber, but our ambition must be to keep him in the universe of our service. We can still keep him in the free world. Then, when we hit the right content for him again, we can upsell him to another pay service.” To summarize, startups need to remember that it is vital to communicate with the customers even when they unsubscribe from the provided services. This would be useful in the future when another product or pay service is launched that can be sold to a previous customer.
Becoming visible online requires one to implement a successful marketing strategy. What many companies fail to realize that becoming visible is not sufficient; the next step is to get your consumers to sign up for a free trial subscription. Encouraging users to make use of free subscription is an effective way to ensure the consumers stick around and begin paying for services.
How to Build A Successful D2C Startup
Every business trend comes with its own set of challenges. While the problems mentioned above are common for most manufacturers, we have created the following list of useful strategies and tips that startups should consider while building a successful D2C model.
Getting Business Plan in Place
The most important thing before you start implementing D2C is to have your business plan in place. Having a business plan in place will help you understand the market and then formulate strategies that work best for your business. Your business plan should be able to answer essential questions such as why is it important? How do you plan to use your business roadmap? What should be covered in your business plan? And what tools suit your business the best?
Handling CRM Data
The internet is flooded with data, and one can find relevant as well as meaningless data splashed across multiple systems and applications. If a business has the power to handle this data efficiently and organize it effectively, then that would be like winning half the battle itself. Hence, to understand the customer better, it is essential to manage and interpret data to identify opportunities.
To profit from this mass amount of data, startups need to make sure they choose the best platform or tool that works for their business. Choose a tool that helps you effectively sort these heaps of data in a way that analyzing and understanding it becomes easier.
Many businesses fail to realize that handling transactions are a crucial aspect of your relationship with the consumer. Transactions such as shipping and delivery is an essential indicator of your commitment to your customers. It also helps them understand how well can you accommodate their requirements. A report by Accenture shows that two-thirds of customers have chosen a particular retailer over another based on the delivery options provided by the business. Having a smooth, fluid return process could help startups become a favourite amongst customers and establish a good brand value. Startups that are unable to meet the demands on their own can consider partnering with third-party providers like Amazon to ensure customer satisfaction.
Taking A Brand First Approach
By the time a startup has established its business, it is essential to have a pretty good understanding of the market potential. This should be vital for defining brand purpose. Understand why a brand exists and the fundamental values that it embodies to establish a brand value. Since a brand is what can help startups to make their online presence felt it is essential to take the brand first approach. Start filling your platform with detailed product descriptions, how-to-videos, engaging content and videos to increase your brand awareness.
Innovation- The Secret Sauce
In the digital era, offering consumers the latest is not enough. Today’s consumer is more aware and wants what is best for them. Hence offering the consumer a unique platform experience or a one of a kind of product can help in standing out amongst competitors.
“Innovation is seeing what everybody has seen and thinking what nobody has thought” is an essential slogan that startups need to remember while building a successful d2c model. This thinking out of the box can help in offering consumers a unique experience and at the same time, increase brand value.
Providing Best Consumer Experience
The kind of experience that a consumer has on a platform defines the relationship they will have with the manufacturer. Startups need to engage consumers through messages that ensure satisfaction, service interactions across every channel and developing trust through content.
Startups can meet consumer and market needs by uploading high-quality content on their website, social platforms, emails, etc. They can also empower customers with self-service in the form of FAQs or chatbots and personalized e-commerce experience by identifying the behaviour of your consumer. Along with engaging content and creating viral videos, it would also be helpful to reach out to social media influencers who can market products effectively.
Additionally, it is essential to maintain a strong customer relationship throughout the customer journey, from attracting consumers to the platform to delivery of products.
Analyze, Evaluate Implement!
The business plan of startups should include making use of all the right tools. This includes making use of tools that will help you analyze consumer behaviour and results. By analyzing the current progress, startups can develop a d2c strategy that works best for them.
It is also essential to start small and take the walk-before-run approach to set achievable goals. This can be done by thoroughly analyzing and evaluating your current progress. D2C is an investment in time, technology, efforts, and resources. Evaluating current achievement will help startups to develop a clear vision about what and how to achieve their goals.
Last but not least, implement. Implementation should help understand whether a particular strategy is optimal for one’s business or not. Startups must take a dynamic approach that will help them adapt and implement changes according to the call of the hour and thus stay on top of their game.
Going the d2c route is no accessible business and would still require months of research and preparation along with thoughtful technology selection. Following this, to stay on top of the game, it would be essential to continually tweak the strategy to maintain ties with distributors and retailers.
Equipped with the right digital experience platform and the best technology could make going the direct-to-consumer route work. However, to go a step beyond and become successful, it is vital to establish a smooth relationship with consumers with the right tools and equipment, become more innovative and gain more control over the brand.
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