4 Reasons The Direct To Consumer Business Model Continues To Succeed

Allison Champion
7 min read June 3, 2022 Modified: June 22, 2022

There’s been a significant shift toward ecommerce shopping, an addition of $219 billion in sales to be exact. Though online shoppers have steadily grown over the past several years, the pandemic accelerated digital adoption across nearly every demographic. The convenience, versatility, and personalization DTC offers speaks to the needs and preferences of what today’s consumers want.

As a result, established retailers have added a directtoconsumer business model to their overall strategies. Meanwhile, DTC-exclusive brands are quickly reconfiguring their business models in order to stay competitive. Because one thing is certain, ecommerce has become the preferred shopping experience, and DTC is becoming the main driver for many brands. 

What is the current DTC landscape and why is it continuing to grow?

Brands that entered the DTC space early with a strong strategy for customer retention have a headstart on other ecommerce retailers who have recently added a direct-to-consumer model to their approach. However, the DTC model must continuously be refined and positioned for the rapid growth spurred by the buying behavior of today’s top consumers. Additionally, brands must get creative with their approach in order to stand out because with this expansion comes greater competition and less of a chance for brands to differentiate themselves. Not everyone will succeed. 

Nevertheless, DTC sales are expected to reach $175 billion by 2023 in the U.S. and become a mainstream strategy for ecommerce businesses. Even if DTC isn’t the primary approach, it’s important for brands to consider implementing it to stay competitive within today’s current landscape. 

What are the key components of the direct-to-consumer business model and how have brands put these into practice?

The DTC model continues to succeed because it creates a direct connection with customers who immediately respond with feedback which brands can use to refine their processes. Here are the characteristics of a DTC strategy and examples of brands that have successfully conformed to them. 

  1. Personalized experience

Successful DTC models implement strategies that delight customers. This includes curation through algorithms that offer recommendations based on their past purchases to reflect the type of products they are likely to be interested in most. 

Women’s clothing subscription brand StitchFix capitalized on customization for its customer base by curating the shopping experience. Members receive monthly (or dependent on the customer’s schedule) shipments, filled with stylist-selected items based on each customer’s personal style profile. 

The clothes are chosen exclusively based on the shopper’s preference with inspiration for how to style them. Additionally, StitchFix makes returns simple by including pre-paid bags customers can use to send clothes back they didn’t purchase. Clothes that are selected are heavily discounted, incentivizing shoppers to purchase more clothes.

1. Optimized fulfillment 

Maintaining the customer journey post-purchase is essential to a successful DTC business model. Otherwise, all marketing efforts that have gone into acquiring the new customer can quickly be depleted if order fulfillment falls short. 

Casper is a prime example as one of the first bed-in-a-box companies to deliver mattresses straight to customers’ doors. They offer free shipping within most of the U.S. and Canada and send a shipping confirmation email with tracking numbers to follow the progress of the delivery. Plus, a generous return policy allows customers to try out their new beds and send them back for free if they don’t quite fit their needs. 

2. Customer-centric

Although putting customers first is the central factor for any business model, with DTC, it’s up to the brands to make the connections with their audience versus relying on retail partners and in-store product placement to help with discoverability. 

Chubbies created an active fan following, which skyrocketed them to notoriety, via viral social media posts and active brand ambassadors generating word-of-mouth. The apparel company, known mostly for its colorfully printed shorts, continues its strong brand identity and showcases its personality across all marketing channels. Thus, creating a strong, direct relationship with consumers.

3. Social savvy

Prior to being acquired by consumer goods company Unilever, Dollar Shave Club set the standard on how to stand out on social media. Their cheeky YouTube video defied traditional marketing messaging and instantly went viral, leading to a new direct-to-consumer trend. The magnetic pull of social media motivated customers to sign up for the company’s razor subscription service largely due to how much they enjoyed the brand.  

In addition to their entertaining tactics, DSC delivered affordable, everyday products every person could benefit from. Put together, they managed to find the ideal combination for what went on to become one of the most successful DTC brands to date. 

What are the main characteristics that successful DTC brands have that make their supply chain and overall operations efficient? 

For every success story, there’s a failure of consumer brands that couldn’t quite find the sweet spot of profitability and customer satisfaction. The successful DTC business model incorporates efficiency whenever possible by knowing how to streamline processes with technology. 

Experience collecting first-party customer data

Knowing how and which customers data to analyze is essential to drive an effective DTC strategy. Evaluating metrics, such as a customer’s buying behavior, real-time inventory flow, and cart abandonments all help shape a D2C business model and enhance it for continued success. 

Uses CRM software to communicate with customers

Every step of the customer journey is important, lasting far beyond when a customer confirms payment. For example, two out of three consumers say they would not buy from a retailer again following a negative returns experience.3 Use CRM software to communicate with customers and provide tracking information regarding delivery and returns. Communicate along the entire buying journey to keep customers informed and satisfied.

Leverages social media

Social media is where the shoppers are. Reports say two-thirds of shoppers turn to social media during their buying journey.4 Create a seamless direct-to-consumer experience by enabling social media throughout the journey, especially post-purchase. The goal of a DTC model is to maintain a lifetime customer versus a one-time sale. This can be achieved through offering a rewards program, user-friendly app, and other incentivizing ways to keep them coming back and shopping for more.

What are the major benefits of DTC? 

DTC strategies allow ecommerce businesses to make data-driven decisions based on what their customer wants and expects. By managing control over the entirety of operations, they can immediately implement changes that would improve customer satisfaction and increase profitability.

Access to customer data

With DTC, there’s direct access to your customers’ data. These customer insights paint a clear picture of purchasing behaviors, product preferences, and other key performance indicators that show where improvements need to be made. Traditional retail doesn’t pass along the benefit of sharing customer data, making it more challenging to hone in on who your ideal customer is and how to sell to them.

Increased control over the user experience

With complete control over the entire customer experience, from brand positioning and product placement, to online presence and reputation management, it allows your company to maintain a high-quality shopping experience and quickly pivot as needed. Whereas, standard retail distribution decides stock quantities, shelving, and other factors that can affect how your products appeal to customers.

Greater visibility into whitespace territory for product development

By analyzing customer data, ecommerce companies can personalize the omnichannel experience. They can test and launch new products faster as a way to differentiate themselves from mass retail. It also allows companies to start on a smaller scale and review consumer feedback before launching it full-scale across the board, saving on costs and resources.

Optimized fulfillment

With Flowspace technology, ecommerce companies can connect in-order management systems and have real-time visibility of inventory to create a seamless shopping experience sans out-of-stock messages or overstocks. Furthermore, using an algorithm to determine the closest fulfillment center to the customer reduces logistics costs and ensures the delivery is always fast, affordable, and on time.

Greater supply chain flexibility

DTC provides flexibility to handle higher demand and provide customers with personalized options by maintaining control over the entire logistics operations. Products can be delivered faster and packaged in a way that’s reflective of the brand. Flowspace software integrates all online consumer sales channels to organize and optimize retail fulfillment and manage accurate inventory to adapt to customers’ changing demands.

Support DTC Strategies with Flowspace Technology

The D2C model is designed to build better relationships with new and long-time, loyal customers. By leveraging technology to directly connect with your audience directly, there’s greater opportunity to increase brand loyalty, customer acquisition, and customer lifetime value.

Using data to drive the customer experience helps brands build and refine their products. It shapes strategies to continuously promote value to both new and returning customers. And it ensures fulfillment is flexible and affordable enough to meet rising consumer demand. 

Flowspace delivers an advanced technology fulfillment solution to amplify DTC efforts. Ecommerce companies can maintain direct connections and power business decisions with real-time data accessibility and easy-to-implement integration to fulfill a holistic omnichannel experience. 

The DTC business model will only continue to grow and evolve as ecommerce eventually becomes the mainstream method of shopping.  Having the right technology in place is necessary to streamline efforts to help ecommerce brands succeed and stay competitive.

To learn more about how Flowspace technology can optimize your efforts, get in touch today.

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Author Bio

Allison Champion leads marketing communication at Flowspace, where she works to develop content that addresses the unique challenges facing modern brands in omnichannel ecommerce. She has more than a decade of experience in content development and marketing.

Sources:

  1. Digital Commerce 360. Coronavirus pandemic adds $219 billion to US ecommerce sales in 2020-2021. https://www.digitalcommerce360.com/article/coronavirus-impact-online-retail/
  2. eMarketer. Direct-to-Consumer. https://www.emarketer.com/topics/category/direct-to-consumerhttps://
  3. McKinsey. DTC e-commerce: How consumer brands can get it right. www.mckinsey.com/business-functions/marketing-and-sales/our-insights/dtc-e-commerce-how-consumer-brands-can-get-it-right
  4. Forbes. How Shoppers Are Using Social Media. https://www.forbes.com/sites/forbesagencycouncil/2021/08/27/how-shoppers-are-using-social-media/