The retail market is constantly shifting, and lately DTC ecommerce sales continue to project upwards. Data shows DTC ecommerce grew at three to six times the rate of overall ecommerce sales from 2016 to 2019, with DTC ecommerce buyer growth projected to reach 103.4 million by 2022.
Before fully diving into the world of DTC, let’s first discuss what does direct to consumer means, and add some context to the growth in DTC sales. DTC stands for direct to consumer, and the term most often applies to any independent online retailer that chooses to sell directly to consumers versus through a separately owned and operated marketplace or established brand. DTC retailers include native online brands, such as Warby Parker and Dollar Shave Club, which market directly to their audience base.
What does direct to consumer mean in terms of supply and demand? And, how do brands decide to sell their products on an ecommerce website vs marketplace, or through third-party retailers? While many brands choose to sell products through marketplaces like Amazon or eBay, more and more brands are discovering the value of connecting directly with their consumers on a one-to-one basis via DTC storefronts.
Benefits of Selling Directly to Consumers
In terms of a selling strategy, a DTC approach gives you more control over your brand and marketing strategy. It also means all marketing, discovery, and customer acquisition are up to you, as you’re unable to rely on third-party retailers to promote and distribute your product.
Essentially, DTC brands bypass the “middleman” factor of wholesalers and marketplaces. This gives brands full control, and offers deep insight into customers and their brand experience. Let’s explore the importance of this a bit further.
Ownership of Consumer Data and Insights
As a brand selling direct to consumer, you maintain control over all customer data, including contact information, purchase patterns, marketing preferences and interests, and customer lifetime value. This data is limited when working with a third-party marketplace, like Amazon, which retains control over the customer because they own the sales channel. Though the convenience of working with a well-recognized third-party brand is enticing to online sellers, the drawback is you don’t have complete access to the customer base you’re building.
When you own your own customer data, you have greater visibility into who your loyal customers are and what their specific demographic and buying behavior is. Understanding who your customers are allows you to set up referral programs and personalization through email and other digital channels to help strengthen your brand and promote company growth.
Another benefit of selling direct-to-consumer is you maintain control over every part of operations. This allows for faster product development and iteration based on first-party customer data, be it through surveys, reviews, or other means of customer feedback. Data collection methods could include everything from crowdsourcing to optimizing landing pages with location-based messages. By using the data available at your disposal, you can offer the products, variations, and services that speak to what customers are most interested in buying.
Ability to Optimize Customer Experience
There are countless brands out there competing for the same customer attention, which means it’s up to you to stand out from the rest. Today’s consumers are often looking for a curated experience. They have loyalty to established brands that align with their values and speak to where they are (and what they need) in the present moment. As a DTC brand, you can be creative with how you present your brand, launch new product offerings and campaigns, and develop innovative growth strategies based on the customer data you’ve collected. There is much less flexibility and freedom when working within the confines of a third-party marketplace or retailer.
Though many brands take advantage of an omnichannel approach, making products available both DTC and through marketplaces and other channels, your direct to consumer customers are the ones that will provide the most valuable feedback and input as loyal brand customers, especially as consumer preferences evolve and shoppers begin to place more importance on brand attributes like service and core values.
Statistics show that 57% of all adults in the U.S. are willing to pay more for quality customer service. Data also shows 73% of millennials are willing to spend more on sustainable offerings. As the consumer priorities shift, it’s important for brands to take note, using customer data to guide the brand output.
Increase Profit Margins
Sales that come from DTC channels typically have higher profit margin, as the fees associated with additional third-parties are eliminated. Though some brands rely on marketplace-provided logistics and fulfillment services, these are also costly, and independent alternatives are available that can further reduce the overall cost of DTC fulfillment.
Why the Surge in DTC Retail?
The Covid-19 pandemic impacted the retail and ecommerce industries in a major way. Early on, Amazon restricted sales on its third-party marketplace to “essential items,” devastating brands that relied on the marketplace to drive sales. Following that experience, many brands realized the importance of setting up multiple sales channels, and finding partners that reduced reliance on third parties that control a brand’s ability to succeed.
Diversifying to DTC
Even legacy brands that have existed long before the Internet are getting into the DTC game, developing strategies that diversity reach and offer optionality and choice to consumers.
An example is PepsiCo, which launched Snacks.com and PantryShop.com to allow customers to buy a variety of its brand’s products directly from these sites. In 2020, with trips to the grocery store (and other in-person operations) limited, consumers were largely looking online for specific items versus succumbing to product placement in their local store, movie theater, or sporting event. Pandemic-born habits have held strong, as many now prefer the benefits of shopping online and are continuing to either stick with that method or incorporate a hybrid of online and in-person shopping as part of their regular buying behavior.
DTC Supports Personalization Consumers Value
In addition to the shakeup brought on by the pandemic, the surge in DTC retail can be attributed to the generation of consumers that dominate the marketplace and want personalization with their retail experience. Though they, too, value convenience of getting their products as fast as possible, customer curation is a top request of shoppers today. A survey conducted by Epsilon and GBH Insights reported 80% of people want personalization from retailers at every part of the shopping experience.
Often, personalization is what helps DTC brands either thrive in a sea of other online retailers. A positive customer experience can boost sales conversion rates by 10 or 15 percent, at minimum. By capitalizing on what consumers are asking for by developing loyalty programs and targeted promotions which speaks directly to their needs and wants, personalization helps brands differentiate themselves and maintain a loyal customer base, ultimately increasing sales.
The brands that regularly analyze their consumer data and listen to what their customers are telling them are the ones that will grow most quickly. Consumers know they have options when searching for any product. It’s the brand experience, including quality and customer experience, that set them apart.
How DTC Fulfillment Through Flowspace Works
Companies like Flowspace provide fulfillment services for brands selling through all channels – DTC, marketplaces, wholesale, and retail. Flowspace gives brands access to the customer data they need within its platform, and provides omnichannel fulfillment for brands, centralizing all ecommerce operations in one place. With a variety of integrations to every major shopping cart and marketplace, you can connect and optimize all your channels seamlessly.
Flowspace can also identify the optimal fulfillment centers that put your products closest to consumers, reducing shipping costs and speeding delivery, leading to an improved customer experience.
With DTC brands continuing to see retail success, it’s important to have the solutions in place that enable you to keep up with customer demands. Schedule a demo today to find out how Flowspace can help set your brand up to succeed.