What Is Direct-to-consumer? The Direct-to-consumer Business Model In A Nutshell

Direct-to-consumer (D2C) is a business model where companies sell their products directly to the consumer without the assistance of a third-party wholesaler or retailer. In this way, the company can cut through intermediaries and increase its margins. However, to be successful the direct-to-consumers company needs to build its own distribution, which in the short term can be more expensive. Yet in the long-term creates a competitive advantage.

Understanding direct-to-consumer

Some estimates suggest eCommerce sales will surpass $6 trillion by 2024, with approximately  $175 billion occurring via the direct-to-consumer model in the United States alone.

Direct-to-consumer is a strategy where a business sells directly to consumers through an online medium. The approach is in stark contrast to more traditional B2B strategies, where a manufactured product may pass through a wholesaler, distributor, and retailer before it is purchased by the consumer.

Manufacturers operating under the D2C model must necessarily wear the hat of the wholesaler, distributor, and retailer in addition to meeting their production and fulfillment responsibilities. So why would a manufacturer take on more work voluntarily? There are two answers to this question, and both are related to the evolving needs and expectations of modern consumers.

For one, consumers prefer to go directly to the source when purchasing from a specific brand. For example, a golf fanatic is more likely to visit the TaylorMade website than they are a traditional sports retailer when looking for more information. When more consumers are going direct to TaylorMade, this also means the company can no longer rely on third-party sports retailers to adequately sell its products. Essentially, TaylorMade may be forced to adopt the direct-to-consumer model and make its products available for direct sale.

Advantages of the direct-to-consumer model

While it is clear manufacturers may have to take on extra work, there are nevertheless quite a few benefits to adopting the direct-to-consumer model:

  1. Customer data – manufacturers who sell to a retailer or wholesaler are less exposed to important purchasing data regarding their products. The D2C model helps manufacturers learn more about their target audience, resulting in smarter product development and increased awareness around consumer trends and demand.
  2. Customer experience – selling direct to the consumer means the business has control over the entire buyer journey. The business will learn where consumers shop and how they prefer to pay. By interacting with consumers directly, the business can offer more responsive customer support and develop targeted and consistent marketing campaigns using SMS or email, among other channels.
  3. Brand engagement and reputation – many businesses who sell through a retailer have little say in how their products are presented. Retail salespeople may have limited interest or knowledge in promoting their range, which can lead to a poor first impression of the brand itself. In the D2C model, manufacturers ensure the company brand and associated products are painted in the best light possible.

Direct-to-consumer examples

Here are three companies utilizing the direct-to-consumer model:

  1. Glossier – a cosmetics company founded by blogger Emily Weiss, who built a strong relationship with her readers before developing products to sell to them. By asking consumers what they wanted directly, Weiss was able to bypass selling her goods in traditional cosmetics retailers.
  2. Dollar Shave Club – a company that was started because its founders were tired of paying for expensive razor blades in supermarkets. Dollar Shave Club sells cheap razors direct-to-consumer on a subscription basis.
  3. Casper – a manufacturer and direct seller of innovative mattresses, pillows, sheets, weighted blankets, and even dog beds. Casper enables consumers to avoid buying these items from aggressive salespeople in traditional furniture stores.

Key takeaways:

  • Direct-to-consumer (D2C) is a business model where companies sell their products directly to the consumer without the assistance of a third-party wholesaler or retailer.
  • Despite requiring extra work and involvement, direct-to-consumer has several benefits for manufacturers. They include more transparent customer buying data, a higher-quality customer experience, and increased brand engagement and reputation.
  • Examples of businesses employing the D2C model include Glossier, Dollar Shave Club, and Casper. 

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"