Direct-to-consumer (DTC) selling isn’t easy. It requires a lot of hard work in the marketing and messaging department and an uncompromising customer focus. Without the convenience of traditional distribution channels, DTC brands have to start from scratch. However, DTC continues to be a popular business model for new retail startups because it offers a number of unique advantages:
Middlemen in the distribution process can take a huge bite out of your profit margins, A successful DTC brand can generate larger profit margins by cutting out the middleman, even though it also makes distribution more difficult.
You can also reduce the built-in cost of creating, manufacturing, and delivering products by going straight to the consumer. Some DTC brands are able to offer costly products such as mattresses and luggage for much less than what they would normally cost in a retail store, just by simplifying the supply chain and minimizing inventory movement—even drop-shipping straight from the factory. This allows you to keep prices competitive while creating better earnings potential, especially as your company begins to scale.
Customers have options, especially when buying shoes. Buying in-store can be a time-consuming, tedious hit-and-miss experience; buying online can lead to dashed expectations in sizing, quality, or materials. Allbirds came up with its own solution to these dilemmas by offering a limited number of styles and sizes (no half-sizes) but an array of colors using high-quality merino wool materials. Shoppers even get the option of choosing shoelaces to match and have 30 days to test them out. If they change their mind, they can return their new shoes—even if they’ve been worn outside and scuffed.
Allbirds recognized early that online was great for launch, but physical stores increased the value of its brand and improved its connection with customers. Physical stores also happen to have a lower customer acquisition cost than online channels, making it cheaper for Allbirds to keep growing.
Selling directly to customers allows Allbirds to protect its brand by controlling the entire customer experience and getting it just so. Its shoes are never presented by an uninformed associate and never end up on the discount rack at a shoe liquidator. Full control of the customer experience allows Allbirds to teach its customers to expect quality and simplicity with every single purchase—a common characteristic of almost every modern DTC business.
Selling wholesale removes your brand from direct customer contact and almost always means you have no first-party customer data on purchases to evaluate performance and cultivate customer relationships.
But this data has enormous value for your brand. It can give you information about how your customers value your products, as well as their satisfaction with shipping and other parts of the shopping journey.
Part of DTC’s appeal is the ability to increase access to customer data and to leverage it to build strong relationships with your customers and make better business decisions. More complete data leads to better shopping experiences, improved customer outcomes, and even better backoffice operations.
Many DTC brands use their unique selling platform to position their brand as a either a status symbol or a way for customers to improve their quality of life.
Companies like Blue Apron market heavily to busy professionals who still value healthy eating and quality foods. Warby Parker has positioned itself as a trendsetter in eyewear fashion. Away's stylish luggage is recognizable to other travelers, making it a status symbol for its customers.
All of these DTC brands are able to protect their brand integrity by controlling the supply of their products and eschewing relationships with department stores and other distribution channels,
Brands are drawn to DTC models because of their distinct advantages. The challenge is creating a retail strategy that can survive without the support of distributors and other retail relationships. When it’s you against the world, how will you make your brand stand out?