Catering to the Modern Shopper: The unprecedented rise of the D2C model
The world has changed, and business models are no longer confined to B2B or B2C. To better meet the precise demands of the end-consumer, the E-commerce industry is seeing a slow shift to an alternate strategy called D2C (direct-to-consumer).
The D2C model has exploded in popularity in recent years and is continuing to do so. Most brands are increasingly focusing their attention on D2C channels due to an increased focus on convenience for customers and the rise of internet purchasing.?
In the last several years, India has seen the arrival of a new “non-linear” reality that provides revolutionary potential. Buyers can now get insights, explore and analyse, buy, pay, share and engage across a variety of physical and digital touch points.?
According to a research, by 2026, online consumers would account for half of the online population, with major demand coming from Tier- II and Tier- III cities. Consumers who were once just aware and eager to try out new products now prefer a personalised and direct connection with brands which has led to an evolved digital infrastructure.?
A slew of Direct-to-Consumer firms have entered this space to challenge traditional retail models and their impact has been felt in different areas like domestic items, fast-moving consumer goods, Lifestyle and many more. Nike, L’Oreal, Pepsico and Levi’s are just a few firms that have embraced the D2C model and are revolutionising their business models.?
D2C is predicted to grow rapidly in the coming years thanks to the rapid development in the ecosystem, particularly post-Covid.?
The Rudimentary Digital Transition
In the last two years, there has been a significant and fundamental movement towards online, aided by the explosion of digital platforms for everything from E-commerce to connecting with digital media, brand-building, and more.
Brand owners in the traditional media and retail channels don't have complete control over their platforms, marketing or operations. The sheer quantity and range of customer engagement modalities available today, including a plethora of social media channels, allows brands to express their narrative to consumers even before they make a purchase. Brands can reach out to their buyers in a more tailored and focused manner, primarily because they have the entire authority over every part of the customer experience. This assists the brands in personalising and customising the customer experience, thereby leading to a higher customer lifetime value. Furthermore, it serves as a catalyst for D2C brand hyper-growth.
Generation Z who rely heavily on digital media to provide information and trends are more inclined to try new brands and shop online. This expanding trend of personalised purchasing complements D2C's focused and tailored shopping proposition exquisitely.
Consumers are gravitating toward D2C brands.
Consumer preferences and expectations have evolved as E-commerce capabilities have improved. As huge retailers struggled to fulfil these consumer demands and expectations, clever entrepreneurs saw an opportunity to better serve these customers by going direct.?
Consumers prefer D2C brands for a variety of reasons:
Consumers enjoy having easier access to both their favourite and new brands. Consumers are willing to engage with brands if it leads to a better shopping experience in terms of convenience, choice, pricing, personalisation, customer service, and even social ideals.
D2C is proving to be one of the best E-commerce models for business.
Going direct to consumer offers various benefits, and retailers are adapting to suit the changing demands, expectations, and behaviours of the post-pandemic consumer. Apart from the potential for larger margins on orders placed when compared to selling through aggregators and marketplaces, the D2C model offers many benefits that firms are taking advantage of.
Direct Customer Interaction
Consumer demands are changing at a breakneck pace. The D2C model allows brands to effectively communicate with their customers at every stage of their journey. This helps the brands to cater to different needs that the consumers might have at each point and address them to the best of their abilities.
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Control Over Brand Identity
While the D2C model provides an opportunity for the brands to curate the customer experience, it also provides them the control that they cherish over their brand identity. They can decide how the product should be packed, what marketing message should be used to promote it, how it should be delivered to the consumers and the post-purchase experience.?
Personalised Customer Experiences
The D2C model allows brands to provide customers with a more personalised experience by displaying product recommendations that are relevant to them. It helps the brands to upsell and cross-sell the products that the consumers might be interested in and therefore, eases the consumer decision making process.
Omnichannel dominance
It has become imperative for the brands to develop their presence across different channels as the gap between online and offline has reduced from the customer’s perspective. Consumers will switch between the two media while making purchases as we get closer to normalcy and therefore, having a D2C model is bound to have a positive impact on the brand’s financials with an increase in revenue and profit margins.
While D2C has a myriad of benefits it also poses several challenges.?
Increased competition, the desire for personalisation, and rapidly changing customer behaviours can be overwhelming for any D2C firm.?
Supply Chain Transparency
If a D2C brand does not have an effective delivery tracking system, it may be difficult for logistics managers to monitor on-ground operations and take preventive measures in the event of any deviation from anticipated delivery timetables. It might result in bad user experience and churning of the customer from the ecosystem.
Increased Competition
The surge in competition in the digital sector is arguably the most significant problem that D2C brands will face this year. More and more businesses have moved their activities online in recent months due to need and this plethora of options will offer the customers to look for alternatives in the event of unsatisfied experiences.
Product Differentiation
While the D2C model has proved to be beneficial for the brands, the right product, which has significant differences from the competitors, with a distinct selling point is the key to attaining success. Without much differentiation, it would be difficult for the brands to lure the customers into buying their products instead of their competitors’.
Marketing and Customer Acquisition
With multiple brands coming up in the recent past and every brand competing for a similar consumer persona, it has become increasingly expensive for the brands to acquire them through advertising. According to a Forbes report, Facebook ad expenses grew by 90% year over year between 2018 and 2019. While advertising costs vary by sector and company size, keeping up with the competitors with higher advertising spends can be tough.
A growing trend in recent years has been the rise of influencer marketing as a customer acquisition channel due to its greater ROI. However, D2C brands face an enormous challenge in spending on influencer marketing due to higher costs and accessibility to the right set of influencers.?
Future of D2C Brands in India
D2C has evolved into a one-of-a-kind platform that encompasses all types and sizes of businesses. With the epidemic increasing the adoption and efficacy of the digital world, both brands and consumers have seen a significant shift in their selling and purchasing practices.? Social media has had a significant impact on the consumers’ shopping habits. Customers are increasingly relying on gaining inspiration and conviction from their friends and acquaintances before making the decision to buy a product. This has resulted in the rise of social commerce in India.
Social commerce is the merging of E-commerce and social media, allowing firms to sell items and services through social media platforms. Social commerce allows buyers to interact directly with companies they like through organic content. With social commerce expected to grow tremendously in the near future, it is imperative for D2C firms to ensure that social commerce is integrated into their D2C growth strategy.