How Direct To Consumer (Dtc) Brands Cracked The Code Of Disruption.

Businesses go through the product life cycle organically and it’s the role of great business leaders and teams to extend the business life cycle inspite of disruptions.

Business life cycle is in four broad phases: The introduction/launch phase, growth stage, maturity and eventual decline. Yet, many businesses have managed to extend their lifecycle inspite of various disruptions into their industry.

One of these disruptions is DTC businesses. DTC businesses/brands are those that sell their products to consumer directly, online. DTC is similar to B2C (business to consumer model) where brands also sell directly to consumers. The key difference is DTC leverages direct sales online where B2C model sometimes include brick and mortar, retail/middle men or online market place channels.

DTC trends can be traced to e-commerce disruption by Amazon et co but many manufacturers didn’t perceive these as direct threats as they were market places versus actual manufacturers. However, the threat became more significant with the evolution of businesses that had their own brands and sold directly to consumers.

DTC model is famous for 1 advantage: direct bypass of retailers/middle men that lowers cost of distribution. But in the same vein, it means the company has to factor in cost of customer acquisition (CAC) and most importantly, find the customers themselves and service them!

In this age of data, data, data! Brands also get data of consumers and the opportunity to build direct relationship with consumers, with agility.

This wasn’t the only disruption successful DTCs brought to the table. In addition to the disruptive go to market channel, Dollar Shave club, launched in 2011, disrupted with pricing versus Global giant Gillette. It offers a flexible 1$/month subscription package. It also created a strong path to purchase eco-system: massive awareness online that linked directly to online stores, end to end customer buying experience , innovative marketing (viral videos e.g F_cking great launch video). It is an explosion of pricing, disruptive marketing and go to market. Product wasn’t bad either.

But, It wasn’t all roses for DTC brands inspite of the juicy acquisition deal! Many remained unprofitable, even after acquisition. Unilever acquired Dollar shave club for a whooping $1billion in 2016. Unilever also quickly realized the CAC of each customer was almost equal to the costs of brick & mortar retailers/wholesalers being avoided.

There are several industries where DTC models are thriving. Casper, only founded in 2014 as one of the first e-commerce companies that sells sleep products online and in retail locations, turned over about $490million and at a profit in 2020.

Glossier, now worth over $1.2 billion and only established in 2010 first as a beauty blog has grown into a big online store, selling its own line of skin care and make up. The disruption started from the insight of real beauty by real, regular people backed by a strong community and heavy word of mouth.

Warby Parker disrupted the eye wear space , with pricing and simplicity of decision and purchase process.

Warby Parker not only set out to make the process of getting affordable eyewear for much less, but also to ease the process by which eyewear users could make a purchase while lessoning the stress of making a decision. They offer convenience with their “Try 5 frames at home for free” model.

Gymshark was started by 2 teenagers, in 2012. First, as a body building supplements business, then evolved to fitness apparels. They leveraged the power of influencer marketing, and their Gym shark luxe tracksuit went viral after their exhibition in 2013.

There are several ways that DTCs tend to win that “regular companies” can proactively innovate for:

1.????Cost/price. Why should consumers pay more, if they can pay less? Brands need to consistently prioritize offering great value to consumers: especially in developing nations. This needs to be a strategy and can be achieved by offering a mixed portfolio: premium/expensive products that help with EBITDA/equity and mid-tier/lower priced that help with scale and overhead allocation.

2.????2 way communication with consumers: Marketing has evolved to personalization at scale.

3.????Convenience is key: consumers have normalized convenience shopping.

4.????Innovative offerings/products: doing new and exciting things help with relevance.

5.????Leverage brick and mortal footprint beyond distribution. ?Eventually many DTC brands evolve to brick and mortar for scale. Regular companies already have the brick and mortar football and can leverage them beyond distribution purposes.

How can you apply these learnings to your business?

Tolu Adedeji.

Love simplifying business & marketing concepts.