How Direct-to-Consumer (D2C) Brands are re-shaping the market

What is D2C commerce?

Is it a Brand New Model?

Direct to Consumer, or D2C, is exactly what it sounds like—brands selling directly to consumers rather than through the route of the retailer, wholesaler, or distributors. It means that the manufacturer takes responsibility for all things retail-related within the business in addition to their original manufacturing, brand ownership, and fulfillment responsibilities. This business model disrupts the traditional model entirely, with manufacturers “cutting out” the retail middleman and selling straight to the end-consumer. D2C trends and technologies are evolving as innovative brands are booming – taking charge of creating, marketing, selling, and shipping their products themselves, without a middleman. Let us look at the comparison below to understand better -

It’s not a brand-new model. The door-to-door salesman, the shopping catalog, the D2C salesperson—these are all examples of D2C. Direct-to-Consumer has been a buzzword in our country for over 2 decades now. This strategy is fast becoming a popular route for manufacturers and CPG (Consumer Packaged Goods) brands to enter the market directly — instead of the traditional route.

A good example for us to discuss is the concept of various direct selling organizations that have created their own Brands by category along with a loyal consumer base.

Background of the Direct Selling Industry?

Direct Selling in India has literally more than doubled its size in the decade gone by. For people who grew in the ’90s, they can resonate with someone knew in their circle exploring to encourage your family to buy professional looking products in great packaging quite regularly. The key USP has always been the direct sellers who make a personalized recommendation to address consumer demand thereby elevating satisfaction levels. As per research, 92% of people trust a recommendation from a peer on their purchase decisions.

The era of such organized direct selling was marked by companies like Amway, the US-based direct selling company, and Modicare, a homegrown Indian company. Most of the organizations in this space have started with a very limited portfolio and have penetrated deeper into several categories over the years. Some of the known names in the industry include -

·        Amway

·        Modicare

·        Avon

·        Oriflame

·        Herbal Life

·        Eureka Forbes

Like any other industry, direct selling has its own set of challenges – online, counterfeit, etc. however their strength is their loyal followers who associate with them towards fulfilling their combined interest of product, fame, and money.

What are the benefits of going D2C?

The benefits of going D2C are immense, but to name a few, going D2C eliminates the barrier between the manufacturer and the consumer, giving the manufacturer greater control over its brand, reputation, marketing, and sales tactics. In addition, it helps the manufacturer directly engage, and therefore learn from, their customers. A strong uniqueness of a D2C organization or brand emerges from their strength to have one-on-one relationships with their consumers in addition to capturing valuable data that is nearly impossible in a typical Kirana outlet.

What are the keys to success in D2C?

What is driving the rise of D2C?

What makes D2C unique?

As per global research, 59% of consumers prefer to do research directly on the manufacturer’s website, with 55% preferring to make purchases the same way and this is just an example of the power that D2C really has been growing consumer aspirations and need.

The reason D2C companies have experienced such success in recent years is that they’re better able to cater to the evolving needs of today’s consumer. More and more brands are exploring this route and advances in technology are the prime reason for the same. Brand selling in this space strives to exhibit authenticity and take complete ownership of the entire experience and ensure that it goes right. Brands are bypassing the old gatekeepers altogether to reach, engage, and sell to the end consumer directly.

Another critical key to success within D2C is a deep understanding of the brand’s consumers. Organizations that are able to gain a view into consumer needs and insights will support a competitive edge, increase brand loyalty, and boost their revenues. By having that direct line to consumers, D2C brands have a wealth of data that can be used to create a more relevant, engaging experience.

Scaling up and diversifying product offerings is one of the D2C trends that brands are employing to increase sales and expand their consumer bases.

D2C represents a huge opportunity for brands looking to gain the coveted share of wallets being offered by today’s consumers. Being successful will require brands to understand the shifting climate and leverage these trends in the most efficient and creative ways possible. At the end of the day, people want convenience, and they want to trust the brands they’re doing business with.

Need for In-store experiences?

Having an in-store experience that allows D2C brands to further showcase their goods to consumers has proven to be a boon. While naysayers were declaring the demise of the in-store shopping experience, D2C leaders have been busy reinventing retail, and physical locations do play a big part in that. Consumers of D2C products are amongst the savviest around, which means D2C sellers must continually up their game in innovative and creative ways to garner top of the mind recall across multiple consumer-centric channels. What will be worth noting is the further evolution of this in the new normal. 

Has this medium of business created any impact on the Industry?

While the barriers to enter the fray as a startup D2C brand are relatively low, one has to remember that the competition is against retail giants like Amazon, Flipkart, and the likes who have already established a massive customer following.

D2C and E-commerce

Today brands stand at a crossroads – and there’s everything to play for. The digital commerce revolution has irrevocably changed consumer shopping behaviors and expectations across online, in-store, and everywhere in between. Covid-19 has boosted the relevance of online D2C as more consumers embrace e-commerce.

With retail outlets closed for protracted periods due to this pandemic, consumer product companies have had to increasingly re-examine their online direct to consumer (D2C) strategies. Many have sustained or increased sales through such channels despite traditional Route-to-Market (RTM) failing. Some are exploring fresh opportunities to create stronger, more resilient online D2C business models that will sustain them during the oncoming economic downturn.

In fact, the current crisis has turned D2C RTM from an opportunity to a necessity. Online sales have rocketed. The average online transaction value has risen in excess of 70% compared with a year ago. This is a perfect example of how D2C has sailed through such an unprecedented crisis.

With consumers acclimating more rapidly to online shopping in the longer term, businesses getting their online D2C strategies right could be in a unique position to build growth, market share, and profitability.

Retail pundits have rightfully expressed about the greatest trend of the last decade that has had the deepest impact on retail and it has been… brands' desire to have a more direct relationship with their consumers.

Given how much things have changed, what has worked in the past almost certainly won’t work in the future. Fast forward to now…

It’s time to get hyper-focused on the consumer

Today consumers expect brands to allow them to browse and make purchases on their terms – where, when, and how they want, directly or indirectly. That means brands must provide a consistent, personalized, and more digitally supported Omnichannel experience – whether that’s the web, mobile, social, in person, or a combination of these. Achieving all this requires advanced analytics and the ability to constantly track and anticipate consumer behavior and understand real-time intent.

Is technology required to survive in the D2C model?

At a time, when the technology bug has hit one and all in the post-pandemic era, it’s a question of relevance. Even if the product or service in context doesn’t work in terms of regular orders, shopping needs to be extremely simplified. This means an attractive, fast-loading website that is clear and equally easy to navigate. It should have all the relevant information that consumers need without them requiring to spend a lot of time or effort to understand what is where and also how to place an order.

If any brand wants to win the D2C game, they just can’t stop at filling orders efficiently. They would also need to take to fruition, the evolving expectations of consumers who place those orders. The desire, on the consumer’s part, for more personalized and authentic engagements with the brands they do business with definitely isn’t a fad that is going to fade away soon enough. The reality is, consumer experience is becoming more and more important as time goes on — to the point that it will soon overtake price and product as the key factor that differentiates one brand from another.

The brands that are winning in the marketplace are the ones that understand and own the fundamental interplay between experiential and transactional. If D2C trends are any indication, personalized experiences have become a hallmark of modern marketing.

By offering the services, goods, and products that consumers want and need – in the simplest manner possible – brands are endearing themselves to consumers, who will in turn reward them with loyalty.

A well-executed D2C strategy is all about delivering relevant, personalized experiences and making it easier for consumers to make informed choices. And direct interaction through e-mail, mobile apps, e-commerce, mobile loyalty applications, social media, and in-store media all add up to excellent ways to turn big data into delighted customers. Let us look at this representation from Deloitte Report - 'Going digital, going direct' to understand how this evolution has really been on various elements between the traditional route and D2C -

One thing is for sure, brands with D2C channels not only benefit from increased direct sales but they also have an opportunity to gain an unfiltered insight into consumer wants, needs and behaviors – which can be further used to draw insights to streamline the path to purchase, resolve problems and create value.

What do you think of this Industry and its relevance for the future? Pls, share your thoughts and comments below...