Going direct-to-consumer (DTC) is, simply put, the process in which a business eliminates the middleman and starts approaching, engaging with, and ultimately selling their products directly to end-users.
There’s a big advantage to bypassing suppliers and retailers, understandably. A business can potentially cut significant costs and invest in improving their products and operations instead. But there are some challenges, too. This article will discuss the rising DTC trend, its advantages and disadvantages for modern manufacturers
Why are brands going DTC (and why you should do so, too)?
E-commerce has revolutionized the entire process of buying. Before e-commerce made it possible to buy pretty much anything you can imagine online, shopping often involved buying a number of different goods from one store, in particular grocery stores like Walmart.
The past decade, however, has seen a tremendous growth of ecommerce sales throughout the world. The graph below illustrates this growth, which has been accelerated even further by the Covid-19 pandemic. It’s clear there’s no way back for e-commerce, considering that eMarketer estimates ecommerce sales worldwide to hit more than 6 trillion USD.
As customers are buying more and more items online, they choose to go directly to the source, instead of department stores. Having a strong online presence is essential for continued business growth.
Adopting a DTC model also helps businesses increase their profitability by having control over the entire process, from manufacturing, to shipping, and delivery. They can improve their margins and offer competitive pricing to end-consumers.
Owning customer data is another important benefit of leveraging a DTC model. You can easily learn how shoppers interact with your website, learn about their demographics, preferences, and expectations. Data is knowledge, and knowledge is power. Owning customer data means you’ll be able to accurately map your customer’s journey, create or improve products to meet their needs, and follow relevant trends. That also helps improve your business’ reputation and build strong relationships with your customers.
Challenges (and solutions) to the DTC business model
Business operations can be hard to manage. As we discussed above, cutting out the middleman is the most appealing aspect of the direct-to-consumer business model. Ironically, this is also one of its biggest challenges.
Adopting a DTC business model means you will be responsible for processing orders, shipping, packaging, creating and maintaining various sales channels, getting, supporting, and retaining customers, and much more.This implies a much more personal interaction with your customers and the need to manage pretty much the entire supply chain.
On top of that, nowadays customers expect a rich brand experience, so you’ll have to make sure you build a strong brand, tell an interesting story, offer friendly payment methods, fast delivery and much more.
Using the right technology to automate processes and help with managing your business becomes critical for your success. Successfully selling online, directly-to-consumers entails using e-commerce platforms like Shopify or WooCommerce, marketplaces like Amazon or Etsy as complementary sales channels, accounting tools like QuickBooks or Xero, shipping apps like ShipStation, that smoothly integrate with a manufacturing ERP software. This way you’ll access data about your manufacturing, inventory, sales, accounting, and shipping from a single point-of-truth.
Final thoughts
Traditional selling in the manufacturing industry is coming to an end. You can still be successful with this approach, there’s no doubt. However, it’s slow, requires massive resources, connections, and perseverance. Nowadays, more and more production-based businesses move towards a direct-to-consumer model to grow their businesses, increase profitability, and improve their reputation through strong customer relationships. The model doesn’t come without challenges, however technology and automation are foolproof ways to efficiency.