Considering going direct-to-consumer (D2C)? Don’t follow traditional retail tactics. Mapp & VTEX have compiled the must-read differences and opportunities for D2C marketing.
This rapidly growing channel is popular among emerging manufacturers and retailers shifting sales models. Profit margin was one of the original reasons, but now brands can see the value and profitability in owning and creating authentic customer experiences.
The retail channel provides wider consumer reach and allows manufacturers to focus on one thing – just the manufacturing. The supply chain is a long and expensive journey from product idea to a product in consumer homes, requiring a variety of expertise.
Many brands have been dipping their toes in the D2C world, with the primary driving force being a declining margin through the retail channel. However, these newer reasons are validating a second wave moving to the D2C model.
Lower eCommerce technology barriers
More accessible logistic processes
Focus on values and ethics
D2C brands are anticipated to grow, but it’s not a new concept. The foundations of commerce started directly between the producers and consumers, and has evolved over time.
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As a result of the COVID-19 pandemic, brands of all kinds are looking to shore up their own direct-to-consumer (D2C) efforts as more consumers seek authentic and engaging brand relationships in increasingly digital spaces.
There are several key differentiators that D2C brands should focus on that can positively influence the experiences that a direct-to-consumer relationship can offer. We highlight the 10 core differences and opportunities for manufacturers to consider.
Provides instant access to a wide reach of prospective customers that are already interested in the product category and want a low barrier to transacting.
Emerging brands often start from scratch. But they have a unique position to start building an audience prior to selling product, even including them in design.
Ethics and values might be important, but it’s hard to guarantee that the manufacturing processes for all goods sold live up to the same high standard.
Owning the supply chain allows full control of ethical principles. The focus on values can create exceptional experiences, connecting on emotional levels.
Builds credibility of new products but maintains the relationship. Often sells competitive brands or launches their own private label at a lower cost to retain customers.
This is the Holy Grail – the direct relationship with consumers. D2C enables authentic experiences with the brand, nurturing, and personalized moments to upsell.
Requires commitments to larger production batches, which delays getting feedback and insights on how the product can be tweaked to increase customer satisfaction.
Direct access to consumers and their immediate feedback provides greater flexibility to tweak product design or formula, and test small batches.
Price is often dictated. Options to provide brand-specific vouchers in joint campaigns with the retailer may occur. Manufacturer rebates are tedious and not immediate.
More flexibility in pricing, refund policies, and offers like “try before you buy.” Subscriptions are common, allowing consumers to schedule regular deliveries.
Takes a significant proportion of margin, allowing economies of scale throughout the supply chain, marketing, and distribution which facilitates greater reach.
Lower margin is not a given, but there is an opportunity to save significant proportion of margin by cutting out the middleman from the supply chain.
Creates an inherent gap in ability to connect transactions and loyalty to individual consumers, making it hard for manufacturers to recognize or reward.
Every transaction can be attributed to an individual, providing frictionless customer loyalty and reducing brands’ reliance on discounts.
Meeting the specifications of the retailer and standing out on shelves can result in excessive packaging and placing a huge priority on branding.
Packaging can be simplified (even recycled) allowing more focus on the overall brand experience and product quality, rather than visual differentiation.
Provides a variety of choice for a variety of goods. But consumers love low prices and home delivery, giving rise to Google and Amazon, diminishing retail success.
Consumers’ resistance to buy from manufacturers directly is a barrier. There is an opportunity to sell niche and exclusive products; choice is moot point.
Retailers have market insights based on product sales data and consumer data, giving an advantage to forecast demand and define pricing strategy.
With direct consumer data, manufacturers can gain insights on why customers buy from them and discover new products that capitalize on consumer preferences.
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