In a world with endless competition, savvy brands are fine-tuning their direct-to-consumer strategies to slice through the saturation. With more shoppers reaching for online retail, this model gives brands the space to craft unforgettable customer-first experiences. But what does this mean for you? Let’s explore! Whether you’re a digital leader or a budding entrepreneur, this guide will provide all the insights you need to navigate the direct-to-consumer (DTC) landscape.

What is direct-to-consumer?  

The direct-to-consumer model does what it says on the tin. It’s a retail structure where brands sell to their customers themselves, without middlemen like Amazon or Walmart. While this model is about 100 years old, nowadays this is usually done through a website, but some brands do have a physical presence. This simplifies and streamlines customers’ shopping experience, speeding up the buying cycle.  

“According to Shopify: Direct-to-consumer (DTC) is a retail model where brands sell directly to new customers. It skips the wholesale middlemen and eliminates the need to join forces with big retail brands and brick-and-mortar stores.”  

The availability of direct-to-consumer brands boomed with the rise of internet shopping. Suddenly, all bets were off and anyone with an idea could reach potential customers with their products.  This growth shattered the retail landscape’s status quo. With online retail enjoying lower costs than physical, micro brands competed against giants on a level playing field. Smaller, personality-rich, super niche brands like Glossier, Gym Shark and Warby Parker challenged large, established stores and captured consumers hearts.  

Why did it work? In a world with endless choice, customers crave personality and connection. They care about their own values and seek out brands that fit with these. Additionally, customers know exactly what they want and won’t settle for less. The DTC brand boom gave everyone access to a massive variety of products and fueled intense competition. 

The playground for this competition is the internet. Online retail has exploded to 5.8 trillion U.S. dollars in 2023. While distributors like Amazon and Alibaba still take home most of the market, in the US, DTC makes up about one in six sales, and this is expected to grow. 

In self-owned online spaces, brands can let their true selves shine and protect their brand identity. Most DTC brands sell a limited selection of products to a very specific target audience. Think Gymshark, only offering gym wear to a younger, mostly female audience. 

What are the pros and cons of direct-to-consumer? 

To really understand the model it’s crucial to weigh up the direct-to-consumer pros and cons.  

Starting with the good stuff: 

• Access to data to create personalized experiences 
• Increased brand loyalty from niche offerings 
• The space to innovate effectively 
• Massive market access for growth 

And the challenges: 

• Increased responsibility and liability without distributors 
• Potentially increased costs 
• Competition is fierce  

Pros 

Here are the good bits in more detail. 

Access to data 

The secret weapon and one of the major direct-to-consumer benefits is data access. Skipping distribution networks, wholesalers and physical stores removes the space between manufacturers and customers. The gold comes from being able to build better, super-personalized offerings. Both for products and customer experiences. 

The brands that do this well have a deep understanding of their customers’ personalities and preferences. They know exactly who they are, what they want, and why their audience engages with their brand.  

Increased brand loyalty and retention 

Building an empathetic connection, along with delivering excellently tailored products keeps customers coming back for more. With direct-to-consumer marketing, you can build emotional connections with your audience which can help increase customer loyalty. 

Inspired innovation 

The DTC approach outpaces traditional models when it comes to innovation. You can grasp the chance to launch new, unique products at smaller scales, with an engaged test audience.  

Bigger is better 

DTC is an online game, and your audience can be from any corner of the world. This instant access to global consumers means scaling can be much easier than business-to-consumer models.  

Cons 

Like any model, it’s not all smooth sailing and there are some direct-to-consumer challenges.  

Increased liability 

One of the main risks with the direct-to-consumer model is increased liability. With full control comes great responsibility to ensure cyber security is maintained and you’re working with reliable members to fulfil your supply chain. Usually, this responsibility is shared with third parties but here, it’s all on you.  

DTC can be costly 

This comes with a potentially increased cost. Tools and software to fulfil your needs without distributors add up, and that’s before any advertising costs. 

Keeping with the ‘it’s all on you’ theme, reaching new customers can be expensive. 66% of DTC companies say increasing customer acquisition costs is the main barrier to growth. In traditional models many products and brands will attract a consumer to a marketplace. Think someone browsing the Amazon app. All these people are potential customers already, whereas with DTC you need to get your name out there first, often using Google or social ads. 

Part of a crowd 

Ad costs are high in no small part thanks to competition. As more businesses emerge or pivot towards DTC the market is getting rather crowded. You need excellent customer experience, products AND marketing to be heard over the noise.  

What are the key direct-to-consumer retail trends you need to be aware of? 

Let’s see what’s happening in the world of direct-to-consumer retail trends. Brands are experimenting to stand out in a crowded marketplace, and customer behavior is evolving. 

Convince cautious customers

Inflation results in tighter consumer budgets, but this can work in your favor if you build a clear brand message. As shoppers become more selective, it’s essential to shout about why you meet their needs better than competitors. Stand out with a seamless digital experience, perfectly personalized customer journeys and unparalleled customer service to turn a casual consumer into your biggest brand advocate.  

Personalize everything 

Personalization is one of the biggest trends in direct-to-consumer retail. And customers are in the know, with 56% expecting personalized shopping experiences.  

Get the scoop with zero-party data 

To dig deep into what customers desire you need to know what they are thinking. This, alongside the iOS update and the move to a cookie-less world has accelerated the importance of zero-party and first-party data.  

Zero-party data is information customers willingly hand over. A great way to do this is with quick, fun quizzes that result in personalized recommendations. You learn what customers want and they get right to the products that suit them.  

Chat away  

Customer service might not be glamorous but it’s critical. DTC companies are turning towards chatbots to fulfill this vital role. These tools can respond to customers faster and at all times of the day, improving customer experience. Plus, they can reclaim up to 70% of the customer service team’s time.   

Social shopping  

Through Instagram Shoppable posts or the dedicated TikTok Shopping tab, social media purchases have stuck. Increasingly popular with Gen Z and millennials, these functions keep people engaging in-app for longer. The speed and ease of purchase is particularly appealing, and since they get a slice of the pie the platforms are incentivized to continue to improve social commerce tools.  

How to build your brand using a direct-to-consumer business plan 

Here are some top-line tips to help you build a direct-to-consumer business plan for your new brand. Ultimately you need to be flexible, an early adopter of new opportunities and know exactly who you are.  

Steps to success: 

Who are you? 

To build a direct-to-consumer brand, start by identifying your niche. In a competitive market you need a flawless understanding of what problem your product solves. This will give you a clear message to consumers, which you can then test over and over to find your perfect audience and voice.   

Who are you talking to? 

Success is found by building intimate relationships with customers. Understanding their mindset and why they would engage with you. Conduct thorough market research on who you appeal to and your target audience. Continue to gather feedback and use this information to make improvements.  

How are you communicating?  

Every experience should be exceptional. Design and refine every customer journey to ensure a seamless experience. Speak to the world through innovative social campaigns to build a community. Remember the power of customer service and keep on top of review and community replies to build a positive online space. 

Practical tips: 

• Leverage popular platforms: Use Instagram and TikTok to actively engage with your audience  
• Invest in visuals: Websites with appealing images and striking social posts will typically capture more attention than text 
• Utilize data analytics: Make data-driven decisions to optimize your marketing strategies 
• Invest in customer service: Exceptional customer service can set you apart from competitors 

Direct-to-consumer has re-written the script on the way brands connect with their customers. By keeping up with the latest trends and strategically building your brand, you can thrive in this space. Download our new eBook for a detailed guide and kick start your journey. https://www.pressganey.com/newforsta/resources/from-click-to-collect/