GET MARKETING INSIGHTS TO GROW YOUR AMAZON BUSINESS
– MARKET SHARE
– COMPETITOR INSIGHTS
– PRODUCT CATEGORY POTENTIAL & A LOT MORE!
DTC or Bust in 2020: How Manufacturers Are Selling Direct-to-Consumer & Why You Should Too
As professionals and consumers alike, we’re used to technology changing the way we work and live. In product manufacturing and selling, this is no different. Over the years, technology, specifically eCommerce, has enabled selling in ways that were once inaccessible – namely, Direct-to-Consumer (DTC) selling.
DTC is known to help strengthen brands, improve customer experience, and increase profits. It was pioneered by major companies like Dell, who in 1984 became the first computer manufacturer to sell directly to its consumers rather than through a retail channel. Though a much younger brand, Warby Parker is often considered a pioneer of DTC for disrupting the prescription eyeglasses industry in 2010 by selling directly to consumers online and offering the ability to try on different pairs at home before making a purchase.
Traditional Retail vs. DTC: What Are They?
In the traditional retail model, manufacturers sell their products in bulk to retailers or distributors, who then resell the product at a higher price to the consumer. Often unable to take on the cost of maintaining brick-and-mortar stores, to handle order fulfillment and shipping, or to effectively tap into a customer base, manufacturers rely largely on their retail partners to take on those responsibilities. After all, they are conventionally more equipped to do so.
While this traditional retail model is of course still the most common way product is sold today, the rise of eCommerce has simplified each of its steps to the point where manufacturers no longer require the physical retail space or employee base needed to take on the act of selling product to consumers. Recognizing this, there has been a considerable increase in the number of manufacturers who are doing just that – making DTC part of their go-to-market strategy, building eCommerce websites and selling straight to their customers without the need for a retail partner in the middle. For seasoned manufacturers who already have channel partners in place, DTC can become an additional selling avenue.
Direct-to-Consumer selling has been proven successful, even in highly unlikely categories. Casper is perhaps the most well-known DTC brand, often used as a success story when discussing the benefits of selling directly to consumers. By simplifying the act of shopping for a mattress, including offering just one standard bed model in the beginning, Casper was able to open the doors to a massive consumer base online. The company made over $100 million in its first two years. Since then, the brand has grown to become a $1.1-billion company, with its own brick-and-mortar stores now also in the picture. The success of online DTC selling has enabled brands to expand beyond just one selling avenue, often balancing eCommerce with retail stores and wholesalers for even more success.
Why Sell DTC?
There are many positives associated with selling directly to your consumers:
- Ownership over customer relationships
- Building brand recognition and loyalty
- Potential cost savings and higher revenue by removing or supplementing the “middle-man”
- Stronger control over brand perception
- Access to customer data and buying patterns
- Flexibility to sell where and how you want
- No direct competition with other brands on your own eCommerce store
- End-to-end control over the manufacturing, merchandising, marketing, logistics, and customer service
The big takeaway for manufacturers is often the end-to-end control, including the control of brand perception. A major part of this comes through in the ownership of content that can be created on a DTC eCommerce store. By running your own online store as a manufacturer, you’re not relying on a retailer to write your product content for you (which can sometimes end in misrepresented or inaccurate information).
Dollar Shave Club, a wildly successful subscription-based DTC brand, launched in 2012 with a funny, tongue-in-cheek YouTube video that quickly went viral. It earned 25-million views and so many orders that the manufacturer’s eCommerce website crashed. While the company was purchased in 2016 by Unilever, Dollar Shave Club’s eCommerce store still features content with the same humorous tone, something the brand and parent company have been able to hold on to by taking control of the selling channel.
By selling DTC, manufacturers take on the responsibility – and control – of crafting engaging and brand-specific content including website copy, product descriptions, buying guides, product photography, video, and even digital advertising. While this may be overwhelming for the manufacturer who is new to the DTC space, there are eCommerce service providers like geekspeak available to produce these assets.
Like any new business strategy, there are challenges associated with selling direct-to-consumer that many manufacturers will need to navigate.
- Existing retail partnerships: When a brand adds DTC as a selling channel, it becomes a competitor of its existing retailers. Developing a well-thought-out strategy that involves strengthening retailer relationships, being mindful of products, pricing and promotions, and balancing the effort placed on all channels will help lead to success in this area.
- Lack of experience: For manufacturers who have never sold directly to consumers, the lack of retail experience can prove to be overwhelming when developing a DTC strategy. From understanding consumer trends to effectively marketing and merchandising a catalogue of products, manufacturers should consider working with experts in the retail field to aid in their transition – or at least be patient and willing to deeply develop a strategy and stick to it.
- Taking on the work: By selling DTC, a manufacturer must ensure they have the bandwidth to handle all steps in the selling cycle – or access to services, platforms and tools that can help them. Product design and development, marketing, shipping and logistics, customer service and more will all become work performed by the brand.
- Owning relationships and reputations: Taking on all the work also means taking on the responsibility related to customer relationships and brand reputation. While control over perception is considered a positive of DTC selling, it is a component that needs to be nurtured and carefully executed day-to-day.
How to Get Started with DTC
So how does a manufacturer start making the transition into becoming a DTC brand? There are some key steps and considerations to make before diving in head-first:
- Do your research: Identify your brand’s direction and define a goal. Determine areas in which your competitors are selling, how and where your audience likes to shop, etc.
- Be transparent: If you’re currently selling through retail channels, be transparent with your vendor partners to ensure they’re aware of your move to DTC. If you’re planning on balancing your selling channels by keeping up with both retail commitments and DTC, work with your retailers to avoid channel conflict and strengthen those relationships.
- Find a platform: Decide where you want to sell – on a marketplace like Amazon or eBay? On a self-developed eCommerce store? On a website created through a platform like Shopify, BigCommerce, Magento or Volusion? On Instagram? A combination of these? Decide as well if it makes sense for you to sell in your own brick-and-mortar or pop-up shops.
- Build an eCommerce website or launch on a marketplace: Once you’ve decided where you’ll be selling, build that eCommerce shop or create that marketplace account and fill it with engaging product content that will drive shoppers there.
- Invest in your product content and assets: In order to effectively merchandise your products online, it is important to invest in the creation of high-quality and highly engaging content including product descriptions, product photography, product video, and enhanced marketing content.
- Market your products: With your DTC channel, you’re no longer relying on retail partners to market and sell your products. Develop a marketing strategy based on where you’re selling and who you’re selling to. Will that include digital advertising? Influencer marketing? Traditional advertising routes like TV and radio? Do what makes sense for your brand and its goals.
- Prepare to serve your customers: Now that you’ll be closer to your customers, it’s important to ensure you can serve them well. Put the preparations in place to ensure you can handle customer service inquiries, quick order fulfillment and shipping, returns and refunds, and more.