D2C – the end of regular retail?
Now manufacturers can choose to sell directly to consumers, without the middlemen, such as retailers and wholesalers, and in most cases, without bricks-and-mortar shops. This process is also known as Direct-to-Consumer (D2C) marketing. The recent covid-19 pandemic has given the final push for us entering this era – where barriers between producers and consumers are eliminated.
Though D2C has been growing over the last decade, this doesn’t mean that it is a completely new concept. The mail-order catalogue is an early form of D2C, where consumers chose the products they wanted to purchase from a pamphlet (usually in a form of a book or magazine) directly from the manufacturers.
In the modern age, D2C is an improved and enhanced form of direct-mail catalogues. Instead of paper catalogues, consumers purchase directly online from the manufacturer and have their products directly mailed to them without having to go to an actual store.
D2C is almost exclusively digital-first since manufacturers enter the market directly without any third-party vendors – they focus on their web presence and online shopping environment to engage with consumers. However, this doesn’t mean that DTC companies only exist in the e-commerce category, some have also launched physical stores or experience centres for consumers who prefer to get to know the products before purchasing.
This e-commerce focus and no middlemen approach brings many advantages to manufacturers. They have total control over product branding and marketing, product deliveries, and services, as well as full ownership of consumer communication, engagement, and experience without financial and practical obstacles. That being said, they have no control over whether consumers are going to choose their products since consumers also can easily choose from the competition.
Another pain point is also the hassle and cost of returning purchases. A free return policy will give consumers greater reassurance to place an order. As D2C mainly focuses on online marketing, consumers tend to be more hesitant to purchase products they can’t feel and see physically. This policy will give consumers the final push.
Why is the D2C model popular?
The online nature of D2C has its advantages, putting brands directly to consumers. This suddenly gives the faceless brands offered by retailers a sense of familiarity and trust. Impersonal brands suddenly offer a streamlined and personalized shopping experience with excellent customer service.
Not only the personality of the brands is valued, but D2C also makes shopping more convenient, cheaper, and quicker. This is especially appealing for younger generations. They often look for convenience, low cost, and an authentic and seamless shopping experience. The D2C model facilitates this and the e-commerce ecosystem makes it even more appealing since younger generations do most of their shopping online.
Manufacturers are able to get to know their consumers and apply direct marketing tactics most suitable to them. The D2C model allows manufacturers to tailor their messages and products to meet consumers’ preferences. And by doing so, manufacturers are creating communities of consumers who strongly feel related to the brands.
Is D2C here to stay?
With various businesses now adopting the D2C model, it seems like this will not fade anytime soon. We can now find various businesses with this model – from bicycle manufacturers to food producers. Also, bigger and more well-known brands are also shifting their focus to D2C.
In Europe, where there are multiple countries with different cultures and regulations, D2C marketing can be quite challenging. Besides, the markets are mainly dominated by Amazon and eBay, as well as other local players like Otto, Real (DE), CDiscount (FR), Bol (NL), and Allegro (PL).
However, this doesn’t mean it is impossible to operate with the D2C model in Europe. Gymshark has proven that the European market is one to conquer. Relying on social influencers and brand “ambassadors” allows them to reach European consumers.
With the Covid-19 pandemic still in Europe, the D2C model seems to be THE solution for current business activities. Even in the post-pandemic situation, this model is predicted to continue growing, both for conventional products like clothing, as well as packaged food and beverages. YET – this doesn’t mean regular sales through retails are going to disappear. Walmart is one of the proofs that people are not ditching retail just yet.
At ADK Insights, we continue to monitor emerging trends and translate their impact on consumer behaviours, providing insights to help businesses future-proof their innovation. To know more about our experience and what it could mean for your business, please contact Dam.