Unnoticed by many, the direct-to-consumer model has been quietly undergoing a revolution. Some of the best-performing brands of recent times have been direct-to-consumer (DTC) – such as the Dollar Shave Club, recently valued at $1billion, or Glossier, currently excelling in the tough beauty space.
What brand wouldn’t be interested in the benefits of the direct-to-consumer model? It offers big advantages in terms of control over your brand, how it’s presented and marketed. Compared to using retail intermediaries, it gives better control over the customer experience. DTC also offers better access to the customer and as a consequence, more insights into their behaviour.
There are no retail intermediaries to have to deal with and that gives a lot of power (not to mention time) back to the brand.
Many DTC brands focus ruthlessly on a small niche with only one product. Bonobos started by selling just one pair of trousers; Casper sells only one type of mattress. This gives these DTC brands good grounds to claim they are just offering the product that’s in the best interests of the customer and the best example of its kind.
Removing the so-call ‘paralysis of choice’ that customers face when confronted with a large range of products seems to help DTC brands cut through the noise and just make sales. Glossier only offers one shade of red lipstick but it promises that it’s one that’s universally flattering.
Direct-to-consumer brands certainly tend to drive relentlessly for sales right from the start of operations, without fussing too much over branding. Focussing like this can deliver really good product feedback right from the outset. It can help the organisation scale rapidly and then consolidate its image and brand.
DTC brands tend to offer a very strong buyer experience and are able to do so because they control the entire interaction. Chubbies, a wildly successful retailer of men’s’ shorts, excel at customer service and offers free returns. That’s pretty typical for DTC companies.
This focus on offering a strong buying experience often means that customers become loyal or recommend the brand, which supports growth and word of mouth acquisition. In some ways, DTC companies are living what other vendors and retailers are striving to achieve using more conventional intermediary models.
Succeeding in tough markets
Direct-to-consumer brands are the unicorns of the retail sector in the sense that they’ve managed to make a success of things in a cut-throat retail market. Rather than participating in the race to the bottom, they’ve used brand personality and often a good story to stand out from the crowd even when they’re selling products that are available elsewhere such as shorts, makeup remover or mattresses.
They’ve bucked the horrible retail trend of tight margins and a tough operating environment by making retail fun and frictionless for the customer. Although price is certainly a part of their proposition, their focus is on good value rather than lowest cost.
Although DTC brands typically start out with just a single product, they do have the ability to grow and add new lines pretty rapidly. Glossier claims to launch a new product every 6 weeks, and it focuses ruthlessly on R&D to achieve this and maintain quality.
This rapid-adaptation model is helped by the fact the brand is in direct contact with customers so it can pick up on trends and feedback.
Brand activities are mostly enabled by the internet. Customers are able to reach these brands without the benefit of intermediaries, and brands can reach out and acquire new customers through online advertising and other digital channels.
Direct-to-consumer companies tend to be pretty nifty at jumping on the latest content type or advertising medium and they tend to be able to move fast when they spot an opportunity. Soylent uses influencers, Glossier uses micro-influencers and Chubbies excels at content marketing.
With a greater and greater proportion of sales now happening online, it’s perhaps realistic to conceive of a future where D2C brands become even more mainstream than it is now. But if these brands are going to expand, they will need to take their offering abroad and find new audiences.
That’s a tough proposition for brands that have excelled at meeting customer needs by catering to preferences, which are often culturally-rooted.
It’s pretty common for brands to expand first to markets that (on first glance at least) appear very similar to their home market. Many UK brands venture first to Australia, seeing similarities in language, culture and retail environment.
But first appearances can be deceiving. Just because two markets have strong affinities, it doesn’t mean people there have the same values when it comes to buying shorts or contact lenses. There can also be a very different competitive landscape. Whilst your B2C proposition may seem a breath of fresh air at home, in a new market it may not break the mould in the same way.
Direct-to-consumer brands have excelled by spotting a consumer problem and responding to it in a way which delights them. But it’s not always possible to replicate this model in new markets.
Success can only be replicated by truly understanding the market and possibly recreating the brand’s unique selling proposition for that new audience. It remains to be seen whether the success of D2Cs can be replicated overseas at large scale.