Direct-to-consumer: What is it? And is it right for my business?
Over the past couple of years, businesses have had to learn to operate differently, adapting to a new normal of ongoing change in regulations and business practices. Among these changes are an increasing rise in direct-to-consumer channels ( DTC or D2C) to capture, maintain, and scale business as consumer habits change – maybe for good.
What is direct-to-consumer?
Simply put, direct-to-consumer is a business model that gives you the ability to market and sell directly to the end consumer. Traditionally, many businesses would sell to retailers or wholesalers who would then sell to the consumer. Going direct-to-consumer puts you in direct contact with the customer.
Benefits of a direct-to-consumer channel
You can probably see one of the top advantages of adopting a DTC channel for your business – you don’t have to share your profits with a middle man. You are selling directly to the customer, you set your price and do not need to share the revenue.
In addition, marketing directly to your consumers allows your brand to become more involved with the customer. Getting to know your customers better gives you an opportunity to understand what they’re looking for from your brand. It gives them the chance to speak to your company, ask questions about products, and get assistance. All of this contact builds consumer trust in your business, and trust leads to loyalty and referrals.
So what’s the downside?
We’ve outlined many of the benefits of a direct-to-consumer business model, but you might be wondering if there is a downside. The main issue small business owners may find challenging in operating a DTC channel is having to do everything on your own. Building and maintaining a website is just the tip of the iceberg. In addition you need to either have a team in place or pack and fulfill orders on your own. Lastly, there’s the customer service aspect. You have now opened your company up to the consumer market. If they have a question or need help, they’ll be looking to you for support.
These are not terrible issues to encounter; they’ll just take some thought and planning ahead of time. Getting your team in order will arm you with all you need to tackle the demand for a direct-to-consumer business model.
Launching a DTC strategy
Before you start selling direct to your customers, have a plan in place. Throughout this period of pandemic, businesses have been making changes and adjustments – almost overnight to keep their businesses profitable. Businesses have been forced to come up with contingency plans on the fly. It’s been eye-opening for many businesses, and those that learn from it may have a better chance of success.
Your backup plan could stay around long term if you find that it’s manageable for your business and generating revenue. Many individuals are shopping online now – in 2020, US ecommerce sales more than doubled to 35%, up from 16% the year prior, according to McKinsey & Company. Shoppers have a new comfort level buying online. Ecommerce websites are seeing the benefits of having a well-maintained, operational platform to serve these shoppers.
Supply and demand
An ecommerce website is just one piece of the puzzle. You will also need to make sure you have products available and are ready to deliver to your customers. Be sure to pay attention to stock levels – as your business grows online, anticipate a surge in demand. This is especially the case if you’ve invested in any paid marketing.
Ensure you can deliver on the orders you’re receiving to avoid potential customer service issues. If an item becomes unavailable, be sure to indicate that immediately on your website. Including an estimated availability date will help set expectations for your customers.
Make sure the content on your ecommerce website is up to date. If prices change, be sure you’re updating your website accordingly to reflect this. If you have a restaurant, for example, and ingredient costs have gone up and you need to pass this increase on to your customers, your website should be updated and displaying current prices. Again, this just helps avoid potential customer service issues.
Scaling your business online
Going direct-to-consumer means scaling your business. You’re growing your website to meet a new market of customers. This is a big step for you and your business. And you can count on success and profitability with proper planning and execution of your plan.
The ability to reach out to your customers directly is in your grasp – and you have the power to make it happen.