What is direct to consumer (DTC)?
Published on: November 9, 2023
Updated: November 9, 2023
Direct to consumer—DTC or D2C for short—is a business model where companies sell their products or services directly to the end customer without relying on intermediaries like retailers, wholesalers, and distributors.
If you’re a DTC merchant, you sidestep the middleman (i.e., retailers, wholesalers, and distributors) and sell directly to the end consumer.
How do you sell directly to consumers?
Selling direct to consumers requires a different strategy than traditional retail. Here’s a general overview of the typical DTC brand journey.
Deep market research: ??The company identifies a target audience and strives to understand their needs, preferences, and purchasing habits.
Product development and differentiation: The business then develops a product (or brand positioning) that differentiates itself from traditional players.
Build an ecommerce tech stack: With a product and brand in place, the next step is for the DTC brand to set up shop online. This is where the ecommerce tech stack comes in. This stage typically involves an ecommerce solution, order management system, and post-purchase experience software.
Marketing: Successful brands develop high-quality content that educates, entertains, or informs their audience. This can be blog posts, videos, infographics, etc. The content is then distributed across various marketing channels (typically social media).
Analyze and optimize. Once the DTC sales start rolling in, smart brands pay attention to their reporting and analytics to spot trends and areas they can optimize.
What’s the difference between direct to consumer vs wholesale?
|Target audience||End consumers||Other businesses, often retailers who then sell to end consumers|
|Pricing strategy||Brands set the retail price||Products are sold to retailers at a discounted price|
|Brand control||DTC companies have full control over their brand||Retailers may control how the product is displayed in-store|
|Customer relationships||Brands have a direct relationship with consumers||The relationship is primarily with the retailer, not the end consumer|
|Distribution channels||Sales come through the DTC brand’s website, social media platforms, or DTC physical stores||Sales happen through third-party retailers|
DTC brands and wholesalers have several key distinctions. These include:
DTC: Companies sell directly to the end consumers.
Wholesale: Companies sell to other businesses (often retailers), who then sell to the end consumers.
DTC: Brands set the retail price and often have higher profit margins per item since there’s no intermediary taking a cut. That said, this has started to shift as customer acquisition costs have grown over the years.
Wholesale: Products are sold to retailers at a discounted price, typically 50% or less of the suggested retail price. The retailer then marks up the price when selling to the consumer.
DTC: Brands have complete control over how their products are presented, marketed, and sold to the consumer.
Wholesale: Retailers control how the product is displayed and priced in their stores. Brands have less control over the consumer experience.
DTC: Brands can establish a direct relationship with consumers, gather feedback, and adjust their strategies accordingly.
Wholesale: The relationship is primarily with the retailer, not the end consumer. Feedback may be more indirect.
DTC: Sales typically occur through a brand’s website, social media platforms, or DTC physical stores.
Wholesale: Sales happen through third-party retailers, either in brick-and-mortar stores or on their online platforms.
What are some examples of direct to consumer brands?
Direct to consumer brands come in all shapes and sizes, and they operate across a variety of verticals, from consumer packaged goods to furniture. Let’s look at some of the most prominent DTC brands in the market.
Warby Parker: A company that sells eyeglasses and sunglasses directly to consumers, bypassing traditional eyewear retailers. They gained attention by allowing customers to try on multiple frames at home before making a purchase.
Casper: Known for revolutionizing the mattress industry by shipping memory foam beds in boxes directly to consumers, Casper circumvents traditional mattress stores.
Dollar Shave Club: DSC for short. It’s a subscription-based service that delivers razors and other personal grooming products to customers’ doors. Their viral marketing campaigns helped them gain significant traction.
Everlane: Everlane promoted transparency and authenticity before they were cool. This clothing brand prides itself in being upfront about its margins, revealing to customers the costs associated with producing their products and the factories in which they’re made.
Glossier: A beauty and skincare brand that grew out of a beauty blog, Glossier’s digital-first approach focuses on direct engagement with its community of users.
Allbirds: A sustainable shoe brand that uses natural materials like wool and sugarcane. They’ve gained attention for their comfortable shoes and eco-friendly mission.
Stitch Fix: While not a traditional DTC in the sense of producing its own products, Stitch Fix is a personalized styling service that sends clothing directly to consumers based on their preferences and feedback.
Away: A travel and luggage brand known for its sleek and durable suitcases, often packed with features valued by frequent travelers.
Quip: A DTC brand for oral care, particularly known for its electric toothbrushes. They also offer subscription services for brush head replacements.
These brands have leveraged the power of online marketing, social media, and customer-centric approaches to carve out significant niches in their respective markets. The DTC model, with its ability to form direct relationships with consumers, has allowed DTC merchants to quickly adjust to customer needs and preferences, often outpacing more traditional competitors.
That being said, it’s worth noting that while many of the above brands started with the DTC model, some of them have started working with retailers. Quip, for example, has a presence in the big box store, Target.
Why the shift to a retail model? Well, the DTC market has become a lot more competitive, so some brands are diversifying their sales channels to increase visibility, reach a broader audience, and capture a larger market share.
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