One of the most powerful impacts that the Internet has had, has been its elimination of many elements of the supply chain between the manufacturer and the consumer. Direct to consumer, or D2C, has become a marketing phenomenon thanks to changing online shopping habits. We’ll look at some of the brands successfully taking the direct to consumer route, and what we can learn from them.
Consider the pre-Internet market for men’s razors, for example. The manufacturer would have reps, who would take a percentage, and handle distribution to retail stores. This would then involve shipping to those stores’ regional distribution centers, then to the stores themselves, where the razors would be displayed for consumers to purchase.
Today, brands like The Dollar Shave Club have shortened that cycle by going straight to the consumer. Gone are the layers, the distributors, the middlemen, the stores.
While this trend has accelerated over the past couple of years, it was Amazon that got the ball rolling way back in 1995, with its model of skipping the bookstore and shipping titles directly to consumers.
According to the IAB, “As recently as 1992, physical retail stores claimed more than 96% of the $2 trillion in U.S. retail sales, according to U.S. Census Bureau figures. By 2015, non-store retailers had grown to account for 9.4% of a $5.3 trillion retail economy.”
The same report notes that FMCG giant Unilever expects direct to consumer sales to account for nearly a third of sales by 2022.
Today, traditional retailers are struggling and one of the key reasons for that is that brands are selling directly to consumers. Whereas once department stores were kings of the retail landscape, and powerhouses like Toys ‘R Us could make or break a toy manufacturer, today all of these are being bypassed. Consumers are buying everything from toilet paper to toothpaste direct and online. Deloitte notes that this trend is tied to the digitization of our world, and is set to continue.
At Nike for example, direct to consumer business is exploding. In their Chinese market, this is set to surpass 40% of sales. Where Nike was doing $6.6 billion in D2C sales in 2015, that number is set to surpass $16 billion by 2020.
A number of factors have come together to spark this trend:
The tech giant’s success has meant that many brands have had to take an “if you can’t beat them, join them” approach. Amazon’s model has shown brands that the costs and infrastructure present in a physical store environment are unnecessary. This has spurred brands to launch their own online stores, or partner with existing stores, to capitalize on this channel. The growth of ecommerce has been tremendous: according to Forbes, digital commerce transactions will grow globally at more than a 20% CAGR through 2022, reaching almost $6 trillion.
Additionally, where many brands are competing on price, and with shoppers able to compare across platforms, the move to online direct to consumer marketing makes financial sense for brands.
One effect this has had is that brands wary of Amazon’s ongoing success, and mindful of the market they are cornering, are rapidly rolling out their own D2C ecommerce efforts to counter what they see as the threat from Amazon.
Take a train or bus today and you’ll see fellow commuters browsing the latest styles of glasses or shoes. Faster internet speeds and better devices mean that mobile shopping has become mainstream, and brands are missing out if they aren’t there marketing to their consumers and/or allowing others to do so.
The popularity of social media has meant that the holy grail of “the market of one” has almost been reached. Brands can now market to consumers directly based on their tastes and interests.
Anyone can set up an ecommerce store. What this means for brands is that they do not have to have a history of ecommerce success in order to market to their consumers. Many brands were relatively “late to the game” when it comes to ecommerce, but have built successful direct to consumer online channels.
With direct to consumer online selling, brands are in control. They do not have to pay 3rd parties for merchandising, they do not have to rely on others to push their products for them, and they can offer their consumers a holistic brand experience throughout.
Some of the brands that have hit it out of the park when it comes to direct to consumer online commerce include:
Not only has ecommerce changed the way we shop and live, but the world of ecommerce itself is being upended by the direct to consumer revolution. Smart brands have identified this opportunity, and are leveraging data and smart insights to ensure their success.
This is something that we at Market Beyond are passionate about. Get in touch if the world of online direct to consumer commerce sparks your passion too. For anything related to ecommerce intelligence, real-time actionable insights and granular product advantages, Market Beyond is your ideal partner.
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