Evaluation of D2c business model in eCommerce industry

The Evolution Of The D2C Business Model In The Ecommerce Industry

As a consumer, you won’t be happy to pay extra charges for the product that you could’ve gotten for a much cheaper amount. 

D2c business model brings the lowest price possible for a product to the customers by eliminating the middlemen.

The rising popularity of eCommerce has given consumers a taste of the freedom that comes with online buying. This results in a new trend among online shoppers who want to shop directly from firms that are transforming the eCommerce industry. Because of the erratic nature of customer demand, eCommerce firms are being compelled to pursue direct-to-consumer (D2C) prospects.

What is the D2C business model?

D2C stands for direct-to-consumer, which indicates that businesses may create their own products and sell them directly to customers without the need for intermediaries or other associated channels. This one-of-a-kind framework has enabled direct-to-consumer (D2C) businesses to reach customers without intervention, providing them total control over strategy and data. 

As a result, D2C businesses may maintain low overhead expenses and total end-to-end control over product development, marketing, and distribution.

51% of consumers see it as vital to receive a personalized experience through the brand’s various digital channels.

In the direct-to-consumer (D2C) model, any seller or producer who wants to sell his products directly to his end-customers can set up an online website or store, or advertise the items on different social media platforms, therefore removing the intermediary.

D2C business model builds more trust between the brand and the buyer. Consumers frequently feel a deeper connection to the brand, as well as the insight that their hard-earned dollars are going straight to the people behind that brand, rather than to some other company that has nothing to do with the product or service, because there is no mediator, and thus no additional margin in price.

US D2C Digital Buyer Graph

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Advantages or benefits of D2C business model

D2C businesses use a customer-centric approach and thus it automatically gives them an advantage over any other business model. They try to keep their customers happy and satisfied by giving them the best prices and customer service experience possible.

Almost 55% of customers report they enjoy buying directly from brands

D2C brands have a lot of advantages over competitor models, a few of them are listed below.

1. Better prices = Better relationship

When middlemen are eliminated, direct-to-consumer brands may sell for less. Products move from producer through distributor to retailer to customer in the conventional retail paradigm. 

The D2C model, in which businesses may reach out directly to customers, eliminates all intermediaries, lowering distribution costs and boosting their part of the profit margin. It enables manufacturers to keep their costs as low as possible, while consumers benefit from decreased pricing.

As per a recent study, 40% of customers expect 40% of their spending will increasingly go towards D2C brands.

2. Omnichannel superiority

The growth of the direct-to-consumer model accompanies the evolution of the online strategy, with more and more manufacturers increasingly expanding their customer base through both online platforms and offline storefronts. As we get closer to normality, these omnichannel relationships will be enhanced as people switch between the two media while making purchases.

Over 35% of customers expect to be able to contact the same customer service representative on any channel. 

Millennials, who spend several hours each day on the internet, are increasingly forcing the industry toward an omnichannel strategy. An omnichannel or multichannel strategy to sales enables companies to give seamless buying experiences to customers whether they are purchasing online from a desktop or mobile device, via phone, or in a physical store.

With a CRM or similar software, you will have access to actionable customer information, which will improve your revenue and brand affinity prospects.

Average time spent by people on social media (in minutes)

Average time spent by people on social media (in minutes)

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Kapture CRM allows your agents to create orders coming from various social media channels directly through the dashboard, saving time and giving an omnichannel experience to the customers.

3. Personalized customer experience

With millennials’ increased digital spending, rising need for personalization, and desire for convenience, companies now have the chance to provide better value and experience to customers.

D2C brands have a lot of data about the customers, like their likes and dislikes, needs and requirements, and a lot more. This data is used by the D2C brands to give them a personalized customer experience. 

Many businesses are utilizing technology to collect data, track consumer behavior, and analyze it. They may assess customer expectations, as well as any increase or decrease in sales, and obtain immediate feedback.

Within 24 hours of the first contact, 54% of your customers expect you to give them a personalized discount.

4. Innovative product

Sellers have to follow the normal selling procedure and sell the product according to the market trends. They are scared to try something new, innovate new products for their customers. When it comes to the D2C business model, sellers can try and innovate new products according to the feedback provided by their customers. 

Manufacturers can better understand what their customers want, create what sells, and improve where necessary.

5. Complete control over the brand

The D2C brands are independent and they do not have to rely on a third-party business for selling their products. 

D2C business owns their consumers directly and has access to high-quality data, allowing them to create tailored experiences and drive innovation based on the insights provided.

Learning about consumer purchasing habits enables firms to improve existing items and, in some cases, build entirely new product lines.

6. Increased brand loyalty

When you prioritize your customers and provide them with a personalized experience at a comparatively lower price, customers are happy and satisfied and stay loyal to the brand.

Because these businesses are mostly online, they sell primarily through their websites and use online marketplaces to expand their reach and increase brand recognition. Furthermore, they provide a number of add-on services such as free counseling, subscriptions, tailored content, and so on to build a sticky platform that engages clients.

Omnichannel shoppers have a 30% higher lifetime value than those who shop using only one channel.

Challenges of D2C brands

Many manufacturers have adopted a direct-to-consumer model approach to stay up with changing consumer buying patterns and the pace of eCommerce.

D2C e-commerce is the new trending thing in the eCommerce industry but several challenges are faced and need to be overcome.

1. Increased competition

The surge in competition in the digital domain is arguably the most important problem that D2C businesses will face this year. Out of necessity due to the pandemic, more and more firms have relocated their activities online in recent times.

With the advent of social media and other digital opportunities, more and more firms are adopting direct-to-consumer marketing techniques. And this demonstrates that competition in the D2C market is intensifying.

D2C Brands Funding USA vs India Graph

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2. Seamless customer experience

Customer experience is one of the key factors which helps in retaining and keeping customers on your side. D2C business models have a lot on their plate, from packing the product to delivering it, to handling and resolving the issue with the product. 

With the low volume of orders and customer base, it is easy to manage the orders as well as the complaints coming from the customers. As the business scales and the customer base increases, the volume of orders, as well as complaints, also increases.

The user experience is critical to not only win a single sale but also to convince those customers to buy again—and to make them so happy that they tell their friends about you, resulting in repeat orders.

Kapture One Suit is a scalable sales automation solution that upscales according to your needs. It also helps your customer support agents manage multiple complaints at the same time, providing a seamless customer experience.

3. Logistics quest

A D2C company that takes over logistics must send each product itself. Shipping can cause a variety of problems based on the commodities, such as various rules regarding how cleaning products require leak-proof packing, special containers and handling for sensitive things, and even what it means to transport goods that can melt, such as chocolate.

As your company expands, logistics soon becomes a full-time job. Inventory management, refund processing, and printing shipping labels all take time away from handling other aspects of your business.

If you lack the internal skills to successfully coordinate delivery, the efficacy of the delivery process suffers. As your order volume increases, you may find yourself falling behind in your efforts to fulfill orders as swiftly as possible.

4. Volatile customer demands 

With more influence over the brand message and consumer involvement, practically all companies are waking up to face the mounting demands of customer satisfaction.

This means that customer expectations are skyrocketing! What was previously considered a “wow-factor” has now become ordinary.

Customers are no longer just browsing websites on their PCs and laptops with their credit cards ready. Instead, they are rapidly embracing multi-platform purchasing, from mobile websites and apps to tablets and other devices. Purchasing straight from a social media platform may have seemed unusual a few years ago, but it is now a viable choice for customers.

D2C businesses need to adapt according to the needs and requirements of the customers and should sell through their preferred channel to be the best in the business.

5. Gaining trust and customer loyalty

Trust is the essence of any business and every business needs the trust of its customers to grow and scale with time.

Gaining the trust of the customers in one go is one of the most challenging tasks in the direct-to-consumer model.

Let me ask you a question! 

How many social media selling pages do you come across on a daily basis selling different products?

A LOT! Right?

It’s difficult to pinpoint which are trusted and which are just phishing sites waiting to scam you. 

Consider how simple it is to place an order on Amazon. Most online customers already have their shipping/billing information saved, are enrolled in a loyalty program, and have no concerns about how their preferred stores would conduct the business relationship.

Consider the difference between starting order with a D2C brand and starting order with a traditional brand. You have no idea how they will serve you, if their orders will be timely and precise, or even how they will protect your sensitive information.

6. Omnichannel shopping experience

In the 21st century, with the advancing technology customers expect a lot from the brands trying to serve them. Having an online store or physical store is not enough. Customers expect you to take orders from every channel possible, like social media. 

Managing all the channels simultaneously and taking orders can be challenging for D2C oriented businesses as they already have a lot on their plate.

Companies with extremely strong omnichannel customer engagement retain on average 89% of their customers, compared to 33% for companies with weak omnichannel customer engagement.

Examples of D2C brands

Here are a few examples of a few renowned D2C brands.

1. Warby and Parker

Warby Parker examined the market and correctly identified the costly, bloated supply chain that was holding everyone prisoner. They created their own frames, which eliminated the substantial licensing expenses that were previously passed on to end-users. They obtain their own raw materials inventories, lowering the cost of the third-party supply chain that customers pay for.

Warby Parker interacts with customers directly, allowing them to receive feedback and evaluate user behavior. This means they can respond to the data and improve the user experience.

2. Dollar shave club

Dollar shave club identified the problem of replacement razor blades being more expensive than the razor itself. 

Dollar shave club came up with the solution, through a direct-to-consumer subscription model, to sell basic razors and blades to individuals. Dollar Shave Club’s razors are sent to you on a regular basis. Shaver’s are aware of how many blades they require. It’s an ideal situation for the subscription model.

3. Barkbox

Barkbox said that due to the high maintenance costs of the pet a lot of people give up on their pets and this was the problem they were looking to resolve.

The D2C business model helped Barkbox cut a lot of extra charges which the end customers had to pay. A monthly subscription model is used to supply products directly to customers. It’s a quick and easy process that takes just 5 minutes to get started. And by removing third-party manufacturers, distributors, and retailers, BarkBox lives up to its goal of lowering the barrier to a pet-friendly lifestyle.

The emergence of D2C brands

According to eMarketer, in 2020, D2C sales were up 24.3% from the previous year, outpacing total U.S. eCommerce gains.

Direct-to-Consumer eCommerce growth has essentially been the storyline of digital eCommerce in general. Because of the internet’s reach, so many more companies are communicating with, and directly selling to, their customer base without any retail intermediary, which has been a game-changer, to say the least.

D2C is anticipated to grow rapidly in the next few years due to fast development in its ecosystem, particularly post-Covid. Furthermore, factors such as low-cost data connectivity, rising urbanization, novel fulfillment methods, and simple-to-set-up digital platforms have opened up hitherto untapped channels of communication with such clients. 

Customers are increasingly exposed to digital commerce, rapid delivery, a vast product variety, and conveniently accessible information, making it critical for businesses to adopt digital in order to remain relevant.

How does Kapture help D2C e-commerce evolve?

D2Cs have innovated in how they serve customers and provide post-purchase interactions, whether through AI-powered brand education through a chatbot or offer better rewards. D2C businesses have set a new bar for customer service quality, speed, and accessibility.

Kapture’s one suite is the one-stop solution for all your technology needs. You don’t need to hassle and get different software for different problems.

1. Omnichannel experience- Managing complaints and orders coming from different channels can be a tough task for the agents. 

Kapture’s one suite brings orders and complaints coming from different channels to a unified dashboard, making it easier for the agents to manage.

This helps your D2C brand provide a true omnichannel experience for the customers.

2. Order management system- As a D2C brand, you must be getting a huge volume of orders from the customers. Managing orders and complaints altogether can be a challenging job if your agents don’t have the right tool.

Kapture’s one suite lets your agents view and manage orders of the customers through their single dashboard.

3. Logistic integration- D2C brands are bound to communicate with their logistics partners as the product is being delivered directly to the customers.

Kapture’s one suite integrates with your logistic partner and brings in the tracking details of the product to the dashboard of the agent.

4. Self-serve- D2C customers are really eager to know about the product, terms and conditions, order status, and other petty queries.

5. Seamless integration- Kapture easily integrates with your existing e-commerce platform and different channels like social media, youtube, cloud telephony, emails to sync the data to a unified platform.

Kapture empowers your customer with an AI-powered bot that allows them to know the order status, cancel/modify orders, and other petty queries. A customizable F&Q section can also be created that can have all the common questions asked by customers from the brands.

We can be a complete backend system for your D2C business and help you scale and prosper.

Try the demo today.

About the Author

Nimit Kumar
Ankit Kochar
Ankit Kochar is a content writer at Kapture CRM who loves to write creative as well as informative content. He has worked as a creative and academic content writer in the past and has a keen knowledge of writing reports, essays and dissertations. His current field is helping him research and hone his SaaS knowledge.

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