Researching direct to consumer brands? Makes sense.
Online shopping removed all the traditional barriers to connecting directly with customers. Got enough money for a website? Boom, you can sell.
The act of selling directly to customers online also removes pricey intermediaries and gives companies direct access to customer data and feedback.
That means lower costs and better experiences, respectively. It’s a customer’s dream.
To do it right, learn from the masters. Here are the 6 direct to consumer brands we think exemplify the D2C business model.
What makes these D2C brands so valuable? What problems does their adoption of the D2C model solve? Exploring those answers will help you determine what problems your D2C adoption will solve in your industry.
Let’s get to it.
To say Warby Parker is a D2C pioneer is an understatement. Founded in 2010, the business disrupted an industry totally entrenched in the traditional retail model.
Eyeglasses were too expensive. 80% of high-end eyewear was designed and manufactured by a single company, Luxottica. That company also owns Ray-Ban, Oakley, Lenscrafters, Pearle Vision, and Sunglass Hut.
For too long, the only option when purchasing eyeglasses was paying hundreds of dollars at your optometrist’s office. This is in large part because of the near-monopoly Luxottica had over the industry. Everyone was forced to pay for Luxottica’s licensing fees and mark up their products to support retail distribution and display.
Warby Parker took a look at the industry and rightly noticed the expensive, bloated supply chain holding everyone hostage. They opted for vertical integration. As opposed to horizontal integration. The latter of which outsources parts of the supply chain to different organizations. Vertically-integrated companies own or control their entire supply chain.
They designed their own frames, which immediately removed the hefty licensing fees being passed down to end consumers. They source their own raw materials inventory, further lessening third-party supply chain expense that customers pay for.
And, crucially, they started selling their products directly to consumers through a digital storefront. Doing so not only removed the cost of retail display and storage, but allowed them to control 100% of the customer experience.
Which they absolutely crushed:
Customers can select five frames, receive them in the mail, choose the one(s) they want after a try-on period, then submit their final order online. All shipping costs are included. All glasses can be returned or exchanged within 30 days.
It’s no coincidence that the largest team within the Warby Parker organization is the Customer Experience team. This is one of the biggest benefits of the D2C business model. Because Warby Parker engages directly with customers, they’re able to gather feedback and analyze customer behavior directly. This means they can react to that data and make the experience even better.
Most shoe-makers rely on old-fashioned, synthetic materials like polyester. That traditional model of shoe manufacturing was solidly established. Any attempt to go outside of it and create a viable business model was impossibly expensive.
That made the creation of sustainable shoes made out of natural materials a non-starter for years. The sourcing and manufacturing infrastructure just wasn’t there for anyone who wanted to work outside of the established system.
Allbirds needed to lower the price of shoe manufacturing with sustainable, non-traditional material to make the company viable. They opted for the direct-to-consumer model. They only sell their products through their own website and a handful of their own retail stores. By not having third-party wholesalers or retailers, they eliminate a big part of supply chain price inflation.
Cutting these costs allowed Allbirds to spend more money on proprietary design, sourcing, and manufacturing. There wouldn’t be an Allbirds without the D2C model.
Joey Zwillinger, co-founder of Allbirds, sums up the benefits of the business model in a recent interview with Customer Strategist:
“We can’t speak for the whole industry, but at Allbirds, our customers recognize that instead of paying a retailer to sell our products for us, we put that money right into the quality of every pair of shoes—this means that for a very reasonable price, customers can enjoy the amazing, premium materials that we use to make our products. We also believe that the feedback loop between us and our customers is critical, and the improvements we make to our product as a result resonate with our customers.”
Everlane’s approach is similar to Allbirds’. They use a direct-to-consumer business model to subsidize a quality and sustainability that would otherwise make their products prohibitively expensive.
Over 97% of apparel sold in the U.S. is made overseas. Outsourcing clothing production to established international factories has financial benefits: labor is cheaper and the infrastructure is already set up. The problem is that any company that wants to deviate from that formula has to pay for it.
Enter Everlane. They wanted to use only the most ethical and sustainable factories they could find. There are perhaps unsurprisingly far less factories run to high ethical standards than not. That means they’re smaller, labor is more expensive, and volume discounts don’t exist at the scale of established, traditional factories.
Can’t get bulk shipping discounts if there ain’t bulk, y’know?
Any company that wants to pay a premium for that type of production has two options off-set their costs. They can either charge more for their products or they can eliminate as much of the supply chain and distribution cost as possible.
Everlane chose the latter option.
Everlane sells their products on their website or at one of their seven retail locations in the U.S. They don’t retail in big box or third party retailers. By going directly to consumers, they’re able to cut out the wholesale, distribution, and retail intermediaries that cost end consumers money.
This allows them to spend money where they want: ethical factories and sustainable material.
The proof is in the pudding:
It costs Everlane $42 to make a basic cashmere crew-neck sweater. They sell it for around $100. Most of their competitors sell the same type of garment for $200+ and don’t outsource to ethical producers.
That’s because they’re losing bunches of money in the supply chain to middlemen.
Dollar Shave Club
Gillette (the best a man can get) held around 70% of the razor market for many decades. Heck, Warren Buffett even invested in it during its heyday. Made a clean $4.5 billion off that investment, too.
Any frequent shaver over the age of 35 likely remembers the racket: the razor itself isn’t too expensive, but the replacement blades are.
And that expense was on an upward trajectory with no signs of stopping and no one to challenge Gillette’s excess.
Enter Michael Dubin, an unemployed digital marketer. In Dollar Shave Club’s first viral commercial, their founder says:
“And do you think your razor needs a vibrating handle, a flashlight, a back scratcher, and 10 blades? Your handsome-a** grandfather had one blade and polio. Stop paying for shave tech you don’t need.”
Oh, and the blades were kept behind locked plastic cases in pharmacies and supermarkets. Another unfortunate side effect of being held hostage by one company in a traditional retail environment: physically asking someone to get stuff for you.
Everything about the traditional retail model for razors screamed unideal.
Sell simple razors and blades directly to people through a D2C subscription model. You get Dollar Shave Club’s razors directly from them through recurring deliveries. Shaving is a routine. Shavers know how many blades they need. It’s the perfect opportunity for the subscription model. Not unlike a coffee bean subscription.
Shavers are also well aware that shaving is, fundamentally, a simple activity. They do not need “shave tech.” They need a razor. And they don’t want to press the assistance button in the Walgreens aisle to get one.
This low-cost, logical appeal would have only been possible with the D2C model. Dollar Shave Club shaved off their supply chain costs and passed those savings directly to individuals.
A YouTube video from an out-of-work Internet marketer to a one billion dollar acquisition. That’s the power of direct to consumer brands.
Speaking of industries that have historically required in-store dependence on salespeople for products with soaring markups…
For decades, buying a mattress has weirdly been closer to buying a used car than buying a home good. You enter a mattress store, the salesperson approaches, and you navigate a steady stream of upselling for the remainder of your time there.
Buying a mattress has also historically broken the bank. A queen-size Casper original mattress clocks in at just under $1,000. Their luxury-level Wave Hybrid—the costliest product they sell—exceeds $2,300. Other retail mattresses routinely go up to $3,000.
An expensive supply chain and a commission-based sales structure.
Couple that with the fact that you have to get the mattress to your bedroom after purchase. Those things ain’t small.
The traditional customer experience of mattress buying was just plain bad.
This is perhaps the most surprising D2C success story of them all. Direct to consumer models solve the problem of unpleasant in-store shopping experiences, sure.
But Casper solved the problem of getting a dang mattress to your house. Each Casper mattress shows up at your door in a box roughly the size of a miniature refrigerator.
By setting up an online ecommerce site that requires customers transact directly with Casper, they gained:
- Complete control of the customer experience
- The ability to dictate branding and engagement on their own terms
- The chance to leverage customer data directly from their end users
- Lower costs by cutting out many retailers and wholesalers
And that’s what made them a one-billion-dollar company.
Owning a pet is expensive. Giving your pet the best possible products you can is prohibitively expensive. Per BarkBox’s website, they’re goal is to:
“Lower existing barriers to a dog-inclusive lifestyle and help dogs and their people stay together.”
The amount of people who give up on raising their dogs, or raise their dogs suboptimally, because of financial constraints is too high, says BarkBox.
The problem, like that of eyewear or razors, is that of a controlled market. Did you know that six conglomerates are behind 90% of pet food and treats?
That’s not the sort of free-market competition that keeps prices down. Quite the opposite.
BarkBox cuts a whole heck of a lot of costs and passes those savings onto the customer.
- Many products are designed and produced in-house and tested by the company’s own internal test dogs.
- Choices are limited; you choose your dog’s size and nutritional requirements or constraints, then the frequency of delivery.
- Products are shipped directly to consumers via a monthly subscription model.
It’s a streamlined process that takes roughly 5 minutes to initiate. And by eliminating third-party manufacturers, wholesalers, and retailers, BarkBox makes good on their mission statement: lower the barrier to a pet-inclusive lifestyle.
BarkBox is now valued at around $200 million.
The Best Direct to Consumer Brands
What turns D2C companies into the top direct to consumer brands is solving an existing problem. And the traditional retail model is full of problems.
Look at the list of direct to consumer companies above. How can your company turn direct sales to end consumers into a list of problems solved? How can you increase sales by cross selling?
It starts with looking at your industry and examining its common complaints.
With clothing and shoes, Everlane and Allbirds lowered the customer cost of ethical and sustainable business practices. Warby Parker blew off the lid on the price and options offered from the existing eyewear monopoly.
What stale, outdated business practices exist in your industry? Are you in the DTC food market but online sales are tough? Identify that and use this list of the best direct to consumer brands as inspiration.
Go forth and disrupt.