U.S. direct to consumer sales went from $6.85 billion in 2017 to $17.75 billion in 2020.
That’s astonishing growth.
Especially for a business model that, by definition, disrupts the status quo. For hundreds of years, producers sold to retailers and retailers sold to customers.
But the internet rewrote all that. Now over half of online shoppers want to interact directly with manufacturers. And, looking at the sales growth above, that number isn’t going down.
On top of that, it’s actually less expensive for everyone. It’s a true win-win.
Here’s what you need to know about the direct to consumer business model. Each section links out to more in-depth material on the subject. We recommend clicking those links for a fuller understanding of direct to consumer topics.
Direct to consumer sales is a sales strategy of selling directly to consumers, typically online. That means it skips the intermediaries and goes straight to the end user.
A DTC business can be formed with the intention of going direct to consumer. Or existing B2C or B2B business can fold a direct to consumer strategy into their business model. This is the e commerce definition.
Types of Direct to Consumer Businesses
There are five primary types of DTC business:
- The direct seller. Most of today’s online shoppers are familiar with this model. These are retail websites powered by internal or third-party ecommerce platforms. It’s going to a producer or manufacturer’s website and buying directly from them.
- The advertiser. Some companies focus on direct to consumer advertising, first and foremost.
- The marketplace. Companies that use a third-party online marketplace that serve as a meeting place between buyer and seller. BlueCart eCommerce is a great example.
- Community-driven. These are more accurately community-driven marketplaces, like Facebook Marketplace. They act as intermediaries between buyers and sellers but targeting is usually done via community membership and shared interests.
- Fee-based. Think of Costco here. They’re a platform for buyers and sellers to connect directly, but they charge a subscription.
Why Go Direct to Consumer?
Engagement and Branding
When you’re in total control of your sales and distribution, you can deliver a consistent, high-quality experience from start to finish.
You can choose to market in every channel in similar or complementary ways. Be that SEO, social media, print media, etc. You’ll have the most important factor in successful branding on your side: consistency. This is one of the big differences B2B vs B2C.
Interacting directly with your end users gives you the chance to gather lots of data on them. Web analytics like their browsing habits and cart abandonment rates to direct solicitation about your products and their desires.
It’s What People Want
59% of online shoppers do research at the manufacturer’s website before purchase. They go to your website anyway.
May as well sell it to them while they’re there, right?
So that’s what direct to consumer means.
But how does it look in practice?
In the post we link to right above, we look at some dtc businesses who are knocking it out of the park.
- Warby Parker. Followed the direct to consumer model to a cool $1.7 billion valuation.
- Allbirds. Direct to consumer disruptor of traditional footwear manufacturing and distribution. Over $100 million in annual revenue.
- Everlane. They figured out how to make ethical clothing affordable. It’s cutting out the intermediaries that inflate costs and bloat B2B sales prices.
- Dollar Shave Club. One of the most classic examples of a direct to consumer success story. Started by an out-of-work digital marketer, sold to Unilever years later for over a billion dollars.
- Casper. Figured out how to stuff mattresses into manageable boxes. Impressive.
- BarkBox. Removing distributors and wholesalers (see what is wholesale) lowered the cost of entry to dog ownership for a lot of people. Thanks, BarkBox.
What Does a Good DTC Business Do?
They recognize the problems of traditional retail business models and react to them. Allbirds wriggled out of the entrenched footwear manufacturing cabal. Dollar Shave Club metaphorically unlocked the razor case for everyone. Casper mercifully eliminated visits to retail mattress stores.
In short, they disrupt. And here’s how they get the word out to their prospective customers about it. They can still use a wholesale directory to learn how to find vendors and buy wholesale products, but they turn that around and sell directly to the public.
Direct to consumer marketing is all about investing in the customer experience and building a relationship. It’s much less purely transactional than how traditional retail marketing has been in the past.
Here are some general marketing rules a successful DTC business can expect to follow in some form:
There’s no distributors or retailers to get in the way of successfully communicating your brand and value props to consumers. Take advantage of the fact that it’s just you and your potential customer.
Some statistics that reinforce how valuable this conversation is:
- 94% of consumers are more loyal to a transparent brand
- 89% of consumers are loyal to brands with similar values
- 94% of consumers are likely to recommend a brand they feel emotionally connected to
Direct to consumer marketing allows DTC businesses to deliver on these.
Users, Not Customers
Here’s another interesting stat:
77% of the time consumers interact with brands, it’s for guidance, help, or information.
The easier your company makes it for consumers to get those, the more folks will ultimately convert. But you have to start treating people not as transactional customers, but as long-term users of your platform.
Scale the Intimacy
So, you want to have direct conversations that are relevant and valuable. But you want to do it at scale. How do you do it? It’s the million-dollar question.
Typically, it’s done with earned and shared media. Which is a part of direct to consumer marketing. That means blogs and social media, for the most part.
Get Data, Use Data
Direct to consumer companies can use data in two ways. One, they can track web analytics on their website and purchasing portal. That’ll record things like dwell time (the amount of time a user spends on a page), bounce rate (how often the leave the page), conversion rate, and more.
Another way is to ask customers what they think. Send follow-up emails, post-purchase questionnaires, and encourage feedback to customer support. All of these avenues can generate actionable insights. You should also set measurable ecommerce KPIs so you can track users and optimize opportunities to increase ecommerce sales.
Direct to Consumer: What’s Next?
Two popular DTC trends are seen in a lot of successful companies:
- Subscriptions. Blue Apron, BarkBox, etc. Customers pay producers directly, up front, for monthly recurring shipments delivered directly to them. The selling point here is curation. The subscription deliveries are personalized based on pre-conversion surveys or quizzes. That makes subscriptions an easy way to scale customization.
- Retail. A lot of DTC companies that started out with zero brick-and-mortar locations now have them across the country. But these retail locations are more an interactive billboard or community space than a sales driver. They, like all good DTC marketing, reinforce commitment to customer experience and brand consistency instead of pushing for sales.
And let us not forget everyone's favorite thing: food.
Food and beverage companies have a huge opportunity going direct to consumers.
Check out these figures:
The retention rate of online shoppers for direct to consumer food is 31%, over the typical ecommerce rate of 28.2%. Conversion rate for direct to consumer food is 5.8%, over double the average 2.63% of general ecommerce. And cart abandonment is over 20% lower in the DTC food space.
Clearly selling food and bev directly to customers resonates with them.
How do food companies acquire these DTC customers? Three primary ways.
- Organic search (or SEO). This is the primary acquisition source for food companies looking to attract DTC sales. These consumers start searching in Google or other search engines.
- Direct visitors. This is the 2nd most impactful acquisition source. This is when consumers visit the producer or manufacturer’s website directly.
- Paid search (or SEM). These are the search results that are clearly identified as advertisements. Companies pay to be on the search results pages. Instead of SEO results that naturally rank high based on the quality and relevance of their content.
It's time to go direct! You can even use the subscription box business model to further increase customer value.
Direct to Consumer: Straight to the Source
With digital storefronts, all the overhead is taken care of. All any business needs to do is list their product and they’re ready to sell. You'll also want to invest in the right order management system so you can keep up with growing demand.
BlueCart Digital Storefront helps hospitality businesses across the country connect directly with consumers. It’s a front-to-back DTC solution for food and bev businesses ready to take the next step. It also has an integrated B2B platform, so you can sell to everyone in one place.