Why Direct to Consumer is Set to Disrupt Ecommerce in 2020
Traditional commerce consisted of multiple entities, from manufacturers and suppliers to retailers, wholesalers, and consumers. The advent of ecommerce changed the rules of the game and gave birth to a new, consumer-centric model of buying and selling. As ecommerce became popular and gained widespread acceptance, six popular ecommerce business models emerged:
- B2C – Business to consumer
- B2B – Business to business
- C2B – Consumer to business
- C2C – Consumer to consumer
- Drop shipping
However, a large number of customer-facing businesses are now cutting out the middlemen by adopting a Direct to Consumer (D2C) model. This allows manufacturers to manage every aspect of the supply chain – from manufacturing to distribution, marketing, and fulfillment. According to a recent survey, 84% of consumer goods companies have seen increased D2C sales in the past 36 months, and 88% expect their direct sales to increase further by 2020. It would be safe to say that 2020 is indeed, the year of D2C retail.
What is Direct to Consumer (D2C)?
Direct to Consumer marketing is defined as the transaction of products between manufacturers and consumers, without including the mediators in the process.
In a D2C model, the retailers/companies manufacture and deploy their products directly to buyers without relying on traditional stores or other mediators. This allows D2C companies to sell their products at reduced costs than traditional consumer brands, and to maintain total control over the production, advertising, and circulation of products.
D2C brands can research with supply models, from shipping directly to consumers to partnerships with traditional retailers or marketplace, to opening brick and mortar stores. They are self-sufficient and hardly rely on the other marketplaces or big retailers for distribution across various channels.
Why was D2C created?
In a world where profit drives business strategies, there was a need to remove the extra layer between brands and consumers. Manufacturers too are constantly looking for ways to network with the consumers directly.
According to research, more than 30% of the US population is realizing that they need to divert more than 35% of their buying sources to D2C retailers in the upcoming decade. This figure demonstrates the changing habits of consumers who are leaning towards a more personalized buying experience.
In the case of D2C physical stores, more than 55% of consumers prefer to build their wardrobe from traditional brick and mortar stores. If that’s not motivating, take a closer look at the shopping pattern, which reveals that 1 in every four people open their pockets at the traditional retailer store when it comes to cosmetic and beauty products. Not to forget, around 30% of shoppers don’t mind spending time at the retailer shop when it comes to choosing furniture.
All these statistics point to a unidirectional vision of Direct to Consumer, which is not only constricted to ecommerce but also the physical stores a retailer can build. What better example than Apple Inc., that has taken matters into its hand by creating Apple stores that attract significant footfalls every day and ensures the consumer is treated with a highly personalized and rich experience.
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Looking the other way, one of the greatest sports apparel manufacturing retailers has published that its D2C sales to grow by almost 2.5x in the next five years, from $6.6 billion in fiscal 2015 to $16 billion by fiscal 2020. The company had also beat its target of $5 billion in D2C sales by fiscal 2015 by over $1.5 billion. Let’s take a closer look at the reasons that will reveal the underlying de facto for manufacturers to turn towards D2C:
- A unique experience: The word of the hour is ‘Personalization’ and when wholesale manufacturers sell through retail distributors, they have very little say in how the product is sold. They’re heavily dependent on the distributor to ensure that the customer leaves the store (or the website) happy and satisfied. By selling directly to consumers, companies can envisage how the customer journey should take place and execute the tactics required to make that vision a reality.
- Consumer data: What’s better than having a pool of consumer data that is collected from the source. Yes, selling directly to consumers enables the manufacturer/retailer to closely monitor and collect consumer data and behavior. Demographics and consumer buying behavior can enable the retailer to customize the shopping experience of the user/consumer for a better buying experience resulting in better conversions.
- Quicker launches: Every retailer knows the towering expenses before launching a brand/product. And when the product must go via wholesalers/marketplaces, the only option left with retailers is in the power of the middle layer. With D2C, manufacturers can alleviate these risks by allowing them to launch a new state-of-the-art product on a smaller scale. Manufacturers can create a product and test them in a specific demographic to obtain feedback from the consumers firsthand. This empowers big manufacturing organizations to recognize what their customers like and dislike to make any changes that will yield better results.
- Connect directly with consumers: When consumers buy directly from manufacturers, they not only become the advocate of the experience but also connect with the ‘brand’ of the manufacturer. With a highly targeted and persona-driven marketing approach, manufacturers can strike the right chord to ensure loyalty as well as better brand perception with direct consumers, something that was missing with mediators.
How can a retailer get started in D2C?
Now that we have a good idea of the D2C model let’s take a peek at how a retailer can start the journey.
- Identify your brand: Quite often, retailers know what they sell. Start with the needs of the marketing team to find out what the brand stands for and build a persona. With a customer profile at the helm, the retailer can then create marketing content and advertisements specifically for the buyer personas.
- Create your own space: Niche marketing has always been the secret to success. For a successful D2C, the retailer needs to identify the tagline and start campaigning around it. The value proposition extracted from this exercise can boost brand positioning in parallel.
- Create a website: The next stop for a D2C is the obvious website building exercise. A well-built website that ticks all the boxes of essentials of ecommerce websites can take their business leaps and bounds. To achieve this at TA Digital, retailers are offered solutions that range in wide variety of CMS and digital transformations, that are specialized in delivering customer experience, commerce, and marketing fields.
- SEO visibility: How do you ensure you leverage the traffic towards you? A well-built and designed search engine ensures you rank top in the search, which drives consumers to your website.
- Building campaigns and meta tags: Once the personas are ready, retailers need to invest in top of the line campaigns to personalize and deliver campaigns across all the online and offline channels. Using the award-winning Adobe Campaign enables retailers to enjoy a host of features like:
- Email management
- Cross channel marketing
- Segmentation and targeting
- Capture analytics: Retailers should now turn their perspective towards an analytics solution that guides them beyond data to insights they can act on. Adobe Analytics empowers retailers to:
- Collect and measure data from multiple sources and create custom variables to track them.
- Ad hoc analysis helps retailers in building customized analysis projects. They can drag-and-drop any number of data tables, visualizations, and components (channels, dimensions, metrics, segments, and time granularities) to a project.
- Prediction at ease can be achieved using multiple rules-based and algorithmic approaches to attribution, which offer a robust analysis of customer behavior, providing a best-fit model per channel based on customers’ actual interaction patterns.
The newly launched CommerceFactory, a custom-developed fully managed experiential commerce solution which is ready to launch in 90 days, enables retailers to achieve the D2C at a groundbreaking pace. The accurate and well-researched solution developed by TA Digital is ready to install a package that ensures the user is a leader in the ecommerce segment.
At TA Digital, the team of business analysts are on a continuous journey to understand the dimensions on the ever-evolving D2C model to understand better the requirements of the domain and assist in innovating and digitally strategizing the solutions aimed at the core of the business model. The solutions are aimed at better productivity savings, reduced risk- exposure, and faster time-to-deploy. This will enable retailers to achieve the best.
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About TA Digital
TA Digital is the only global boutique agency that delivers the “best of both worlds” to clients seeking to achieve organizational success through digital transformation. Unlike smaller, regional agencies that lack the ability to scale or large organizations that succumb to a quantity-over-quality approach, we offer resource diversity while also providing meticulous attention to the details that enable strategic success.
Over the past 20 years, TA Digital has positioned clients to achieve digital maturity by focusing on data, customer-centricity and exponential return on investment; by melding exceptional user experience and data-driven methodologies with artificial intelligence and machine learning, we enable digital transformations that intelligently build upon the strategies we set into motion. We are known as a global leader that assists marketing and technology executives in understanding the digital ecosystem while identifying cultural and operational gaps within their business – ultimately ushering organizations toward a more mature model and profitable digital landscape.
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