Text: Niels Floors, Head of Partnerships and Sales at ChannelEngine // Photos: ChannelEngine
E-commerce companies worldwide have been making the change to a D2C retail strategy, but what is D2C?
D2C, or direct-to-consumer, strategies allow e-commerce businesses to cut out the middleman and sell their products directly to customers through digital marketplaces. Selling directly to consumers gives these companies more control over their business processes and distribution channels.
The rise of D2C
While the D2C strategy isn’t a new concept, many e-commerce businesses saw the true potential of selling direct to consumer in light of 2020’s pandemic. Physical retail locations were closing their doors, and some e-commerce marketplace websites were slowing down because of the massive increase in traffic. Many customers started making purchases directly from their favourite brands, leading to the rise of the D2C model.
E-commerce D2C sales in the U.S. are on an upward trend with no sign of slowing down. The projected sales for 2021 are $21.25 billion – more than triple the amount from just four years ago. This trend in the U.S. is also happening globally. 40% of internet users indicate that within the next 5 years, 40% of purchases will be from direct-to-consumer brands.
Benefits of the direct-to-consumer model
Selling D2C provides benefits for both the brand and its customers. Consumers get a more personalised experience, and e-commerce companies can increase profit margins and customer loyalty.
Larger profit margins
There’s a simple reason why D2C brands see larger profit margins than other e-commerce sellers: No middleman is taking a cut of their product’s retail price.
Because of these higher profit margins, many D2C companies opt to price their products lower on their own channels than other retailers. According to Retail Dive, lower prices are the number one reason consumers choose D2C brands over others, closely followed by simple return policies and fast, free shipping.
Personalised customer experience
Direct-to-consumer brands get higher-quality data on their customers that they usually don’t get to see when selling through a large retailer. Using this data, D2C sellers can build a more personalised experience for their customers – which is vital, considering 80% of shoppers would instead purchase from brands that offer more personalisation. A McKinsey study found that personalisation leads to:
- 10–20% reduction in marketing and sales costs
- 20% higher customer satisfaction rates
- 10–15% higher sales conversion rates
Higher brand loyalty
Loyal customers are the foundation of any D2C e-commerce business. Selling directly to the consumer gives brands some advantages in this department compared to wholesale marketplaces. D2C sellers can help build brand loyalty by doing things like:
- Offering reward programs for loyal customers
- Sending handwritten notes with customer orders
- Providing tips and tricks on social media platforms
According to Bain & Company, brand loyalty also leads to customer retention, and they also say it only takes a 5% increase in loyal customers for a company to see 25% more profit.
How to get your e-commerce business ready for D2C
While exact strategies vary from brand to brand, here are three considerations for getting started with D2C:
- Create a process plan
When switching to a D2C strategy, you increase your profits by not using a middleman, but you lose some benefits that come with them – namely, you’ll have to deal with customer queries directly. Either you or your employees will have to take up the customer service role to engage with customers rather than rely on intermediaries.
Marketplace management platforms like ChannelEngine can help ease the burden by taking care of returns and handling shipping and tracking information, meaning fewer queries for your team to handle.
- Choose the right channels
When transitioning to a direct-to-consumer business model, you’ll have to determine which channels to use to reach your customers. The most important aspects to consider when choosing the proper channels for your D2C business are: giving your customers a smooth, hassle-free shopping experience and ensuring the experience is the same across each channel. D2C channels to focus on are:
- Online marketplaces to connect your store with customers worldwide
- E-commerce platforms to integrate your store with existing back-end systems
- Click & ad channels for your direct-to-consumer advertising efforts
- Integrate with marketplaces
Going direct to the consumer doesn’t mean that you can only sell your products on your company website. With the right tools, you can integrate your business with the biggest domestic and international marketplaces.
With ChannelEngine, you can fully integrate with marketplaces like Amazon and eBay while fulfilling the orders through your own systems. You can also incorporate the best e-commerce platforms like Shopify and WooCommerce with ChannelEngine’s free plugins – no code necessary.
Ready to take the next step for your e-commerce business?
Going D2C doesn’t have to be a challenge. By integrating your business with the best marketplaces, you can easily sell direct to consumer without having to build a comprehensive e-commerce platform or put together a marketing or development team. You can take advantage of the reach and marketing power of existing marketplaces.
With brands seeing increased profits, higher conversion rates, and improved customer satisfaction, it’s no wonder they’re turning to D2C strategies.
Get started with your free ChannelEngine demo to get more out of marketplaces and connect with customers worldwide.
This article was previously published in Cross-Border Magazine 18.