How DTC Brands are Shaping eCommerce19 Sep, 20235 min
The way that consumers purchase goods has changed dramatically over the last couple of decad...
The way that consumers purchase goods has changed dramatically over the last couple of decades, and DTC brands are at the forefront of this unprecedented shift. DTC, short for direct-to-consumer, is an eCommerce model where companies sell products directly to consumers without the involvement of retail outlets or distribution channels. As they are in control of the fulfilment experience, DTC brands have the freedom to package and ship products themselves without incurring third-party distribution costs and communicate with customers directly.
DTC eCommerce is a business model that allows companies to have greater control over customer experience, build their brands via social media channels, and boost profit margins by removing wholesalers and retailers from the distribution process. A report released by IAB UK revealed that 97% of online shoppers are familiar with at least one of the UK’s top 50 leading DTC brands, a statistic that highlights just how successful DTC eCommerce has become.
This guide will explore the various reasons why DTC brands are leading the eCommerce world. We’ll also examine the advantages and necessary considerations of DTC eCommerce and the trends shaping its future.
Why DTC Brands are Leading E-commerce
While the concept of a direct-to-consumer business model has been around for many years, the development of online shopping has led to its exponential rise. DTC eCommerce enjoyed a spike in popularity in the late 1990s during the dot-com bubble when DTC businesses took advantage of the widespread use of the internet. With the rise of smartphones, social media, and demand for personalised shopping experiences, DTC eCommerce has continued to be a prosperous model for businesses.
Let’s explore three key reasons why DTC brands are leading eCommerce:
1. The Popularity of Online Shopping
The number of people purchasing goods online is growing all the time, and DTC brands are making the most of this unstoppable trend. The rise of online shopping shows no sign of slowing down, with consumer eCommerce now accounting for 30% of the overall retail market. Influential DTC brands like Amazon, eBay, and Netflix are forcing traditional retailers to adapt, drawing in ever-more customers with their personalised marketing strategies and focusing on better customer service.
Online shopping allows DTC companies to offer a wider range of goods than companies using traditional sales methods, delivering the products directly to their homes without the need for third-party retailers. Even in sectors that were once considered resistant to the growth of eCommerce, like food and home decor, DTC brands have gained an undeniable advantage over their offline competitors. As a result, they are able to foster more intimate, longer-lasting relationships with customers, thereby ensuring consistent sales and customer loyalty.
2. Less Reliance on Intermediaries
Companies that sell their products via third-party retail stores or distribution channels incur additional logistics costs that eat into their profit margins. By selling products directly to their customer base, DTC companies are able to bypass these extra expenses, and rather than relying on the geographical reach of third-party distributors, they have the flexibility to sell products all over the country. The money that DTC brands save by cutting out the logistical costs can be funnelled into other, more valuable business areas, like marketing campaigns and recruitment.
Many of the world’s leading companies have adopted the DTC model, and Nike is a prime example. They made the decision to boost their DTC eCommerce strategy in 2020, and DTC sales now account for 33% of their overall revenue. Nike is by no means the only traditional brand to have made the switch, with other notable examples including Adidas and Levi’s.
3. Greater Control Over Customer Experience
Research has shown that more than 50% of customers prefer to visit brand websites over retailer websites, largely because brand sites provide a lot more information. Without having to rely on intermediaries for marketing or sales purposes, DTC brands can exert much more control over customer experience, pricing, and promotions. They can also better manage every aspect of the customer journey, from order fulfilment to customer support.
Having a greater say in messaging, branding, and customer relations is a major draw for companies considering whether to opt for a DTC eCommerce model. With more access to customer data, DTC companies can make more informed choices about how to personalise customer journeys, thereby increasing the chances of long-term customer retention. More control over customer experience also helps brands build a loyal and reliable customer base, which is difficult to achieve when selling products via third parties.
Key Considerations When Switching to DTC E-commerce
The DTC eCommerce model has brought many benefits for brands looking to save operational costs and make more meaningful connections with customers. However, despite the many advantages, there are various considerations businesses need to address when thinking about adopting a direct-to-consumer model.
The increased uptake in online shopping during the COVID-19 pandemic urged many companies to jump on the DTC bandwagon, but many fell foul of avoidable yet detrimental issues like higher marketing expenses and a lack of insight from experienced retailers.
Here are 3 of the main considerations your business needs to consider when switching to the DTC eCommerce model:
1. More Control Means More Risk
Having more say in your branding strategy and customer experiences can undoubtedly be an advantage; however, with more power comes more responsibility. Just because a company has more control over their sales and marketing strategies doesn’t necessarily mean it’ll get it right, and without valuable insights from third-party retailers, less-established brands may find it difficult to navigate their way in the world of direct-to-consumer e-commerce.
Bypassing wholesalers to exclusively sell your goods on your website may sound great, but what if the website experiences technical issues? To minimise risk, it is vital that you hire a crack team of high-quality professionals to steer your business toward a DTC future. Deciding what professionals you need to power your business depends on your unique preferences, but by avoiding third parties, you need to ensure that every department is staffed with exceptional talent.
With a team consisting of outstanding customer service, technical, marketing, and distribution staff, you’ll be well-equipped to gain a competitive edge in the DTC eCommerce space.
2. Higher Marketing Expenses
Though DTC brands may save operational costs by removing the need for third-party retailers, they may take on additional marketing expenses. By opting for a DTC model, companies can no longer count on the reputation of established retail partners to drive sales. Instead, more focus has to be placed on boosting customer acquisition via outstanding marketing strategies. In practice, campaigns via social media sites such as Facebook and Twitter are a great way to target new customers.
However, such marketing campaigns can be pricey. MediaPost reports that social media advertising costs are up 41% year on year. Despite the potentially increased expenses, DTC companies are still in a better position to put marketing ideas into practice quickly due to having direct contact with end customers. A closer relationship with their customer base gives DTC companies a better understanding of what their consumers want, enabling them to create targeted marketing campaigns that drive loyalty, engagement, and sales.
3. Fierce Competition
Year on year, a growing number of businesses are choosing to opt for the DTC model. This trend intensified during the Covid-19 pandemic, with US DTC sales rising by 24.3% in 2020. The DTC eCommerce market has become highly competitive due to the sheer number of DTC brands competing to attract the same customers. With new brands entering the DTC eCommerce space all the time, it’s vital that direct-to-consumer companies come up with strategies to stand out from the crowd. Key methods for achieving this include:
Strengthening their brand
Having a unique and recognisable brand is a sure-fire way of gaining an edge over the competition. Research by LinkedIn found that 75% of job seekers consider the brand identity of any potential employer, a statistic that highlights how beneficial employer branding is when it comes to hiring high-quality candidates who are vital for driving growth and success. Utilising omnichannel shopping, connecting with customers via social media, and establishing an aura of exclusivity are all effective ways to boost employer branding.
Adapting marketing methods
Adapting your marketing methods is another effective way of retaining and differentiating your brand. Being able to diversify your marketing methods in the ever-changing world of DTC is a valuable skill, so be sure not to pigeonhole your marketing strategy. For example, a big trend in DTC marketing at the moment is video content, with 92% of marketers considering video marketing an integral part of their strategies. So, if your business hasn’t traditionally paid much attention to video content, it would certainly be worth investing in TikTok or Instagram content that showcases your brand for a wider audience.
Elevating customer experiences
Facilitating exceptional customer experiences is important for staying competitive, building brand loyalty, and future-proofing your business. In fact, research shows that 86% of shoppers are willing to pay more if they have enjoyed an elevated customer experience. There are numerous strategies you can implement to improve your customers’ experiences, including acting on customer feedback, deploying AI-powered chatbots for solving customer queries quicker, and introducing customer loyalty programs.
The Future of DTC Ecommerce
When DTC eCommerce emerged as an online force to be reckoned with back in the 2000s, brands picked up the direct-to-consumer model due to its promises of higher profit margins, lower costs, and better customer relationships. Though today’s higher competition and increased marketing costs add another layer of difficulty for DTC brands looking to carve out their reputations in the eCommerce space, direct-to-consumer still offers countless opportunities for innovation and prosperity.
As technology continues to advance, consumers can expect highly personalised shopping experiences powered by artificial intelligence and data analytics. Brands will prioritise sustainability, with eco-friendly practices and transparent supply chains becoming the norm. Augmented and virtual reality will likely redefine online shopping, allowing customers to virtually try products before purchasing. In this evolving landscape, convenience, authenticity, and sustainability will remain key drivers of success, reshaping how we shop and interact with brands in the digital age.
The future of DTC eCommerce will ultimately be determined by economic and societal trends, from the rise of embedded finance to the growing significance of social media. AI and machine learning technology are likely to play a pivotal role, and DTC brands are already using technologically-driven solutions to optimise marketing campaigns and personalise customer experiences. Research shows that 49% of shoppers are looking for personalised experiences, so harnessing the power of technology to customise shopping experiences will be a key concern for DTC companies going forward.
The direct-to-consumer eCommerce model has revolutionised how we shop and interact with brands, offering a range of advantages such as greater control over customer experience, reduced reliance on intermediaries, and the ability to adapt to changing consumer preferences.
As we look ahead to the future of DTC eCommerce, technology will continue to drive innovation, offering highly personalised shopping experiences, sustainability, and immersive technologies like augmented reality. DTC brands that embrace these trends and prioritise convenience, authenticity, and sustainability will remain at the forefront of e-commerce, reshaping the digital shopping landscape in the years to come.
Our Expertise in eCommerce Recruitment
At Sphere, our exceptional consultants recognise just how competitive eCommerce recruitment can be, with DTC brands vying for the highest quality candidates to help their companies thrive. As an award-winning agency, we are proud to support clients and candidates throughout the UK, Europe, and America. We regularly recruit for a wide range of top eCommerce jobs and offer a variety of services designed to fulfil our client’s needs.
We look forward to telling you all about how we can support you in your recruitment journey, so be sure to get in touch with us today.