by Amba Wilkes
When it comes to DTC, there are two types of brands that are usually considering this business model:
- dtc for established brands who already understand eCommerce and potentially already have a website.
- dtc for brands that aren’t consumer-facing such as manufacturers and wholesalers.
For those who aren’t as familiar with eCommerce, DTC is new and unchartered territory. While these brands might know how they want to use eCommerce for going DTC, there could be concerns about whether it’s the right route and how to make it a profitable endeavour.
Some brands don’t go DTC with the objective of making it their main revenue stream. Inthese cases, you may be wondering what the point is at all. The caveat of finding a profitable route to market with DTC always comes back to: what’s the purpose of going DTC in the first place?
setting the scene on DTC.
DTC brands sell directly to the end consumer, cutting out the middleman typically associated with traditional retail. When done well, a host of benefits have been found from taking this approach including:
- get to market faster
- increase customer loyalty
- personalise the shopping experience
- forge closer relationships with your customers
- take learnings and apply them to the rest of your business
If you’re going DTC, this is an opportunity to do it properly and make the most out of your investment. Fortunately, we have plenty of first-hand experience and insight to share on this topic. If you want to find out about what DTC is and how it can impact your business, read our blogs:
- selling dtc: how can your brand do it
- going dtc – the stresses and successes: an interview with dan conboy
- customer acquisition and dtc success
- why dtc brands should focus on customer retention
But for now, let’s get back to DTC and profitability.
the concept of profitability and dtc.
When crafting a go-to-market strategy, it’s important to get to the bottom of why you want to go DTC in the first place and what exactly you consider as profitable.
Every business who creates an eCommerce website wants to sell products. But there are many other success metrics that you can reap the benefits of as part of going DTC. It’s about understanding if these mean enough to your business to warrant the investment. Examples of these metrics could include:
1) sell more.
Going DTC may be to serve a functional purpose by providing customers with a different shopping channel to make more sales. If your definition of profit is unit sales and your brand sells mainstream products through multiple stockists, then generating profit with DTC could be a tall order.
Think about it from the end-consumers point of view. If you sell a mainstream beer that you can pick up in any supermarket, why would a shopper go to your eCommerce store to purchase it? Surely picking it up in their weekly food shop would be much more convenient. As such, DTC should rarely be based upon a pure unit sales model. Yes, you should aim for the venture to be profitable and commercially successful, but it must be seen in terms of what value it can bring to the table beyond sales.
2) improve first-hand customer relations.
Maybe you want to go DTC to build a connection with your customers, capture invaluable feedback to inform future business decisions and create a loyal customer base.
Going DTC puts all marketing and eCommerce considerations into your hands. Communicating who your brand is, your mission and your products alongside your customer stories and content can be difficult at the best of times. But add in competitor products sat next to yours on a real or virtual shelf and it becomes all the trickier to win your customer’s loyalty.
DTC presents the opportunity to gain more control by combining storytelling and commerce to stand out from the competition and forge a stronger affinity with your customers.
3) conduct market research.
DTC could act as a tool to conduct market research for more effective product development. With a first-hand relationship with your customers in place, you can use the website to trial new products.
Backed by the knowledge of what your audience genuinely think of the product, you can be confident in making a pitch to further stockists helping you build a solid business case for further investment.
4) personalise the experience.
Is this venture about product innovation and releasing limited edition products? A DTC channel gives you the chance to create and sell a product with a twist that other stockists can’t offer. This could include personalised packaging or a customised shoe design, for example.
Differentiating yourself from the competition by providing something that others can’t may well be the determining factor why shoppers choose to buy with you. Not only this, but limited-edition products get people talking too. Your customers are more likely to keep their purchase or share their personalised product far and wide on social media gaining you further exposure in the form of social proof. This can be particularly useful in a more competitive market where lots of challenger brands exist.
5) brand collaboration.
DTC can open the door to plentiful opportunities such as attention-grabbing brand collaborations. Just take a look at what Goose Island and Cadbury Crème Egg achieved when they came together. Only 1000 units of their limited 'eggdition’ were created and sold – not a lot in the grand scheme of things. However, the publicity both brands received from this collaboration has been invaluable with ongoing mentions across renowned publishers and social media too.
when dtc could work.
It's clear to see there’s more to DTC than simply selling and making a profit. What you define as profitable might not be the DTC channel being profitable itself but the brand in its entirety being profitable. These holistic benefits can instantly make the endeavour worth it for many. When you think about profit, consider what the net benefit of adding these other success metrics into the mix is.
It’s important to remember that going DTC can generate challenges completely unique to your business which is why it’s often worthwhile seeking advice from an expert. However, there are certain scenarios where DTC is more likely to be a success. Examples could include:
- your product is hard to find outside of a certain location, but research shows there is a demand for it elsewhere in the country.
- you can’t purchase your core range through another more convenient channel.
- you offer a product variation that’s exclusive to your business.
- there’s a specific customer group who will buy from your website because they can’t get the product through any other channels.
- there’s a gifting aspect to your product which persuades the customer to buy direct from you even though you can get the same content of the package elsewhere.
understanding if dtc is right for your business.
Understanding if DTC is the right approach for your business can take a lot of research and considerations. Sometimes, it can be hard to create a solution when you’re so close to the challenge.
Working with an unbiased partner, you can be guided through an informed process to understand whether DTC is right for your business. We like to use a three-step cycle:
- define: Defining your vision, the culture behind your DTC offering, the products you will offer, the business model and the team who will help to make it a success.
- build: Considering how your website will be created to best support your goals including design and user experience, technology choices and your customer acquisition strategy.
- refine: Always one to continue improving the solution, this step is used to build on customer retention, new feature development and ongoing performance analysis.
Born from eCommerce, we understand the challenges businesses face on a day-to-day basis. Having helped a number of brands go direct to consumer including Taylors of Harrogate and Goose Island, we can support you in coming to a conclusion of whether DTC will be a profitable venture for your business.
Get in touch with our experts to chat more and get started on your DTC journey.