Direct-to-consumer (DTC) businesses are upending traditional sales models: Many brands have found significant success by skipping intermediaries and selling directly to customers.
The DTC ecommerce model allows brands to cut costs, while also offering consumers the shopping experiences they seek.
It’s no wonder the DTC cosmetics company Glossier is now worth more than $1 billion, while no-frills DTC shoemaker Allbirds is valued at more than $1.7 billion, according to the Harvard Business Review (HBR).
But breaking into this market doesn’t come without potential pitfalls.
Here’s a look at the current DTC market challenges and opportunities, along with a four-step guide to help get your DTC business off the ground.
The DTC Market: Challenges and Opportunities
There’s a massive opportunity for brands to develop DTC businesses that drive increased conversion while lowering total costs:
- According to Influencer Marketing Hub, there are now more than 100,000 DTC businesses in the United States.
- In Europe, Beroe says the DTC ecommerce market is valued at $600 billion.
- In the United Kingdom, 97% of chief marketers surveyed said that DTC channels have become a priority during the pandemic, and 46% anticipate that these channels will account for 30% of total sales over the next five years, according to The Drum.
But it’s not all good news. As noted by CNBC, DTC potential doesn’t always align with market realities.
DTC Challenges
Two problems loom large: unstable supply chains and the increasing cost of online ads.
Under a traditional sales model, brands offload much of their supply and logistics work to third parties.
Using a DTC approach, however, means shifting this responsibility in-house. Thanks to online shipping portals and cloud-based ordering, this is now entirely possible for brands.
Unexpected supply chain disruptions, however, put DTC companies in the unenviable position of potentially missing predicted delivery dates.
Skyrocketing ad costs, meanwhile, require businesses to carefully pick and choose where, when, and how they advertise their products.
Picking the right social media sites and targeting the right users can drive substantial sales — while missing the window can mean money spent with minimal returns.
Retail Dive notes that about 75% of DTC brands in the U.S. generate less than $1 million in sales online, and, of those, 77% still have a physical storefront.
DTC is still a work in progress, albeit one with plenty of potential for brands that do it right.
4 Steps To Get Started With DTC
So what does “doing it right” look like when it comes to DTC? Four steps can help get your brand on track for success.
1. Create High-Quality Product Detail Pages (PDPs)
Great PDPs help give your customers a better sense of what they’re buying — and why they should buy from your brand instead of your competition.
As a result, it’s critical to create PDPs that stand out from the crowd. This means making sure all PDP content is high quality.
From optimized product images and thorough text descriptions to a cohesive page layout, there are a variety of factors that empower consumers to more easily find the information they’re looking for, add items to their cart, and start the checkout process.
It's also worth considering the adoption of new technologies such as 3D imaging, virtual photography, and augmented reality (AR) to help customers visualize your product in their home and customize it to meet their needs.
2. Develop an In-Depth Marketing Plan
As noted above, online ad space is getting more expensive, meaning that effective ad targeting is key to driving DTC sales.
This starts with an in-depth marketing plan that:
- Pinpoints your target customer segment;
- Identifies their pain points; and
- Introduces campaigns that position your brand as the ideal, direct-to-their-door solution.
3. Assess Channel Alignment Regularly
With most DTC brands still maintaining brick-and-mortar stores, it’s critical to create consistent, high-quality shopping experiences across physical and digital channels.
For example, if your online store offers the personalization of products to help capture consumer interest, your physical store should provide the same capability.
While not everything has to be in lockstep — for example, you might have an online-only sale for a set period of time or offer online discounts to new members — it’s critical to ensure your product content is aligned (and up to date!) across channels.
Doing so enables your customers to have a consistent shopping experience across every touch point through which they interact with your brand.
4. Measure, Measure, Measure
The success (or failure) of your DTC business depends on measuring what matters.
You can gain a greater understanding of what’s working, what isn’t, and what needs to change by understanding:
- Where consumers are interacting with your brand;
- How they’re impacted by the experience; and
- How this translates into sales numbers, repeat purchases, or abandoned carts.
The Advantages of a DTC Business
DTC comes with massive opportunities for brands if they can navigate potential pitfalls and build a business that consistently delivers what customers want — and keeps pace with changing market conditions.
Discover which metrics matter most with Salsify’s “Essential Ecommerce KPIs for the Digital Shelf” guide.
