Cutting out resellers and distributors is a sales model that’s been around for a while. But in recent years, this approach has gained favor with some notable consumer products companies. As the following Forbes article describes, some companies have been quite successful in going direct to the consumer.
The direct-to-consumer (DTC) model isn’t entirely new, but in recent years we’ve seen an increasing number of companies like Glossier, Away and The Honest Company that skip the intermediate step of retail to land their products on customers’ doorsteps. These brands are still small (most making under $1 billion in annual sales), yet their power is undeniable, toppling industries such as mattresses, shoes and men’s grooming. In 2017, DTC sales increased by 34% and represented 13% of all e-commerce sales.
The secret sauce? Successful DTC brands make data-driven customer experiences their core offering.
In traditional retail, wholesale manufacturers sell through retail distributors with little control over how the product is sold — where exactly it’s placed in the store, what sales associates say about it and whether the overall shopping experience is satisfying. The brand experience gets conflated with the retail experience. If the latter is overwhelming or confusing, the customer’s frustrated friction feeling gets projected on the brand itself and may even prevent a sale.
In contrast, the DTC model allows the brand to control every moment of engagement and learn about customer motivation and behavior at each step of the journey. Those touch points live in a vacuum, and the brand can accurately gather customer experience data to guide changes that create a frictionless experience.
What’s interesting is that some DTC companies have opened, or plan to open, brick-and-mortar stores. For example, Warby Parker and Bonobos now have stores in many cities. Casper is planning to open 200 stores as well, and also, Amazon has its physical bookstores. So while retail websites and next day delivery have changed the face of mainstream merchants, there is still the need for the consumer to get up close and personal to many products. That’s the emotional pull strategy that successful merchants over the years have always been able to master.
Overview by Raymond Pucci, Director, Merchant Services at Mercator Advisory Group