Future of Commerce: Is It Retail or Direct-to-Consumer?

 You must’ve heard about direct-to-consumer (D2C) a lot over the past few years. It’s an emerging retail model in which brands sell directly to consumers instead of through retailers and distributors.

Although D2C brands have been emerging since the advent of the internet, they have boomed over the past few years. 

Today, you’ll find D2C brands in every industry. It could be Cuts Clothing in fashion, Blume in food & beverages, Yellow Beauty in cosmetics, and so on. 

D2C brands are a bit different from traditional retail brands. They’re usually driven by a strong mission and backstory, resulting in creative marketing and unique positioning. This way, they click better with the consumers and enjoy higher loyalty.

But does that mean retail brands will soon meet extinction?

Let’s find out.

D2C vs. traditional retail: The difference

Broadly speaking, a D2C brand sells directly to consumers through a website or a self-owned physical outlet. But in the traditional retail model, a brand sells through intermediaries like distributors and retailers. 

However, the differences go beyond that. 

Look at this table to better understand the difference between the D2C and traditional business models. 

The above table may indicate that D2C is better than the traditional retail model. But don’t jump to a conclusion so quickly. 

While D2C has its benefits, it also poses some challenges. Similarly, though the traditional retail model has drawbacks, it also offers certain advantages to manufacturers. 

To get a better idea, let’s discuss the pros and cons of both retail models. 

Pros and cons of the D2C model

Here are some advantages and challenges of the direct-to-consumer (D2C) retail model. 

Pros of D2C

• Complete control over branding and reputation: D2C brands enjoy full control over their branding, marketing, and reputation. You can decide how to position and promote your brand to maximize customer engagement and sales. 
• Higher customer engagement and loyalty: No retailers and third-party sellers are involved in D2C, enabling you to engage your consumers better and generate loyalty. 
• Direct access to consumer data: First-party customer data is the need of the hour. D2C brands interact directly with the customers, so they can collect first-party data. With first-party data, you can run tailored marketing campaigns and engage your consumers better. 
• Seamless business scaling: D2C brands have complete ownership of their business and sales channels, which makes scaling effortless. 
• Implement and integrate channels: Implementing and integrating various sales channels is feasible for D2C brands. Hence, D2C brands are better equipped to go omnichannel. 

Cons of D2C

While the D2C business model has many benefits, here are some drawbacks to be aware of. 

• Complex operations and supply chain: D2C brands must take care of the entire supply chain, from collecting orders to shipping and fulfillment. Hence, managing the supply chain can be complicated and challenging. 
• Increased competition: In light of the benefits mentioned above, every brand is going down the D2C path. This has resulted in high competition in the D2C marketplace, making it difficult for new brands to break in. 
• Limited reach: D2C brands need to reach customers by themselves. This could sometimes lead to limited reach, affecting sales and revenue. 
• Getting sales can be challenging: Because of the limited reach, sales may not come in easily for D2C brands. This is especially true in the initial stage of the business when you’re new and haven’t yet built a brand. 

Pros and cons of the traditional retail model

Having discussed the pros and cons of D2C, let’s now move to the traditional retail model. 

Pros of the traditional retail model

• Reach the consumer easily: When you sell through retailers, you can reach the consumers quickly and effortlessly. You can have your product in various stores to reach a large audience. 
• Straightforward supply chain: Since you don’t need to take care of order fulfillment, shipping, etc., the supply chain is pretty straightforward. You just need to supply the products to the wholesalers and distributors, and they’ll take care of everything else. 
• Sales on auto mode: The distributors and retailers take care of sales in the traditional retail model. Unlike D2C, you don’t need to handle the sales yourself. 

Cons of the traditional retail model

• No control over brand messaging: You don’t have control over how you position your brand and promote it. Your brand and marketing are at the mercy of the retailers. 
• No access to customer data: In the traditional model, you won’t have direct access to consumer data. Since people will buy through retailers, the retailers will have access to the information.
• Lower profit margins: Wholesalers, retailers, and distributors take away a significant amount of profit. Hence, brands get narrow profit margins in the traditional retail model. 
• No meaningful customer relationships: Since you don’t get the chance to interact and engage with your consumers, you won’t be able to make meaningful relationships with them. 

D2C vs. traditional retail: Which one to choose?

Now, let’s come to the burning question. Which one should you choose: D2C or traditional retail?

Well, there’s no hard-and-fast answer to this question. It depends on who you are as a brand. 

As discussed, you shouldn’t go on the D2C route only because you want higher profit margins or better marketing outcomes. 

D2C brands have a characteristic brand position, often driven by purpose and, in many cases, social causes as well. If you have a distinct brand and want to position it in your own way, D2C can work for you. However, know that the D2C model does present some challenges, as discussed earlier. 

If you don’t have operational bottlenecks and want to smoothly run your business, you can continue with the traditional retail models. Nowadays, many retail brands sell online through third-party marketplaces like Amazon. 

Best practices for D2C

If you want to be a D2C brand, here are some best practices that will give you a kickstart. 

Take a value-driven approach

Consumers love D2C brands, but not because they can buy directly from the brand’s website. They just want the best deal; they don’t care if it’s on Amazon, Walmart, or the brand’s website. 

What drives consumers to buy from D2C brands is their unique value proposition. So, it’s essential to be bold with your value proposition and take a value-driven approach. This will differentiate your brand from others. 

Become creative with your marketing

D2C brands are largely marketing-driven, so your marketing must be top-notch. Instead of using the old, commonplace marketing tactics, look for something different. 

For example, you can use QR codes to bridge the offline-online gap and offer an omnichannel customer experience. 

Offer a spectacular user experience

Consumers should come to you not only because you offer a great product but also for a memorable experience. Find ways to make the user experience unforgettable and highly engaging. This could be through gamification or more. 

Focus on building a community

D2C brands must go beyond getting sales. If you truly want to build a loyal consumer base, you must focus on building a community. 

Let’s understand this with an example. Though Apple isn’t essentially a D2C brand, how it approaches its community management can be a great learning for you. Apple has built a cult following, which translates to brand loyalty. 

The same goes for brands like Nike and Sephora. 

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Final thoughts

As consumer behavior continues to change rapidly, the retail landscape is also evolving. Brands must find ways to reach their consumers directly to collect data, build loyalty, and increase sales and revenue. 

For these reasons, many D2C brands have been entering the market lately. 

The D2C model offers many benefits, but there are also some challenges to keep in mind that otherwise don’t arise in the traditional retail model. 

Whether you’re a D2C brand or not, QR codes can make your marketing more effective and customer-centric. Implement QR codes in your marketing now to take your marketing to the next level. 

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