Direct-to-Consumer as a Retail Channel

June 25, 2018

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The direct-to-consumer (DTC) business model is becoming more attractive to retailers for several reasons. To engage consumers, manufacturers are incorporating new channels into their mix. DTC is a growing channel for retailers in today’s competitive global economy as it offers the ability to interact with the customer.

Companies such as Nike, Time Warner, and Tesla Motors are investing more in their DTC efforts. These companies are realizing the following benefits that this channel offers:

Consumer Satisfaction

Consumers in every market are looking for a better buying experience. Those companies that can provide the type of experience the consumer desires, has a competitive advantage over others. When selling through distributors, companies lose control over how their product is sold. Selling directly to customers enables businesses to guide the customer through their buying experience.

Brand Loyalty

In order to gain their loyalty, retailers need to cultivate a relationship with their customers. DTC offers businesses an opportunity to sell their story. With the direct-to-consumer model, companies can relay their brand messaging right to the consumer. A brand experience, coupled with DTC online sales, creates a relationship different from those in typical retail channels.

Customer Insight

Insights from customers help companies make better business decisions when they understand why consumers are making the purchases they do. Customer data is best, and most useful when it comes from a sale made directly to the end consumer. DTC channels also offer the chance to use data as a way to maximize lifetime value because brands can gather more information about their customers and create personalized experiences for them. This creates a more meaningful and longer connection. To create the most value, data should also be integrated with what’s learned from other retail channels.

Better Business Control

More traditional models of selling and distribution (i.e. through big-box retailers) take much of the control away from brand’s once the product leaves their warehouse. Competition means products are always fighting for shelf space at major retailers – both online and at their at brick and mortar locations. This translates to less representation as retailers cannot support every brand they sell as well as the brand can itself.

When a brand incorporates the DTC channel, they no longer just become the manufacturer.  It allows the company to have control of their supply chain, marketing efforts, and connections to their market as well as determine why products are successful or not. With very intense competition in many markets, retailers are exploring the DTC model as a way to increase their market share.

Inventory and Price Control

When a product is sold at multiple retailers (either online or brick and mortar), the price can be marked up or discounted several times, of which the brand has no control. Brands that use the direct-to-consumer model dictate the price and whether or not it is going to be discounted, and when.

The price can be more closely tied to actual inventory. Direct-to-consumer brands are also able to carry more inventory online than they could in stores, meaning customers have access to a great number of items.

For many businesses, the DTC model gives them better control over what products they are offering, and the prices charged.  And, they are able to better-satisfy customers with a variety of options.