Table of contents
Table of contents
- What is the difference between B2C and D2C?
- The origins of direct-to-consumer e-commerce
- What are the competitive advantages of D2C?
- What does direct-to-consumer really mean?
- What makes a good D2C strategy?
More than 80% of consumers are forecast to make at least one purchase through a D2C brand within the next five years.
What is the difference between B2C and D2C?
Except for one of the letters, D2C and B2C sound similar enough. They are processes to get products to consumers, which is the ultimate objective of businesses. But as a marketing strategy and a customer journey, D2C/DTC e-commerce, or Direct-to-Consumer e-commerce, has pronounced differences from B2C, or Business-to-Consumer.
What is D2C e-commerce?
Foremost, D2C means the product reaches the consumer directly via digital channels without a middle distribution channel.
B2C also gets goods to the customer, but — obviously — it's not a direct route. Retailers or wholesalers might be parts of the equation.
That's why D2C advertisers like to tout the saying: “We cut out the middleman.”
Whether that's a prudent strategy depends on the brand, the product, and the consumer. Sometimes, a transaction with a distributor, wholesaler, or retailer has as much value as a direct sale.
The benefits of an online D2C e-commerce strategy are numerous. They include personalization and customization, greater product variety, guaranteed inventory, increased cost control, actionable data insights, opportunities to engage and influence over marketing, production, and distribution.
What is B2C e-commerce?
As a business model, B2C e-commerce can take a few forms, but in simple terms, B2C companies are intermediaries who don't actually own products or services, but connect buyers and sellers together - examples include Expedia and Etsy, subscription-based streaming services like Netflix and Spotify and community-based social media platforms such as Meta, where advertisers use the platform to promote products directly to consumers.
Is Amazon a D2C or B2C?
While technically a B2C model, Amazon is popular with direct-to-consumer brands looking to expand their reach and increase their sales, and actively encourages D2C brands to join their network. D2C brands can leverage Amazon’s reputation as a well-established online shopping brand and buyers have peace of mind about customer service and order fulfillment and can shop more confidently.
Consumers will regularly purchase through D2C
According to the Direct-to-Consumer Purchase Intent Index, four in five consumers will make at least one purchase through a D2C brand over the next five years.
Consumers already prefer to buy from brands directly
Over half of shoppers now make purchases through D2C, according to research by Gartner
Increase in D2C purchases between 2019 and 2022
Insights from Statista reveal the proportion of consumers worldwide who made D2C purchases increased considerably over the three-year period from 2019 to 2022.
The origins of direct-to-consumer e-commerce
In terms of customer relationships, D2C e-commerce is hardly a new trend. Merchants have sold their wares directly to consumers for centuries. But as transportation, industry, and technology evolved, businesses saw the need to expand, provide a new customer experience, and reach a more geographically spread-out customer base.
Digital commerce changed market dynamics. Until 20 years ago, B2B and B2C had clear distinctions. Factories sold to stores in bulk (B2B) and stores sold to consumers in smaller quantities with a markup (B2C).
Brands now could test how and where they would distribute and what retail relationships would look like, and whether they wanted their customer experience to take the form of a brick-and-mortar retail store or an e-commerce website.
By utilizing D2C, businesses could offer customers an online shopping experience tailored to their preferences and behaviors from end to end. In the beginning, large companies had a learning curve to master before investing fully in their e-commerce website.
Since the pandemic, consumer expectations have changed considerably, with preferences increasingly given to brands that offer omnichannel shopping experiences. Meanwhile, more and more brands are turning to composable commerce solutions that give them the freedom to flex in the moment and adapt to evolving consumer trends and demands.
What are the competitive advantages of D2C?
The D2C retail model is disrupting traditional retail because it offers numerous competitive advantages. What are those advantages?
Here are seven benefits to consider:
- Brand control: Before, the traditional manufacturer/retailer relationship left little room for manufacturers to control their brands. Manufacturers pay for the advertising and marketing, but it’s ultimately the retailers that present the product to the consumer. Once the product is in the hands of retailers, manufacturers might have marketing specifications to pass along, but there's no guarantee they can influence the sale, build a relationship with consumers, or gather data. With D2C, businesses are in total control of their products and have the freedom to opt for omnichannel selling across all relevant touchpoints.
- Innovation opportunities: A D2C business model allows manufacturers to launch new products at a smaller scale, test with selected demographics, and collect feedback. This gives manufacturers the chance to understand what customers want, produce that sells, and improve accordingly. In a non-D2C environment, retailers typically lean toward limiting inventory and selling proven products, restricting manufacturers to producing what only retailers want.
- Access to customers and their data: D2C provides more personalized contact. Manufacturers can gain an insight into who's buying. Through a collection of email addresses, location, social media profiles, purchasing preferences, and post-sales information, manufacturers can learn more about their customers through each stage of the buying process. They can also optimize existing products, and, possibly, create new product lines.
- Gaining higher margins: By eliminating intermediaries, brands can sell their products at the same price as retailers, which impacts the brands' bottom line. Obviously, no middleman means no markup from cost to gross sale. In the era of supply chain concerns and order fulfillment, selling directly is a clear advantage.
- Stronger brand loyalty: In D2C companies, manufacturers have more autonomy in terms of providing consumers with better service and support. This engagement drives strong relationships and retention through targeted marketing campaigns. And in turn, loyal customers yield higher conversion rates.
- Make noise: Speaking of marketing campaigns, D2C brands need to create buzz before and after their launches. If a D2C business is not widely known, the brand must be creative and rely on turning early adopters into micro-influencers from the very beginning. Then, as your brand scales up, reward the loyalty of the early adopters with free or discounted incentives that can be spread.
- Going global: Without retailers, partnerships, or distributors in certain locales, manufacturers are no longer restricted by geography. The world is their oyster and they have complete control of the market. It's just a matter of selling to the right customer segments in the right market.
- Flexibility: Consumers can have unpredictable needs. This means it's always a good idea to create forward-looking plans to ensure that the model remains consistent and not stagnant when it comes to customer demand.
What does direct-to-consumer really mean?
Having a D2C strategy increases brands' resilience in their market route. It's a direct route, yes. But brands should also count on multiple routes between destinations. Just like investing, brands should diversify and have other options.
If a brand has only one route to their consumers, then any disruption — supply chain and inventory management issues come to mind — will be painful, if not a deal-breaker.
By planning ahead and establishing multiple routes, a brand can weather any storm without significant disruptions.
A D2C channel allows brands to build direct relationships with their customers — and by direct we mean a close connection, just short of being a personal concierge. Ongoing engagement provides learning opportunities for brands. They can absorb crucial data — preferences, dislikes, aspirations, and future needs. Leveraging this information, brands are able to tailor interactions and create experiences that help customers build trust and loyalty.
What makes a good D2C strategy?
A solid D2C strategy needs a foundation of solid data. Using up-to-date, real-time information, brands can create relevant, personalized, omnichannel experiences that make customers feel truly seen and understood.
Delivering these types of tailored experiences at scale requires a next generation solution –this is where Sitecore can help.
- Sitecore CDP is an advanced customer data platform that eliminates data silos, allowing brands to create a single customer view that consolidates real-time and historical data from all online and offline channels. By layering decisioning, predictive analytics, experimentation, and orchestration, simple interactions become meaningful experiences at every step of the customer’s journey.
- Sitecore Personalize is a goal-driven personalization and optimization solution that allows you to create hyper-relevant experiences for every customer in every moment.
- Sitecore XM Cloud is Sitecore’s SaaS enterprise-ready CMS that creates content once and delivers across any channel for relevant, impactful customer experiences.
- Sitecore OrderCloud® is a scalable and composable cloud-native e-commerce platform. OrderCloud powers custom e-commerce experiences, order management, and B2X models and marketplaces for some of the world’s best-known brands.
To find out more about how Sitecore can transform your e-commerce business, reach out to one of our experts.