The desire of every business is profit maximization. As an entrepreneur, you want to retain every coin you generate from your business. This desire is high when you are in the manufacturing business. Your wish would be to sell your products to the customers directly.
For a long, this has been a challenge. You had to work with many middlemen in the distribution channel. These middlemen which are part of the value chain include distributors, wholesalers, retailers, and agents. Each of these players gets a share of the profit from your products. The bad thing is that they do not contribute to its production.
With the surfacing of the internet, a new model is coming up – D2C or direct to consumer approach. So, what does this model involve and work? Read on to know.
What is D2C Business Model?
D2C – Direct to Consumer Business Model is a model that involves selling products from the manufacturer to the consumer directly. This concept does not involve intermediaries. A company makes products on its facilities, distribute, and sell them to customers through its channels.
In other words, businesses employing this model deal with customers or consumers one on one. Sellers or manufacturers do not have to negotiate with intermediaries and resellers to get their products to the marketplace.
How Does D2C Work?
As the term suggests, direct to consumer business model does not engage a third party in their selling process. You do not need wholesalers or retailers to get your items to consumers. Instead, you use your organization’s channels to drive sales. This model cuts out all middlemen and enable manufacturers to sell to the end consumer.
For instance, if you are a baker, you do not need to deal with suppliers and retailers. Instead, you take the baked products to the consumers. You can run shops or use your website and social media pages to reach out to the target customers. so, no resellers on between you and your customers.
Example of D2C Business
With the rising of e-commerce and the internet, many businesses are shifting to the D2C model. Their objectives are to reduce the supply chain and maximize profits. As you know, the shorter the distribution channel the higher the profit margin that the manufacturer will retain. Examples of businesses applying this concept are in every niche.
Some of the notable brands using direct to consumer business model include Daou Vineyards and Winery. This Californian winemaker producer several wine types. The company does not offer it to restaurant and wine and spirit retail. Instead, it uses its online and offline stores to sell these wines direct to the customers.
Another brand applying this model is Hien Le. This fashion maker sells his apparel and clothes in his online and in a store based in Berlin. He does not engage resellers in his business. Warby Parker is the gold example of a successful direct-to-consumer company. This company deals with optical glasses. Warby Parker makes it easy for people to buy glasses online and at their convenience. So, you deal one on one with the glassmaker and not the reseller agent or retailer.
Dollar Shave Club stands out as another brand employing the D2C technique. The company manufactures men shaving tools. They then sell them directly to the men through their online stores.
So, as you can see, all these businesses deal with end-consumers. They do not have intermediaries or third parties carrying out the reselling role.
Pros and cons of D2C business model
The D2C model comes with a package of benefits and shortcomings to the business. Here are some of them:
Pros
Maximizes your profits
The goal of your venture is to maximize profit. You want to retain every revenue that you get from your sales. By cutting off the resellers, D2C allows you to get the whole profit share. You do not distribute the earnings from your products across the resellers’ network. So, earn a higher profit from your products by selling them directly to the consumers.
Opportunity to offer personalized products and services
Personalization is the new currency in the modern market. Customers are looking for businesses that can offer personalized products and services. As you interact with customers one on one, you get more information about them. This information helps you to develop a package that aligns with their specific needs and tastes. Hence, D2C offers you the opportunity to offer personalized products and services to your customers.
A chance for product improvement
With other business models, your role as a manufacturer is to make the products for the market. You do not have a chance to engage with the consumers. Though the consumers offer their feedback and views to the resellers, they are less likely to pass the information to you. This aspect affects your business as you continue offering products that are far from your target customers’ needs.
In the D2C business, you work directly with the consumers. So, you can gather essential information about your products and services from their consumers. This information becomes the guide for improving your products to meet the current customer needs.
Easy to test new products
Sometimes, you may want to introduce new products to the market. With the traditional models, it would be a long and tiresome process. The product moves through the reseller network and you may not get the consumers feedback.
However, D2C eliminates this aspect. Testing new products become an easy affair. Since you deal with the consumers you can assess their reactions to the new products. This way, you can decide whether to continue with their production or suspend it immediately.
Cons
Challenges in establishing your brand
Eliminating the reseller network comes with a drawback to your business. As you know, the resellers work hard to build your brand. They build online stores and market your products. This aspect helps you build and establish your brand within a short duration. In D2C, you need to establish your brand to make sales. This task can be a challenge and difficult to accomplish.
Carry all the responsibilities
Direct-to-consumer means that you will handle everything in the business process. You will market, receive orders, carry the fulfillment, package the products, ship them, and receive returns. This task is a challenge as it calls for extensive dedication and coordination of business operations.
Conclusion
As you can see, the D2C business model shortens the supply chain. You do not need to move your items from your factory to resellers. Instead, you work directly with the final users. This approach enhances your profit and gives you control over the supply chain. However, it calls for extra commitment, dedication, and coordination to achieve success in your business.
