4 Myths About Direct-to-Consumer Fulfillment in Direct Sales
Direct-to-consumer fulfillment has progressively expanded in the last few years, fueled in part by the COVID-19 pandemic and its lockdown restrictions. According to forecasts, D2C sales will reach $21.25 billion in 2021, a 20% increase over last year. It may be an excellent time for merchants to consider D2C channels now that this space isn’t going anywhere but up.
Is D2C a new concept, and why are so many brands getting involved with it?
We’re going to describe D2C and the myths about Direct-to-consumer that companies should consider before diving into it.
What is D2C?
Direct-to-consumer (D2C) eCommerce involves a merchant selling directly to the end consumer over the internet, rather than using intermediaries such as retailers, distributors, or wholesalers to reach the target market.
Brands dealing with D2C can handle their inventory and complete shipping orders in-house, via drop shipping, or by outsourcing the process to a third-party logistics company.
D2C’s growing popularity
Despite the pandemic’s contribution, D2C growth continues to accelerate as a result of existing trends. With the increasing cost of renting physical space, more brands are choosing to launch digitally to cut costs while reaching more consumers.
D2C is also set to enjoy the lion’s share of eCommerce growth as consumer preferences shift toward convenience and ease of purchase. 55% of consumers prefer to buy directly from brands rather than through other channels.
However, there are also challenges and opportunities associated with D2C for merchants. We explore the myths around direct-to-consumer and the things you should keep an eye out for when starting your business.
- MYTH: You shouldn’t buy products at a discount from direct selling companies.
FACT: The fact that independent contractors can purchase products and services they love at a discounted price is one reason why they join and remain in the direct selling industry. Direct selling initially appealed to many people for that reason, and for many, it is a stepping stone to selling to others.
- MYTH: To start selling, direct sellers must purchase their inventory.
FACT: There is no truth to this statement. The direct selling industry depends on individual companies, but many companies allow independent consultants to accept orders from customers without requiring them to order inventory. In addition to purchasing products for third parties, independent consultants choose to buy products for their use for reasons that are either personal preference or a desire to familiarize themselves with a variety of products and services available. While some direct sellers purchase inventory for sales, members of the Direct Selling Association (DSA) follow a Code of Ethics that provides crucial financial protection to direct sellers. Every company must purchase unused inventory from independent consultants at greater than 90% of the original cost as part of this process. On the other hand, bad actors may use the practice of inventory loading, in which individuals are convinced to buy large quantities of a product or service that cannot easily be resold or returned. Direct sellers suffer a great deal from this practice, which is unethical. Moreover, the method is also indicative of pyramid schemes.
- MYTH: People involved in direct selling are exposed to high financial risks.
FACT: A low entry cost and relatively low financial risk are two reasons direct selling is so appealing. Generally, the entry cost for direct sales consultants is $106.40. Still, the prices for independent consultants in other industries, such as those in the restaurant business, can range from $1,000 to well over $100,000. Most direct selling companies offer customers and independent consultants protections and guarantees, some of which may surpass Federal Trade Commission (FTC) and state laws.
- MYTH: Direct selling is primarily a way to earn a significant income.
FACT: The reasons for getting involved and staying in the D2C business are many. In addition to discounts on products and services, a work-life balance and the chance to earn supplemental income through entrepreneurship are some of the benefits people enjoy. Americans who work in direct sales do so for funding holidays, family vacations, or just some extra spending money. It is common for independent contractors to work part-time in direct sales, and many have other jobs.
- MYTH: Direct sellers rarely make a profit.
FACT: Different success metrics motivate direct sellers. Their interest may lie in the flexibility of direct sales offers or in the potential to supplement their current income. A record amount of money was made by those involved in direct selling in 2015. Yet, direct sales are not a primary source of income for most. Instead, they use the supplemental income from direct selling to treat the family to vacations, buy gifts during the holidays, or spend money.
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