Understanding Dynamics Behind Sudden Transition to D2C Market Models
Brands face various problems like supply-side pressures, retail challenges, competitive threats, and ever-increasing customer demands. And since the pandemic wave of COVID-19 escalated, brands have to face a new challenge of running their businesses under new government laws and restrictions.
Meanwhile, manufacturers have minimal control over their brands in the conventional manufacturer-retailer relationship. While manufacturers retain control over packaging, advertising, and other marketing operations, once the product is delivered to retailers, they no longer can influence sales, establish relationships with customers, or collect data. So it makes sense to eliminate the intermediary, allowing companies to earn a more significant margin while still having direct access to their customers and data.
It shifted the market dynamics on D2C or direct-to-consumer marketing as a popular and hassle-free way for manufacturers and CPG (Consumer Packaged Goods) businesses to join the market directly. The D2C has a diverse range. On one end are micro-manufacturers, who have perhaps turned a hobby into a revenue stream using knitting and crochet needles and scores of woolen yarns in a storeroom. On the other end, D2C is also attracting interest from major brand owners. In other words, any channel, whether it is an e-commerce platform, social media, or retail store, can act as a D2C channel.
Building one-on-one consumer connections by utilizing technology to offer deep consumer data is the goal of a direct-to-consumer strategy. It may result in more relevant, tailored products, services, experiences, communication, and offers and more efficient consumer acquisition, conversion, retention, and advocacy. Meanwhile, because the available data predates COVID-19, the inclination to go direct-to-consumer will likely rise even more in the face of the supply chain instability and loss of control that we’ve seen in recent months. Simultaneously, the sales process is more straightforward, less reliant on third parties, more focused on direct marketing, and better tailored to the final consumer. A new generation of more agile, more relevant firms is displacing the old behemoths, making them more prepared to prosper in the future customer-centric, data-driven consumer market.
The pandemic has accelerated the growth of D2C to unprecedented levels throughout the world. According to the Direct-to-Consumer Purchase Intent Index, more than 80% of end customers are projected to make at least one purchase through a D2C brand during the next five years. Some of the main drivers that are encouraging this change are:
- Personalized Touch: Direct to Consumer adds a personal touch to customer service and makes it easier to track purchase patterns and data. Using various algorithms, brands may recommend and sell what your customer wants. Not only will this enhance customer happiness, but it will also increase sales, allow exploring more innovative and personalized opportunities to connect with the target audience.
- Saving Unwanted Costs: Companies can save money by avoiding third-party fees and profit-sharing entirely. It may reduce expenses even further by storing less inventory, using less space, and having more control over the delivery process. You can channelize all these savings to schemes that will increase sales and, more crucially, have a fantastic chance to engage in brand loyalty programs.
- Quick Capturing of Audience: Because a majority of the intermediaries are eliminated under the D2C model, brands can minimize time to market. They may sell the goods anywhere (as long as they have shipping capabilities) once the brand website is launched and products are available, allowing the companies to capture consumer mindshare quickly.
- Showcasing Product Diversity: Retailers seldom stock a brand’s entire product catalog, preferring to allocate shelf space to items most likely to deliver repeat purchases. In D2C, manufacturers may provide as extensive a product selection as they wish by creating and operating their online shop, enhanced by their material, such as comprehensive product descriptions, photographs, and videos, which retailers may not utilize. In addition, manufacturers have complete control over their brand image and presence. Manufacturers may develop product pages with as much information and data as they intend and appealing pictures and high-quality writing and design that reflects the image they want to project to their consumers.
- Omnichannel Experience: Manufacturers have complete control over all aspects of their business, from packaging to marketing. It means they can provide their customers with an omnichannel experience. Furthermore, they will be free of the limitations retailers frequently impose on them, such as demanding low pricing or confining the product line by only purchasing a few products from the catalog. D2C enables manufacturers to sell products at the same price as retailers, positively impacting their bottom line.
- Ease of Setting up: New and emerging brands may get their businesses up and running for far less money by avoiding the significant and continuing overheads that come with maintaining a physical retail presence. Because of the ease of putting up an online store utilizing a platform like Amazon, a brand can start selling and shipping merchandise within a few hours in the D2C model.
With promises from D2C brands like having a better customer experience, obtaining products and services that are more likely to match their needs, and avoiding stressful and unsatisfying retail encounters, D2C is staying for a long haul. As more and more customers are eager to spend for a frictionless shopping experience, while manufacturers are looking to simplify their relationship with their audience, adopting a D2C strategy is beneficial from a financial and operational standpoint. It is high time that instead of focusing solely on brand visibility, brands create seamless, personalized experiences for long-term brand loyalty.
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