TLDR: The DTC model skips the classic physical distribution store or selling through online platforms like Amazon. Instead? You ship directly to consumers. Seem like a no-brainer, right? You leapfrog the fees and costs that the retail giants may get from you. However, you need to play your cards right to make the model work as it comes with it’s own headaches.
🛵 What is DTC?
✊ Give me Freedom or Give me Death
😒 Not All That Glitters is Gold
🥊 Survival of the Fittest
👟 The Nike Way
😎 The Chad Takeaway
🛵 WHAT IS DTC?
For starters, DTC stands for Direct to Consumer, and as the name suggests, is a strategy for manufacturers and businesses to sell their products directly to their final consumers rather than relying on wholesalers or retailers.
The internet definitely made businesses more capable of starting their own commerce and distribution platforms, so hey, it makes sense to try to bypass retailers and saving up on hefty fees.
There have been many success stories in the DTC space. Names such as Athletic Greens, Casper, and Dollar Shave Club have become synonymous with the model. Some more successful than others!
But wait… DTC has both ups and downs, so let’s do a rundown to see if its the right choice for your business.
✊ GIVE ME FREEDOM OR GIVE ME DEATH
So what are the benefits of going for a DTC model?
Well, for starters, less intermediaries means less people to split the profits, so a bigger margin for your business overall.
DTC models of course are meant to work on fewer resources which voila! Means lower costs. You can even translate those lower costs to your price, gaining a competitive edge.
You can’t forget that going with a DTC online strategy lowers your barrier of entry to start a business.
Like old man Ray, you can tell those commercial space leasers to hit the road, Jack.
Instead of overpaying for a competitive spot in a retailer’s shopfront, suddenly the internet is your whole space.
And this does not come from a Cyberpunk movie. You can just set up an e-commerce platform and get ready to go.
Since it’s your store you are in full control (pretty much). No need to follow any specific rules from retail giants like Walmart or Amazon.
Just like the Red Ranger on the Megazord, you are the head honcho and the one taking all the decisions.
Seems scary right? Well, look at the bright side: You can completely customize your customer experience, and tailor it the way you’d like.
You can set up your own return policies, and build your own brand reputation.
Most importantly, you are not building your castle in another man’s land.
😒 NOT ALL THAT GLITTERS IS GOLD
Ok, so the question is obvious, if the DTC model is just the vie-en-rose, then why the hell isn’t everyone going for it?
First of all non-one will know who you are so. So you have to be prepared to spend a ton of money to drive traffic to your website. You are not just running a store, you are running a fully fledged marketing operation.
So, the money you are not paying to a retailer like Walmart in fees you will pay Facebook in Ads.
Additionally, all that customization of the customer experience glory also means that you are handling most if not all of their data. You know, credit card numbers, and private details.
Suddenly you got a a whole liability in your hands. God forbid you get a breach in your cyber security system, you could easily get sued into the Flintstones era.
Heck, even shipping directly to your consumers might become a problem.
There’s that comfy feeling of just delivering your goods to a retailer, and farewell them with the sweet cash in your pocket, saying “Hey! It is now your problem you send it to the clients!”,
Well, that whole option is gone on DTC. You got to handle your own distribution and the malfunctions that come with it.
Oh, and by the way, now you aren’t just shipping a truck to Tesco or Costco, one one huge, but overall simple delivery.
Your clients (hopefully many) might be as scattered around the world as Maradona’s unrecognized sons. Buckle up because those deliveries will multiply.
Some might be just a few blocks close, others might be far, far away. And good news! They all want your product. Now.
Of course there are ways to mitigate all those challenges. You can use the right software and vendors to deal each of them.
So it is not an unsurmountable challenge, but you should certainly bear them in mind right now.
🥊 SURVIVAL OF THE FITTEST
One of the biggest weak points of a DTC model its is own ease to set up. If you can get your own e-commerce platform for your product from the comfort of your home, what is exactly stopping your neighbour to do just the same and cut you out?
With the entry barrier being so freaking cheap, everyone is hopping on the DTC bandwagon. Even big companies are suddenly flirting with the DTC model to compensate for the dwindling numbers of retail sales.
What happens a lot of the time, a hot product starts to get traction. A bunch of dropshippers start overcrowding the market with knock-offs. And as nobody knows you, there is no way to tell that you were the real OG.
It’s like an arbitrage that disappears as soon as there is money to be made.
👟 THE NIKE WAY
As explained, even giants and leaders of an industrial sector can try the DTC model with reasonable success. Probably Nike is the biggest example.
After having a rough second fiscal quarter, the company decided to trim almost 2 billion dollars in costs, which in return saw them increasing their annual revenue by 19%.
Nike decided to reduce their number of partners while boosting their own app SNKRS and pushing their own stores.
Of course this is easier to be said than done. But Nike actually did a lot of things right. Using their own-made channels, they got a better grasp of their consumer activity, allowing them to create a better experience.
And just you want the whole experience when you enter a store, the same is true with an online channel. Just take a look at Nike’s social media channels and website. They are filled with content, most of the time partnering with some of the most well known stars.
🚀 ALTERNATIVES TO DTC
Let’s roll with some alternatives to DTC. Because, let’s face it, it’s not the only path to glory.
First, there’s the good ol’ Wholesale Model. You sell your gear in bulk to retailers. Less direct interaction with customers, more time to focus on the big picture. It’s like letting someone else drive while you enjoy the ride.
Then, enter the Franchise Model. It’s like cloning your business. You expand your reach, others do the heavy lifting.
What about Subscription Services? This is your ticket to steady cash flow. Customers sign up, you deliver regularly. It’s like having a fan club that pays you every month to stay awesome.
Last up, Dropshipping. Here, you’re the connector, not the collector. Take orders, pass them to the supplier, and they ship. Your hands stay clean, your pockets get heavy.
If you can’t beat ‘em, you can join ‘em. Sell your product through Amazon for example and outsource all the headache. Something known as Amazon “FBA”. They will take hefty fees but there is a reason people use them: it works! (sometimes).
😎 THE CHAD TAKEAWAY
DTC might have a low barrier of entry, but that is what makes it extremely competitive, and carries a different set of risks.
And still it might be hella attractive. If you can navigate those perils, you can end up with a higher profit margin, and being able sculpt your own customer experience to perfection.
That’s the bottom line. Just remember that a good DTC model lives and dies by its added value. Add content, use the new data you collect to redesign, refine, and try again. Otherwise, you will be copied into oblivion.