Probably, scrolling through your Instagram stream, you have already fallen victim to them: brands that maybe sell just one product, but do it so well that you have an incredible urge to immediately click the “Buy” button. It could be a toothbrush, a razor, a mattress, or a bubble bath: products that are simple but, represented in their uniqueness, seem to be finally perfect, revolutionary, incredible.
Most of these brands that appeared out of nowhere are technically defined as D2C, or Direct To Consumer. D2C brands are so defined because they promote and sell a good directly to the end consumer, through their eCommerce, without intermediaries. They often design the product in question together with the community and, by avoiding intermediaries, are able to create very strong loyalty relationships.
Take the Quip toothbrush, for example: it looks like a regular electric toothbrush, winking at influencers’ Instagram profiles. This toothbrush, however, can only be purchased on the official website by signing up for a subscription that sends a replacement brush head every three months, along with a tube of toothpaste and floss. In practice, Quip creates an exclusive relationship with its customers, creating an unparalleled loyalty that is more reminiscent of a Netflix subscription than a simple tooth-cleaning tool.
There are now hundreds of products and services like Quip, and D2C seems to be the future of new brands or spin-offs of established brands in the market. Indeed, let us remember that not only startups are D2C: when Disney creates a platform like Disney+ to show its movies, it is in fact doing D2C; when Nike invests everything in eCommerce and Nike-branded stores, it is putting a D2C component alongside the big retail, which it also uses to provide additional data to its partners.
Certainly all that glitters is not gold in the magical world of D2C, but to an open mind this sector certainly gives insights and ideas to bring into our strategies. In this new article, therefore, we can understand together the advantages and disadvantages of this strand of commerce.
With great power comes great responsibility
Like all “fads” of the moment, the D2C fad should always be taken with a grain of salt: as Wesley Chai of Tech Target analyzes, there are great opportunities but also several risks when you try to centralize your entire brand value chain. Since we like to see the glass half full, let’s start by listing the most obvious strengths:
- By reducing intermediaries, D2C has more control over profits, with more satisfactory margins.
- There is definitely a better focus on conversion. When you sell your product directly, in fact, you focus 100 percent on your own success. A retailer like Amazon, on the other hand, doesn’t aim to maximize your profits–it aims to maximize its own: you would then risk seeing yourself sidelined by one of your competitors.
- Direct sales create a preferred channel of communication with the customer. This allows for better work on loyalty or cross-selling or up-selling techniques.
- Customers to purchase sign up on the brand site, allowing for better profiling. This information can be used, for example, to generate more effective retargeting campaigns.
Instead, we now try to adopt a more critical eye, pointing out some of the risks of D2C:
- Competing with giants like Amazon and eBay is not easy: many people prefer them, for example, because they do not want to enter their credit cards on multiple sites. You can limit the damage by using universal payment systems such as Paypal or Amazon Pay itself, but that’s not enough: the big online stores are where millions of customers shop; not being there could make us invisible.
- Then we also think about delivery time: competing with generalist eCommerce is really difficult. It will be necessary to focus on other things to give value to the customer, such as exclusivity and opportunities for customization.
- Not having large retailers to “guarantee,” one has to work hard on one’s credibility to appease the buyer and position oneself as a level-headed and respectable brand.
- There are extra responsibilities: marketing, sales and customer service are totally in the hands of the brand. This, in fact, also brings more reputational risks.
As we have seen, then, the life of D2C brands is by no means easy. Perhaps this is also why the parable of D2C start-ups seems to follow a circular path: they are born D2C, make a name for themselves, and then often seek more stability by starting to rely on outside retailers as well. This is because a hybrid model allows them to get the best of both worlds. Such is the case with Jimmy Joy, a brand of protein drinks called “Plenny” that, after being sold exclusively online, has since landed in Spar supermarkets as well to further expand its audience: its website remains the main and most convenient channel, but thanks to supermarkets it has been able to make itself known to a wider audience.
As many analysts are saying today, D2C should not just be a channel, but a mindset. We must make the best of the experience of these brands, knowing that direct selling should be seen as an opportunity, perhaps to test the impact on the audience of a new product, but not a religion to be followed to the end.
So, knowing that direct-to-consumer can have something to teach just about everyone, even the most traditionalists, let’s continue with our analysis of native D2C brands, because there is indeed a lot of food for thought here.
The eCommerce counter-revolution: selling a single product is back in vogue
What many of the brands we have already mentioned so far have in common is that many of them started by selling just one product. It sounds small, but this is a real counter-revolution in the online sales landscape. Before the advent of the Internet, most retailers could sell little, only what they could find shelf space for. This led them to stock up on popular products, reducing the availability of products that could satisfy only a niche.
In 2004 Chris Anderson wrote in Wired that with the Internet things would change: in eCommerce there are no space problems, and since the audience is global, the famous “long tail of niche products” could become really interesting. So today on the web music stores sell millions of records, book stores have available all human knowledge, and so on. Prominent among them all is Amazon, the “infinite superstore,” which makes available any good that exists in the world, in one “place.”
In this revolution, D2C brands seem to want to turn the tables. They may be selling a niche product, but only that, enfranchising themselves from superstores in order to devote body and soul to the enhancement of a single model. This, for example, is the case with Harry’s, a D2C brand that appeared online in 2013, selling just one model of razor. Presented as the evolution of shaving, Harry’s is in fact a very simple razor, with no frills, but with blades perfect for most people’s needs- Another strength of Harry’s is the subscription for periodic replacement of heads, which actually provides savings over supermarket competitors and makes life easier for those who often forget to buy replacement heads. Today Harry’s sells all kinds of shaving products, but the razor is always the same, and the company is valued at more than $1.4 billion.
Selling one thing is a way to stand out from the crowd and attract attention: the product, in its uniqueness, can be promoted as the best in its category. With so many competitors on Amazon, building one’s storefront and community around a single “product-fetish” enhances its prestige. In addition, this approach makes life easier for the customer, who may be tired of searching for one razor among many … turning to the product of choice by those who have made razors their life.
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They called them the trinity: first the customer, then the community and finally the product
When selling products as simple as a razor, body lotion or toothbrush, the target market is gigantic. Everyone needs a toothbrush as well as a razor. Because these targets are really broad, the dominant brands often have a long history and it is not easy to revolutionize the market.
Entering these sectors effectively, therefore, often requires creating an initial audience of ambassadors, supporting the brand in its early days and then helping it expand by word of mouth. D2C brands are great at this, because they work precisely on community building and virality. First they identify the customer, then they create a community, and only then do they start selling the product. To do this they often implement effective storytelling about their origins, or create engaging mechanisms such as invitation-only access or referral programs.
It sounds small, but it is a David versus Goliath war. These brands are starting from scratch and facing marketing giants with immense budgets on the strength of their relationship with their community alone. Often some customers feel so involved that they invest directly in the brand even before the product launch, with crowdfunding operations.
Leading the way in this context is Rob Rinehart, creator of the powdered nutrition brand Soylent. Before selling the product himself, Rineheart, shared with his community his experiments in creating the world’s most balanced powdered meal, showing recipes and more or less successful attempts. Followers quickly turned into supporters, funding the birth of Soylent with a $755,000 crowdfunding. Although today Soylent is no longer just a D2C company, it was because of this business model that it launched itself to its current success. Investors became the early promoters of the brand, continually improved its formula, and promoted it by recounting their experience in blogs and forums.
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It’s not enough to sell: you need to invest in the user experience
A key focus for all D2C brands is quality. So far we have explained how they often have a small product portfolio, creating a sense of prestige around their brand. More important than the concept of “quality,” however, is the customer experience during the buying process, and of course also after the buying process.
Many D2C brands invest in continuous or subscription-based forms of purchasing, or they invest in a personalized and tailored experience.
The simplicity of the experience, the ease of choice, are core values for a customer who turns to these brands: in fact, they do not want to choose among a thousand products, but only turn to the reality they consider best for their needs. In reality, many of these companies do not have real superior quality … but they certainly have a better user experience, because they are more complete and totally focused on a single product.
By often having a smaller audience than the giants, they can also offer a more personal and direct relationship, almost as if they were the online version of upscale boutiques. Men’s pants manufacturer Bonobos, for example, has invested in the simplicity of its site and a culture of total availability for the customer. This has led it to achieve excellent standards: the “Bonobo Ninjas” (that’s what they call customer care) call all customers back on the phone within 30 minutes and respond within 24 hours to all emails received. Hard to expect that kind of responsiveness from Primark or other clothing giants.
Ubiquity and virality: key ingredients for success
Probably one of the competitive advantages of D2C businesses is that they are often literally born for the Web. Being “digital native” brands, they adapt perfectly to online media, demonstrating an understanding of the medium and its potential in everything from SEO to social media.
Regardless of the strategy undertaken, however, the most effective ones do not just have a social profile or invest in advertising, but know how to make technology part of the user experience, even in unexpected ways. Take, for example, Dirty Lemon, a flavored water brand founded by Zak Normandin in 2015. Priced at $10 a bottle, Dirty Lemon is certainly not a cheap water, using unusual and unexpected ingredients that promise benefits such as reducing stress or wrinkles.
Initially, the brand gained visibility by investing heavily in influencers, hiring actresses such as Minka Kelly and fashion designer Pia Baroncini. What made the difference, however, was the channel used to buy the water: for the first year of operation, customers could only order Dirty Lemon water via text message. That’s right, the good old cell phone text messages: while seeming outdated, this technology creates a personal and direct relationship, and this expedient certainly generated curiosity in the target audience. The model is referred to as “conversational eCommerce” and has achieved extraordinary results: more than two million bottles of water were sold in the first year. Today Dirty Lemon is no longer D2C and even does not have a website, selling only on Amazon…yet the initial strategy was instrumental in starting the business.
SMS allowed Lemon Water to go viral (everyone was talking about it) and ubiquitous, because it effectively put a store in the cell phones of customers all over the world…all they needed was to be able to send SMS. That’s not to mention the ability to collect data, stay in touch all the time, and re-convert those who may have drifted away for some time.
Whether by SMS, or by other pretexts, being on everyone’s lips and always accessible to one’s audience is something important, and there would be plenty of examples of D2C that could set the standard in this area.
A revolution or a return to the past?
The amazing thing about the D2C world is that while it is completely innovative, it takes us back to the old values of the craft world. A reduced portfolio, a personal relationship with the customer, care and customization, the study of market needs and the simplification of purchasing processes. What used to happen in the old workshops can now also be done on the web, with new technologies and a dash of creativity and originality. So this is the secret of this industry, the return to a privileged relationship between producer and consumer, putting the customer, experience and creativity back at the center.
During the Covid emergency, then, this sector has seen exponential growth. Many food producers, deprived of traditional channels such as restaurants and bars, created their own e-commerce with more than remarkable results. Sodastream, for example, has grown by +1067% over 2019. Bindi, a restaurant confectionery specialist, in the United States has opened to the end customer via telephone sales, using its fleet for deliveries in New York, parts of New Jersey and Los Angeles. Italy’s Granarolo, has activated its channel for Bologna, Modena and Milan, bringing milk to your door exactly as it used to do. This, too, makes us realize that D2C can take us back to a past of direct relationships between producer and consumer, recovering a relationship made of trust and loyalty.
