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In eCommerce, there are so many ways for sellers to achieve success. You have drop shipping, arbitrage, and even private white label selling. Most eCommerce store owners have even shifted to direct to consumer brands.
We’ll explain in detail what direct to consumer is shortly. What we’ve noticed in recent years, there are major retailers and brands that have tested the waters with DTC. What if there were direct to consumer brands that have followed the Amazon business model?
Considering that a lot of fingers are being pointed at Amazon for the cause of many businesses on Main Street coming and going, there are some businesses that are seeing an opportunity that not everyone else is seeing? As the old saying goes “follow the money”. Even some big-name brands are surviving because they are adapting to the times.
Unfortunately, there are some stores both big and small that fail to adapt and soon crumble. Are there DTC brands that can succeed by adopting an Amazon-style business model? That will depend on many factors. For now, IO Scout will explain what DTC is and discuss why it’s important for businesses.
The name is self-explanatory. You are selling items to the consumer who buys them. This can be done through their website or their physical retail location.
Here’s something you might be surprised about: you won’t find DTC brands being sold in major retail stores (i.e -- Walmart). And you won’t see them on online retail sites like Amazon either. If there is one thing that both Walmart and Amazon have in common: it’s they don’t do DTC.
To give you an example, let’s say you have a business that sells handcrafted goods. It’s in your brand to make custom, personalized handcrafted items. And you only sell them via your website.
Does it have to be sold online? Not always. You can have a physical retail location or both.
The direct to consumer model doesn’t include any middleman. There is no other supplier other than the brand itself. So if you are a DTC brand, you’re the one supplying or manufacturing the items. And you sell the items themselves.
It’s all done with your own personal branding. You don’t need to work with different suppliers or any kind of third party company when it comes to production and the like. They sell their goods exclusively through their store and do not sell anywhere else (online or offline).
The key here is exclusivity. You can exclusively purchase a product online or through their store. There is no other place BUT their website or retail location.
While Amazon is technically not a DTC business, they do have items that they sell using their own brand name (i.e. -- Amazon Fire Stick, etc.). Wal-Mart has the Great Value and Equate brands that are exclusive to their stores, but it’s not DTC. Get the idea?
As mentioned before, Amazon is not direct to consumer. Despite selling some of their items under their own Amazon name, they still sell plenty of items under so many different brand names. Of course, there are sellers who purchase different kinds of items via arbitrage or FBA.
Therefore, Amazon is not a pure DTC brand. That’s because it’s a superstore that sells almost every consumer brand under the sun. Furthermore, there are other things that “disqualifies” Amazon from being considered a DTC brand.
For example, there are plenty of suppliers that will fulfill the Amazon orders. Not to mention, there are suppliers around the world from arbitrage sellers to Alibaba suppliers that will ship items to Amazon fulfillment centers. Amazon doesn’t manufacture almost all of the items that they sell through their site.
We can say the same about major retailers that are not DTC. However, large brands like Nike can be considered DTC brands. However, they do sell their items in stores other than their own outlet stores.
As of today, there are more than 400 direct to consumer brands in the United States. While the number seems a bit paltry, you can expect it to grow over the next few years. Compared to a couple of years ago, the sales between D2C brands and their customers have doubled.
Considering the stats, the jury is still out about whether or not there are more consumers that will find a go-to D2C brand. But it is feasible that a D2C brand can survive even today. What it comes down to is your coverage area and the customers you serve.
Thanks to the power of the Internet, you can open your store to shoppers across the country and the entire world. If you opt to operate your store exclusively online, then you may have plenty of customers who can stumble upon your site and purchase what you’re selling. The hard part would be the digital marketing end of the business.
While digital advertising is considerably cheaper than traditional means, you may need to spend a lot more money if you want a large number of people to see your ad. The good thing about digital ads is that you can set the demographics and other sales behavior to laser focus it on buyers that are your ideal audience (hence increasing your chances at more sales). And you can set the ads to where a specific geographical location can see it.
If you are a D2C brand that decides to open up a physical retail spot, then your customer base may be limited to your local area (unless you decide to incorporate an online model along with it). The important thing to note is that if you want to survive as a D2C brand, you’ll want to make sure that you’re selling products that no one can find anywhere else but Amazon (assuming you go that route). Once again, the key to D2C success is exclusivity.
Direct selling is important due to the following reasons:
For processing sales, it can be as simple as investing in a card processing software like Square. You can connect it to your POS system or use a mobile device (assuming you’re starting out). Payment processing is easier than ever before.
If you are doing online sales, you can possibly set it all up and not have to spend anything more than $100. It can be a basic Shopify website and a PayPal account. You can make upgrades and purchase Shopify add-ons as you grow.
If you have a product that is renewable, you will definitely get the upper hand by offering it to interested customers. And they’ll pay you handsomely for it every week, month, year, etc.
The short answer: yes. There are limitations when selling as a DTC brand. Among those limitations, the most major of them all is distribution.
DTC brands put the items in the hands of the customer. No need for any third-party entities. So the DTC brand will need to handle everything from manufacturing to shipping.
There are other limitations that exist in DTC. These can be due to customers not feeling comfortable with leaving their vital information (like their shipping address, credit card information, etc.). Also, the shipping and return policies can differ from one consumer to another.
So you may lose some customers because they disagree with such policies. It’s just the nature of the business. There will be those who may not trust you (just yet) compared to Amazon.
Why would Amazon be more trustworthy compared to a DTC brand just starting out? The keyword: trust. Even though Amazon serves as a middleman, more people trust Amazon more because it’s recognizable and the social proof is through the roof.
This kind of trust can be really hard to build up over time. But if you are successful in selling the right products, provide excellent customer service, and more then your customers will trust you enough to tell their friends and family. Building that trust can be done.
Not to mention, Amazon is more than likely the only eCommerce platform customers have ever used. They are comfortable with shopping on Amazon because they’ve done it so many times. They know of Amazon’s protection policies and the like.
If you are selling DTC, you can experience all kinds of benefits. You can even sell your DTC goods via Amazon. You don’t even have to sell on Amazon, to begin with.
For example, here are some benefits you can experience assuming you sell on Amazon as a DTC brand:
Before selling on Amazon, it’s important to consider some of the following:
We’ll be taking a look now at how Seller Central stacks up against Vendor Central. Both are two separate entities where you can choose between one or the other. However, that is no longer the case since Vendor Central is now “invite-only”.
Here’s how the two stack up against each other:
Compared to sellers who have prior approval for selling brand name products, it can hurt them more than help them. But as a DTC brand, you can have a bit more of an advantage. However, there are some things you need to know to keep yourself ahead of the game:
Direct to Consumer brands are likely going to pop up over time. But it won’t be as rapid paced. Some of them will be taking their time on how they can approach the market and what tools they need to use (assuming they are going online). Whether they are going the traditional retail route or online, there is success to be had in the DTC side of commerce (or eCommerce).