Direct to Consumer (DTC) is big news, and it’s only getting bigger. Fuelled by the wealth of free ecommerce platforms – which allow brands to design, build, and sell through their own online store at no cost – the model is proving an increasingly popular way of doing business.
According to Shopify, for example, DTC ecommerce sales for established brands hit almost $140 billion in 2022* – over three times more than that of digitally native brands. As for the future, it only looks brighter: with DTC sales projected to hit $161.22 billion by 2024.
What does this mean for your business, you ask? Well, that if you want more brand control, higher profit margins, and stronger customer relationships, DTC is the way to go – and below, we’re exploring exactly why that is.
We’ll define DTC ecommerce and its key differences from retail and wholesale, and unpack DTC’s benefits and drawbacks. Then, we’ll shine a light on five of the top DTC brands selling today, before wrapping things up with the five DTC tips you need to know about in 2024.
So what is DTC? Let’s dig in!
Direct to Consumer (DTC) ecommerce is a business model where brands sell their products, online, directly to consumers – without using intermediaries like wholesalers, retailers, or other ‘middlemen’. DTC ecommerce brands create and manage their own online stores, rather than relying on a marketplace (such as Etsy or eBay) or another third party.
Unlike some other business models, such as dropshipping, selling DTC gives your company more control over the entire customer experience: from manufacturing and marketing to sales and customer support. For this reason and more – the rise of digital technologies and the internet, for instance, which allow companies to reach consumers directly through online channels – DTC is becoming an increasingly sought-after business model.
In fact, McKinsey data suggests that three quarters of shoppers prefer the personalized, brand-to-brand interaction and experience that only the DTC model provides; especially considering the alternatives.
So, how does DTC differ from other ways of selling online? Let’s take a look.
Direct to Consumer vs Retail
DTC differs from retail in several ways, including:
- Distribution channel: DTC ecommerce companies sell products directly to consumers through their brand’s own online store. In retail, businesses sell through third-party online retailers: such as Amazon, Alibaba, Zalando, or Newegg.
- Brand control: since they interact directly with customers, DTC businesses are able to retain control over their brand image, messaging, and the consumer experience. In the retail model, businesses tend to have less scope to influence how their products are presented and sold – as this is often influenced by the retailer’s policies and branding.
- Profit margins: generally, the DTC model allows for higher profit margins, as there are no intermediaries or money-hungry retail partners taking a cut.
- Customer relationships: DTC ecommerce businesses can build direct relationships with customers, gathering data to provide personalized experiences. The retail model demands that these interactions are mediated by the retailer involved, and brands often have limited access to customer data and feedback.
Direct to Consumer vs Wholesale
Here’s how the DTC model differs from wholesale:
- Order quantity and pricing: DTC brands set their own prices, and sell individual items directly to consumers. In contrast, wholesalers sell products in large volumes at a discounted price to retailers, who then sell the goods on to the customer.
- Inventory management: DTC companies have more control over their inventory, and can scale product quantities up or down to reflect consumer demand. For wholesalers, however, inventory needs are dependent on retailer demands, and excess stock may lead to issues.
- Brand visibility: DTC companies may have to invest more in marketing to establish their presence and build a brand online to attract consumers directly, while wholesalers’ products gain visibility, by proxy, through the retailers they sell to.
So, how can the DTC ecommerce business model benefit your brand and bottom line?
Let us count the ways:
- More brand control: DTC gives you more control over your brand’s image, messaging, and presentation: including how you display, market, and sell your products.
- Stronger customer relationships: direct interaction with your customers engenders more robust ties, enabling you to gather valuable feedback and insights, and grow your brand through personalized marketing and products tailored to your audience.
- Flexibility and agility: when you sell directly to customers, you can be quicker to adapt to market trends, launch new products, and adjust your pricing strategies – without the constraints of traditional retail channels. You can also respond faster, and more effectively, to changing consumer trends and evolving market demands.
- Higher profit margins: by cutting out retailers and wholesalers, DTC brands can capture a larger share of revenue from each sale.
- Simpler product launches: as a DTC brand, it’s easy to launch new products – then work directly with your audience to test and seek feedback on them.
- A better brand experience: selling DTC, you can oversee the entire customer journey: from the moment they click ‘Buy Now’ to their ongoing post-purchase interactions with your team. This equates to a more consistent and cohesive customer experience.
Of course, no business model is without its challenges – so what DTC drawbacks do you need to be aware of before you start selling directly to your customers online?
- Logistical complications: managing DTC’s operational aspects – order fulfillment, shipping, returns, and more – is complex, and makes big demands on your business’s time and resources.
- Initial cost outlay: setting up – and maintaining – an ecommerce platform is hard work. As is managing your inventory, and handling all your business’s marketing and promotion efforts. For DTC startups and small businesses operating on a shoestring, this can be a tough challenge to surmount.
- Customer acquisition costs: on top of the funds required to get started, DTC brands also have to navigate the price of the customer. DTC companies need to invest heavily in advertising, social media, content, and email marketing to get the ball of brand awareness rolling and attract those all-important customers.
- Fierce competition and limited reach: DTC brands have to compete with established retailers with bigger budgets, more established customer bases, and broader product offerings. Against these well-equipped rivals, DTC brands can often struggle to reach a wide audience and gain a foothold in such a cluttered, competitive space.
- Supply chain vulnerabilities: relying on a single supply chain is risky, and any delays or disruptions – such as manufacturing issues, transportation holdups, or force majeure geopolitical events – can pose big challenges for DTC brands.
Now we’ve covered the principle of DTC ecommerce, let’s look at some well-known examples of this business model in practice.
1. Warby Parker
Founded in 2010, New York City-based Warby Parker started out as an online-only store selling high-quality eyewear directly to consumers.
Since then, Warby Parker’s reputation as a little-known but exciting disruptor in the eyewear space has shifted and now, it’s one of eye care’s biggest brands. Warby Parker now has a wealth of bricks-and-mortar retail stores – with plans to open 900 of them – but one thing that hasn’t changed is the brand’s commitment to its DTC model of doing business.
Founded in 2014 by Joey Zwillinger and Tim Brown – a soccer player from New Zealand – Allbirds is a company with a unique product: footwear made from a soft, specific type of Kiwi wool. Its DTC ecommerce business model – which helped it retain its strong brand power and unique identity, without getting diluted by retailers or wholesalers – has taken Allbirds from a small startup to a billion-dollar company in just four years.
Bonobos began life in 2007 as an apparel company selling menswear online.
A year later, Bonobos had already posted an annual revenue of $100,000. A year after that, it received $3 million in angel investment. By 2015, Bonobos had sold its millionth pair of pants – making it the largest US retail brand ever built on the internet. By 2017, its founder Andy Dunn was selling the business (to Walmart, no less) for a staggering $310 million – a simple story of how commitment to a DTC ecommerce business model can bring colossal success.
It may be going through some issues now, but when Glossier was founded in 2010, it represented an emerging, exciting new disruption to a stale, stagnating market.
The business – which sells beauty products directly to customers through its online retail store – was founded in 2010 by Emily Weiss, and by 2021 was valued at $1.8 billion. However, the brand announced a strategic shift in 2022, and in 2023 began a high-profile retailer partnership with Sephora.
Going forward, it’ll be interesting to see how Glossier’s change of tack – from solely DTC to DTC and wholesale – affects its position in the market, brand power, and levels of customer loyalty in the fiercely contested beauty industry. Watch this space!
Casper is a DTC ecommerce business that sells a proprietary type of mattress engineered to provide a deeper, more comfortable sleep.
Recently valued at more than $1 billion, Casper’s DTC approach has helped it build a strong brand with a loyal following while keeping its profit margins safe from the erosion of retailer and wholesaler cuts. Casper’s success is also a testament to the importance of a sleek, stripped-back, and simple site, as well as policies that benefit and build trust with consumers – such as its mattresses’ promise of a free return within 100 nights.
Building a successful DTC ecommerce business requires careful planning and execution – so here are our top five quickfire tips for doing it well.
1. Understand Your Target Audience
Clearly define your DTC brand’s target audience, ensuring you understand its needs, preferences, and behaviors. Then, tailor your products, marketing messages, and overall strategy to ensure they resonate with your brand’s specific demographic slice of the market.
2. Invest in a User-Friendly Website
Create an intuitive, visually appealing website that reflects your DTC brand’s look and feel, and provides a speedy, slick, and simple shopping experience. This includes ensuring your site’s pages load quickly, render well on mobile and desktop, and that your checkout is both fuss- and friction-free.
Using a website builder is still the easiest way to do this: you can have your online store set up in moments, and be selling through it within the week.
3. Prioritize Product Quality and Transparency
Emphasize the quality of your products, and remain transparent about how they’re manufactured, what materials are used, and the ethical practices you employ.
4. Tell Your DTC Brand’s Story
To develop a strong brand identity, you’ll need to communicate its story in a way that magnetizes and motivates your audience. To this end, use storytelling – including the StoryBrand framework – to create an emotional connection with your customers, and differentiate your brand from its myriad competitors in the market.
5. Implement a Robust Marketing Strategy
Initially and going forward, effective marketing will be key to your DTC business’s success.
So don’t be shy when it comes to investing in digital marketing channels – such as social media, content marketing, email marketing, and SEO (Search Engine Optimization) – for your DTC brand. Plus, it’s not only about running these campaigns but maintaining and optimizing them for success, too. So leverage data analytics – Google Analytics 4 is an obvious one – to measure your campaigns’ efficacy, and to make better, more data-driven decisions.
For more information about how to nail your DTC advertising strategy – plus inspiration from five of the brands doing it best, including Casper and Glossier – our guide will help!
As we’ve seen, DTC is a hugely popular way of selling online – and for good reason.
Higher profit margins, simpler product launches, and more flexibility in the face of the ever-shifting sands of the ecommerce space await. As do greater control over your brand, more robust customer relationships, and a better brand experience.
Sure, there will be a large initial outlay of cash required, plus the costs of acquiring your customers. You’ll also be dependent on a snag-free supply chain, face your fair share of logistical headaches, and be up against plenty of competition.
But is DTC worth it? Given the examples shared above, we think so. But now, it’s time to find out for yourself – so good luck, enjoy, and don’t forget to let us know how you get on in the comments section below!
Not sure which ecommerce platform will be the best fit for you? Don’t panic – we’ve pulled together our top 6 ecommerce website builders to help you decide. (With all rankings underpinned by our in-depth, in-house research.)
And, if you can’t decide whether to build your store with Shopify or simply call the whole DTC thing off and sell through Amazon instead, we can help you there, too; browse our Shopify vs Amazon breakdown for support with that big decision.
While DTC is a form of ecommerce, then, not all ecommerce is DTC.