Are You Down With DTC? The Rise of Direct-to-Consumer Selling

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  • 12/3/2019
    While most major brands have already jumped on the DTC train, it can be daunting for smaller brands or B2B focused brands to make the leap. Amazon is a great way to start start selling directly to consumers through one of the most popular e-commerce marketplaces. Dan Lyons, Digital Marketing Team Lead at thunder::tech, says
    Amazon not only offers brands a marketplace with the ability to scale and reach customers across the globe but is continuing to show increasing potential for B2B brands as well. It'll be interesting to see how more brands adapt in the months to come.
    Marketing Trends Volume 11 digs deeper into direct-to-consumer selling showing readers that DTC sales channel is something businesses should be moving towards, not away from. 

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    Brands have caught on that building, marketing, selling and shipping products directly to consumers themselves rather than going through a middleman has plenty of benefits. The rise and proliferation of direct-to-consumer, or DTC, businesses reflect shifting consumer behavior. As more companies recognize that people are looking for a genuine connection and experience with a brand, they look for ways to interact with consumers on a more personalized level. 
     
    About 25% of DTC companies use a subscription model, such as Blue Apron, Dollar Shave Club or BarkBox. These companies sign customers up with regularly occurring purchases for home deliveries or service at designated intervals. 
     
    Other exclusively DTC brands came out of the gate as disruptors to established industries. Warby Parker broke the eyeglass sales model. Uber and Lyft made taxis virtually obsolete. Casper made mattress buying painless. The common denominator is that each of these brands is cultivating a better experience for the consumer, typically through making shopping convenient and affordable. 

    Out-of-the-Box Selling

    DTC is growing in popularity as an alternative, or complement, to traditional sales models for companies to sell through digital channels. Many brands already sell through big-box stores like Home Depot, Lowe’s, or Walmart. The idea of going DTC could threaten a company’s relationship with the retailers they’ve relied on for the bulk of their business. However, there are ways to avoid sales channel conflict while dipping your toe in DTC. 
     
    “By far and away the scariest proposition of DTC is competing with the folks who put food on your table, the distributors and reps,” said Ethan Karp, CEO and President of MAGNET. “Many companies opt for those ways around being competitors — say, for example, piloting in geographical regions not frequented by current sales channels or by arming others with the tools to get customer pull for your product back through your traditional distributor and reps, thus increasing their business.”
     
    Depending on the size of your organization, spinning up a new brand that is exclusively DTC may be easier than navigating the choppy waters of potentially competing with your biggest client. In this case, you’d keep your legacy brand(s) with the retailer, and have a separate brand name for selling directly to consumers. 
     
    “The problem is that whether it’s a single brand or whether it’s a collection of brands, it just takes a lot of effort to start that,” said Jason Therrien, President of thunder::tech. “Many companies are creating their own brands but putting them on established marketplaces like Amazon or eBay. You don’t have to develop a whole channel, but it may be a brand you can’t get anywhere else.”
     
    For many brands, particularly those that are just starting out or don’t have the brand equity to pull a huge customer base into an offshoot brand, leveraging a third-party platform with an established audience, like Amazon, is a good way to test DTC without investing in building your own e-commerce experience from the ground up. 
     
    “It’s much quicker to experiment on somebody else’s channel that already has the audience,” Therrien said. “Though the margins are a lot worse, the risk is a lot lower and the set of costs are a lot lower.”
     
    Sexy Hair, a beauty company that has been around for about two decades, just began selling DTC through Amazon this year. Their typical sales channels were through retailers like Ulta Beauty for consumers, and distributors such as SalonCentric for professionals. Though they are expanding into DTC, they continue to prioritize their relationships with their distributors and monitor all data coming through Amazon. 
     
    “Looking at the results and the data of our digital sales, we can already tell Amazon hasn’t really affected the business with Ulta,” said Noel Gonzalez, Digital Marketing Manager for Sexy Hair. “We spread the love, too — we were also doing strong campaigns with Ulta at the same time.”

    Why Make the Leap?

    There are many reasons why a brand may decide to go DTC. While retail partners and distributors are often a simple way to get products in front of customers, sometimes the fit isn’t the best for your company. 
     
    “Many manufacturers, especially the small and medium-sized ones that we work with, face their biggest challenges not with actually making product, but with selling it,” Karp said. “Putting their fates into the hands of distributors and rep networks can be the easy, but scary option. When things get bad or your rep or distributor no longer has your best interest at heart, you have to go direct, or at least try.”
     
    Many brands are also looking at ways to diversify and grow their sales channels to reach more (or different) people. Perhaps they’re considering DTC as a way to put products in geographical locations that are unavailable through other sales channels. Another is, they want to have an outlet for discontinued, refurbished, limited runs or other segments of product lines. 
     
    But also, brands are looking at ways to go DTC to proactively disrupt or get ahead of the competition. 
     
    “This is a very strategic decision to manage your competitive positioning,” Therrien said. “You could do it before your competition does, or before something comes out of the woodwork, or reactively if somebody’s in there already and it’s disrupting your market share.”
     
    In the case of Sexy Hair, they launched with Amazon in response to inconsistent brand representation by other vendors selling their products. They are currently undergoing a digital presence overhaul, updating with a website redesign and cleaning up old descriptions, brand imagery and inconsistencies online. On Amazon, it was a matter of protecting brand reputation in addition to potential revenue growth.
     
    “When you’re going into a business deal, you want to make sure the two parties have a list of what they’re trying to accomplish,” Gonzalez said. “One of our bullet points was to say that we are the official brand store on Amazon. We don’t want to be competing with other salons or vendors who are trying to sell through their portal. It was part of the deal we worked out that no other vendor could sell Sexy Hair products.” 
     
    Ultimately, whether you’re already an established brand or you’re starting something new, DTC is a way to unlock additional revenue. 

    Set the Course

    While DTC can potentially be a majorly positive move for many companies, it’s not something you just decide to do on a random Tuesday off the cuff. 
     
    “Going DTC is going to be a huge change and require tremendously different skills and likely outside expertise with a large budget increase,” Karp said. “It isn't a proposition lightly entered into.” 
     
    For any size company, step one is to map out a plan. Create a strategic roadmap for rolling out a DTC model that fits your company goals and the resources you have available. 
     
    “That means the energy, the budget, the phasing that goes into this, and being realistic about the time it takes to build another brand,” Therrien said. “A lot of brands aren’t used to speaking directly to the end customer. They sold through distributors or retailers, who take care of the end-to-end consumer relationship. To some, DTC would be a big shift.”
     
    Thus far, DTC is a very digitally-forward model of selling. It’s trying to entice customers through targeted advertising, whether it’s pay-per-click, social media or display ads. Brands have to know who will buy their product and target them to make a purchase. 
     
    Having a strong partner to help navigate the nuances of digital DTC can make all the difference. From branding, naming the spinoff, and identifying sales platforms to determining the best advertising and messaging strategies, it’s important to have a plan in place to come out of the gate strong. 
     
    “First and foremost, figure out who you can partner with that understands and knows DTC,” Karp said. “While there is definitely crossover in concept (for example, you need a good website, you can effectively use SEO, you can do digital outreach), there are nuances to DTC that others have figured out and earned their right to win at.” 
     
    Once your plan is in place, run pilots to see if DTC will be effective for your organization. And, according to Karp, being bold doesn’t hurt, either. 
     
    “Don’t be afraid to do what you need to do to make sure your product is the one standing at the end of the day, not someone else’s, even if it means upsetting the apple cart once in a while,” he said.
    Are you down with DTC? If so, contact thunder::tech today to explore your direct to consumer marketing options! 
     
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