What is a D2C business model and why you should consider it as your brand’s future

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B2C, B2B, D2C… it can all get pretty confusing. One of them has the potential to sky-rocket and become a trend for both e-commerce and retail brands. Why is the direct-to-consumer model gaining popularity? What’s so special about this business model and why should you care?

Let’s wind the clock back a bit.

The pre-Internet life of a small retail brand was tough. If you weren’t on supermarket shelves, you could already forget about making a penny out of your little company.

In other words, business was dictated by the distributors.

The business of today is different and belongs to producers, as they’re also their own distributors.

In light of this, a new kind of company is emerging – brands that produce, pack, distribute and ship their products. All of that without sharing their margins.

This kind of model is called D2C (direct-to-consumer) and you’re about to learn:

  • What does D2C stand for?
  • Pros & cons of the D2C model
  • Examples of D2C companies that have made it.

Let’s dive in.

What does D2C stand for?

D2C is an abbreviation of direct-to-consumer, which means a company that produces a given product in its own facility, as well as distributes it within its own channels. These channels can include an e-commerce platform, a set of social media platforms, as well as a branded retail store.

It can work in almost any given industry. Here’s an example of D2C in the Wine Industry:

California’s Daou Vineyards and Winery produce a few original types of wine and sell them online as well as their branded retail store. And a case study shows that exclusive retail stores with special offer (a wine tasting for example) significantly increased the sales. A direct-to-consumer brand can utilise this kind of “additional services” to make its customer get to know the product better.

direct-to-consumer wine brand daou vineyards and winery

Fashion also thrives on the D2C business model.

German designer Hien Le sells his own pieces in a store in Berlin and online.

Hien Le targets the local market and over time, his lines became a well-known fashion icon in the Berlin fashion scene.

No need to work with a wholesaler or middleman.

d2c direct to consumer hien le clothing brand

Both of these examples – Daou Vineyards and Winery and Hien Le – have something in common – cutting out the middleman.

The idea is to remove resellers, producers and other companies that go in-between the brand and its final customer. This brings the company closer to its target audience.

Even though the D2C model isn’t as well known as the B2B or B2C models, many brands fit the D2C description perfectly. More on those later.  

For now, let’s focus on the benefits and drawbacks of the D2C model.

Benefits and challenges of a direct-to-consumer business model

You’re probably wondering isn’t it easier to have the middlemen and not be worried about every single aspect of your distribution?

While it might seem easy to use a marketplace like Zalando or even other retail stores to distribute your products, it does take a large slice of your profits. Keep your own money in your back pocket is just one benefit, below are some more.

Benefits of choosing a direct-to-customer model

The benefits of D2C might depend on the exact type of industry you’re operating in. Still, the following concepts can be quite common for all:

  • No middlemen = more profits
  • Gaining access to more targeted customer data
  • A higher degree of personalization in your product range
  • Higher control over profits
  • More room for product testing

Let’s explore some more benefits.

  1. Higher control over margins

How direct-to-consumer brands rise their margins?

Let’s see an example of a direct-to-consumer brand called Glossier.

Glossier is a cosmetics producer who based its offer on chemical-free, high-quality ingredients, with the brand’s promise “a people-powered beauty ecosystem”.

As a direct-to-consumer brand, Glossier sells only via its website and uses its social media channels to promote and get the word out. Not many cosmetic brands decide to do that, so what made Glossier different?

Glossier doesn’t cut its margins to sustain a complex network of resellers. Instead, Glossier invested all its efforts into building an online platform that’s highly leveraged by its solid social media presence.

A killer Instagram profile is in particular responsible for acquiring new customers. With almost 2 million followers, the company created an impressive “pool” of people, who can eventually make a purchase.

This is also visible from the SEO perspective. Here’s the organic (traffic from Google) growth since mid-2016:

d2c ahrefs graph packhelp - direct-to-consumer

The growing tendency isn’t the result backlinks from any resellers (since they have none). This growth happened due to great PR and solid work on brand awareness in social media and cosmetic bloggers

The lesson for you:

D2C allows you to have much better control over your margins. If you’re the only player that distributes your own products, you can introduce a better pricing strategy as well.

  1. Gaining access to more targeted data

Since the D2C model means controlling all steps of your distribution and production, it also includes gathering an enormous amount of data about your customers.

However, there are some serious questions to answer…

How exactly can you gather this information?

What kind of information is relevant?

For starters, you can learn the way your potential customers react to certain products. Tools like Hotjar help you see which areas of your website generate more interest. Generating a heatmap of your website will help you notice spaces that need further work.

Furthermore, a real-life observation (FullStory helps you with that part) brings an insight into the way customers behave on your website.

When selling via a third party’s website, you’re not given access to any of that data.

If you plan to use remarketing strategies, social media is your gold mine. You get a massive amount of information concerning your existing clients, as well as potential customers.

Then, you’re able to implement email marketing and collect leads directly through your website. By adding multiple signup forms scattered over your website, you get the chance to test your ideas.

On top of that all come all the other techniques – Google Adwords, paid ads on Facebook, Twitter, Reddit etc., but also customers from a geographical and socio-economic point of view.

Combining all of this data together, you can sketch a very detailed buyer persona for every line of your products.

The lesson for you:

Middlemen collect a lot of personalized information about your customers, but don’t share it with you. The D2C model allows you to collect more relevant information that you keep for yourself.

  1. A higher degree of personalization in your product range

This is directly related to having more customer data.

More information about your customers allows you to better adapt your product range.

Take a look at the personalization idea of Warby Parker, a $ 1.75b D2C company that sells glasses and frames. Instead of a call-to-action directing people directly to the shop, the company came up with a quiz that helps choose the perfect pair.

d2c direct-to-consumer warby parker

Additionally, Warby Parker offers a try-for-free deal that became a huge win for the company. You can order a personalized box with 5 pairs of glasses to try at home. Warby Parker proves that an online distributor that goes the extra mile to bring a personalized service is a recipe for success.

warby parker box - direct-to-consumer d2c packaging
Source: stylishtravelgirl.com

The lesson for you:

Make your product as personalized as possible. Many customers will also appreciate an option to try your product before purchasing it.

  1. Maximization of your profit

This benefit of a D2C model is directly related to cutting off the middlemen.

When you are the only party that produces, sells, distributes and promotes a product, you control every penny on the way.

Obviously, you still need to be thrifty with your cash flow. Nonetheless, D2C means more money in your pocket at the end of the day.

The lesson for you:

Direct-to-consumer means no splitting of the bill.

  1. More room for product testing

With all of that personalized offer and in-depth data, the direct-to-consumer model allows you to test new products more frequently.

For example, inform your customers via newsletter about new products and gather essential feedback.

Challenges for D2C companies

The biggest challenge for every D2C company is obviously the shift of responsibility in terms of distribution.

Without the big names to support your brand – like Sephora, Zalando or any other large reseller – you have to work harder on making your brand stand out. You are responsible for coming up with your own packaging, organizing your shipping and returns policy, as well as warehousing.

Furthermore, don’t fall for the trick that selling online is easy. Building your online presence is difficult and it requires a lot of dedication.

To complete in the D2C world means to put a lot of focus on marketing. This is true for any brands with an online presence, but even more so when you only have a presence under your own name.

All in all, being a D2C brand means a lot of coordination between various business areas. You’ll find yourself puzzled – probably more than once – but the successful examples of D2C brands (that you will see below) prove it’s a step worth taking.

Examples of successful D2C brands

In the previous section about benefits, you’ve already seen some examples of successful D2C brands. However, there is plenty more to look at – here’s 10 names to follow.

  1. Warby Parker

It’s already been mentioned, but this American brand changed the game in its own industry. The companies like VisionExpress, Boots Opticians or Specsavers – all reselling frames of other companies and designers – dominated the market for years. But Warby Parker, established in 2010, made the online purchase of glasses both possible and extremely convenient.

Until now, it’s still the gold standard for direct-to-consumer brands.

  1. Reformation

It’s no secret that the clothing industry is probably one of the fiercest industries out there and it’s extremely difficult to find your own space.

Some companies, like American women apparel brand Reformation, found their way out of this mess – defining a completely new unique selling point.

reformation - clothing d2c brand - direct-to-consumer
Source: Society19 

Reformation decided to put an emphasis on raising awareness about the environment. The clothes sewed by Reformation are made from organic or recycled materials and delivered in sustainable packaging, without the expense of contemporary, trendy designs.

The result is a brand that gained a huge cult following, thanks to the values it stands for.

  1. Me Undies

“Feel it to believe it” is the slogan of MeUndies.

As a D2C brand, the company diversifies its target group by offering two types of purchase – a regular online store and a subscription service.

D2C brands - MeUndies direct-to-consumer

It’s a great example of trying new products thanks to the flexibility of the D2C model. MeUndies can provide its subscribers with fresh designs and, based on the feedback from clients, decide which of the new pairs should be shown early in the online shop.

Additionally, the double-barreled approach broadens the marketing opportunities too.

  1. Nanit

Essentially, Nanit monitors the sleep cycle of a baby to let parents “do adult stuff”. Whatever that refers to, it’s clearly a benefit that elevated Nanit to become a successful D2C brand.

A baby sleep monitoring device isn’t a particularly easy product to market. Due to its technological background, its search queries might be hard to guess too. And good luck selling such equipment in a bigger supermarket.

nanit - d2c companies & brands - direct-to-consumer

 

Nanit, however, proved that this is a very fruitful niche that required a direct-to-consumer approach. With around $30 million of funding, this American company created a great physical product, supported by a cutting-edge technology. The company provides the product, but also guarantees coaching for their customers. Nanit wins by treating their customers in a personalized way with a product that stays with them for a long time.

  1. HIMS

HIMS serves as a fantastic packaging design example, but it’s also one of the best D2C brands in the cosmetics industry.

HIMS is dedicated to all the men problems – baldness, skin-irritations and even erectile disfunction. It’s all served in a very direct manner and packed in a minimalistic aesthetic. From a D2C point of view, HIMS is an example of killer branding.

hims-d2c brand - direct-to-consumer

The company makes great use of its beautiful designs and minimalistic vibe. Furthermore, its light approach towards intimate and often uncomfortable problems make it look friendly for its customers. As a D2C brand, HIMS wants to become a partner in the discussion and a true help – not just a seller of a product.

  1. Chubbies

Chubbies, an online seller of pants and swimming shorts, implemented two components of a winning online store.

Chubbies customers receive the products for free (meaning a free shipping policy), but the group discount strategy is what makes Chubbies interesting. Buying the pants in bulk (above $500) gives you a discount. Chubbies suggests that their product as a must-have for parties, “team bonding at j-o-b” or even military groups (with a special discount for American troops…).

  1. Dollar Shave Club

The simplest ideas are often the best.

Dollar Shave Club sends you a personalized set of shaving tools – razor, cream and after-shave cosmetics – as often as you ask them to. The company became a phenomenon – a trivial thing that wasn’t seemingly a problem (buying a razor and shaving cream) was turned into a multi-million dollar brand.

  1. Casper

Where did you buy your last mattress?

If you’re in Europe, it was probably bought in IKEA.

Your alternative from now on is the D2C brand, Casper. The company established itself as a mattress expert, turning its product into a symbol of upscale comfort and modern lifestyle.

  1. Away

The world shrunk in a blink of an eye. The discount airlines made flying accessible for almost everyone and the travel industry’s growth isn’t slowing down, thanks to new emerging destinations.

This created a perfect opportunity for a company like Away to rise. Away sells personalized travel bags and suitcases. The company offers its customers to try any suitcase for 100 days and provides a lifetime guarantee for each product.

Without the need to share its profits, Away could easily elevate its product to a high level of personalization.

  1. Ritual

Wellness became just another trend that accelerated the growth of D2C companies. Ritual is proof, with financing of well over $100 million since its launch in 2014.

The company works as a subscription service, but the main difference is that it produces all of the contents on its own.

ritual-d2c brands worldwide direct-to-consumer

The brands above paint a broad canvas of D2C concepts. The common element for them is the lack of external distributors.

Most of these ten companies offer something either highly personalized (Away, Dollar Shave Club, Ritual) or unusual (Reformation and Warby Parker) for the market, but they all managed to overcome the obstacle of not having a network of resellers.

Almost every D2C brand is also a great case in terms of using packaging. Like all brands, D2C companies need memorable packaging.

How do they deal with that?

What’s the best place to get packaging for your D2C brand?

Find out below.

D2C packaging – the key to branding

Almost every company, that was listed in this article so far, uses some kind of packaging. A majority of them chooses cardboard boxes.

Cardboard packaging constitutes an asset for a D2C brand for several reasons:

  • sending products in branded boxes enhances their premium feel
  • cardboard is light and helps save on shipping
  • a wide variety of printing and packaging options
  • it can be ordered in bulk, thus reducing costs

D2C packaging can differ from company to company, but here’s a few examples – also including customers of Packhelp – that will help you grasp the idea.

Koksbryggeriet is a Swedish producer of brewing kits, which uses light boxes made from Arktika paper (lighter than cardboard). The vivid colours of the design create a memorable packaging set.

Koksbryggeriet’s packaging is a great example of a solution that’s also an essential part of their brand identity. And in the case of direct-to-consumer, it’s one of the key parts of designing a box that sells.

Another brand called Monday’s Child sends its products directly to customers in mailer boxes. Monday’s Child sews beautiful garments for children and its founder designed the boxes in a very special way. After the box arrives, kids can use these boxes as dollhouses.

direct-to-consumer brands - monday's child d2c

Coming up with an idea to upcycle your packaging gives your brand adds value.

The big D2C brands incorporate packaging in their strategies too. Dollar Shave Club sends its sets in simple, branded boxes made from corrugated cardboard, and so does Ritual or Casper.

d2c casper brand
Source: casper’s blog

Warby Parker, on the other hand, sends the try-on glasses set in special packaging with an imprint inside, which guarantees a marvellous unboxing experience.

If you are a D2C brand (or this article makes you think that you might wanna convert your business model), you can easily design and order boxes like these at Packhelp.

Sounds cool? Get to know the range of products below.

design your d2c packaging

Packaging, apart from its shipping purposes, will also be a part of your D2C marketing strategy. You can use it to make your brand more “Instagram-friendly”. HIMS, the D2C company that makes products for men, perfected its brand identity. Their Instagram profile bursts with social proof, as well as great product displays and even memes.

Are you ready to become a D2C brand?

Direct-to-consumer is still a relatively new kind of business model. However, the several examples mentioned in this article work as proof that it can be highly successful.

If you’re considering the option of becoming a D2C brand, you will surely have a lot to think about. From coming up with your own distribution channels to doubling down on your social media presence – there will be work to do.

But, quoting Monty Python’s famous song, you should always look on the bright side of life. If you have a working business model, maybe it’s time to step up the game?


Kajetan Wyrzykowski
Kajetan Wyrzykowski Content Specialist at Packhelp. Interested in design and all the aesthetically looking things, but also keen on diving into the analytical side of content.
Content Specialist at Packhelp. Interested in design and all the aesthetically looking things, but also keen on diving into the analytical side of content.