Direct-to-consumer (D2C) retail is a selling approach that bypasses the use of traditional middlemen and third-party suppliers. D2C businesses like Warby Parker, Allbirds, and Birchbox are manufacturers and retailers rolled into one. They create (or source), market, and sell their products directly to customers.
D2C brands connect with customers using primarily digital channels and touchpoints like social media, eCommerce websites, mobile apps, SEO/paid search and email. There are occasional exceptions like when D2C mattress retailer Leesa partnered with furniture retailer West Elm to feature their mattresses in West Elm’s stores.
One of the main benefits of D2C retail is that it has a low barrier to entry when compared to traditional bricks-and-mortar retail. Overhead is lower because there’s no need to pay rent, renovate buildings, or hire in-store associates.
The traditional retail model relies on physical stores for product distribution. Prices are heavily marked up, by the manufacturer, wholesaler, distributor, and finally by the retailer. By cutting out middlemen, D2C brands can sell high-quality products for less directly to consumers.
The D2C approach also makes it easier for new brands like Allbirds, an eco-friendly footwear and apparel company, to break into saturated categories where they would otherwise compete with established brands like Nike and Adidas.
The difference between B2C and D2C Commerce
There’s a difference between a D2C business model and a business-to-consumer (B2C) model. The D2C retail model is a straight path from the brand to the consumer, with the D2C company handling the entire process from manufacturing or sourcing the product to promotion to final delivery.
Backend fulfillment is accomplished using owned distribution centers or via third-party logistics (3PL) providers or a combination of both. With the D2C model, all you need is a product. Something like artisanal peanut butter which can be made in your own kitchen and shipped from your garage can become a hugely successful D2C startup.
A B2C model requires inventory to pass through one or more intermediaries before it gets from the brand/manufacturer to the consumer. Examples include:
- A consumer buys a pair of Nike sneakers in a physical Macy’s store or on Macys.com.
- A big box store orders laundry detergent and pet food from the manufacturers then sells the products in physical stores.
- A consumer buys the latest iPhone on Amazon.
In the above examples, fulfillment may be handled differently—for example, the iPhone might be shipped from an Amazon warehouse or directly from Apple’s U.S. Warehouse using a freight service like Fedex or UPS. In most cases, stock like cat food is purchased from a manufacturer, wholesaler or bulk distributor with no guarantee it will sell. Retailers use factors like seasonality, consumer demand, and past purchasing history to inform their purchasing strategy.
B2C retail is primarily a volume game with intermediaries contributing to higher retail prices because each intermediary gets a cut of the sale.
D2C brands can sell their products with higher margins because they cut out middlemen. This enables them to invest more in marketing, product innovation, and in cultivating a connection with their customers.
The D2C Customer Journey
D2C’s reliance on digital channels is no accident. Groundbreaking D2C brands understand that their customers prefer shopping online and interacting directly with brands.
The D2C marketing playbook is extremely brand-focused. D2C companies have much tighter control of their brand messaging, reputation, marketing channels, and customer interactions, but they’re also more agile.
They leverage the digital channels and technologies that shoppers are using now—social media influencers, viral videos on TikTok, and shoppable video are a few examples.
What it boils down to is a D2C selling strategy that aligns with the modern customer journey. According to recent data from the IBM Institute for Business Value:
- Consumers don’t view online and offline channels as distinct experiences, they expect the entire buying journey to be connected.
- Purpose-driven consumers represent the largest consumer segment. These are people who seek out brands and companies that align with their own values.
- Consumers see digital tools as a necessary part of their shopping experience, but…
- Consumers, particularly Gen Z, expect brands and retailers to support hybrid shopping journeys. That is, shopping experiences that blend physical and digital channels.
- Tech-enabled shopping tools are increasingly becoming part of in-store experiences. Top tools include in-store self checkout, restaurant delivery, BOPIS/BOPAC, mobile contactless payment, and grocery delivery.
By aligning their sales strategy to the modern D2C customer journey, D2C brands bypass roadblocks inherent with traditional channels, like fighting for shelf space in supermarket chains. Complete control of the brand and its messaging means D2C companies can align their company mission with their customers’ values and expectations.
Since most D2C brands launch without a physical location, their website becomes their only storefront—the main hub for receiving and processing orders and collecting first-party customer data which can be used to cultivate deep customer relationships.
The D2C model supports customers by fully understanding them. It embraces a data-driven, consumer-centric approach to retail. To this end, technology is the glue that facilitates the D2C customer journey. It enables D2C brands to support the channels and touchpoints that reach their customers.
Headless commerce facilitates the D2C customer journey
Headless commerce platforms like Kibo support D2C brands in a few different ways. The term “headless” refers to the platform’s architecture which separates (or “decouples”) the front-end presentation layer of your website (e.g., what your customers see) from the back-end data and transaction layer (the machinery that makes your website work).
There are many ways that a headless commerce platform can support D2C customer journeys (and D2C brands). Here are some examples:
- Headless technology supports data-driven commerce: Collecting first-party data is critical for D2C growth. As third-party cookies depreciate and privacy laws limit the way companies collect and use third-party data, the ability to effectively target the right audiences and measure digital marketing initiatives will increasingly rely on owning your customers’ data.
Headless means that you can connect your existing tech stack and associated customer data sources to your commerce platform. This allows you to better understand your customers and create content and campaigns that are relevant to them. Data-driven commerce enables machine learning to drive personalized experiences from your website and across all customer touchpoints.
- Flexible order management: D2C brands need the ability to scale quickly and adapt to evolving customer and business needs. Headless commerce platforms support rapid growth and shifting needs by facilitating things like flexible order management including inventory management across channels, a wide range of fulfillment options, and highly flexible customer and order servicing tools. At Kibo we use a microservices-based approach which means that users leverage only the capabilities that make sense to them.
- Robust product and catalog management: With a D2C approach, the website does the heavy lifting when it comes to making the final sale. Headless commerce platforms like Kibo support robust product and catalog management, making it easy to bundle products or set up collections across categories. You can also add cross-sell, up-sell, and product recommendation functionality which can increase sales and provide rich personalized experiences to shoppers.
- API-First architecture connects your entire retail ecosystem: D2C brands lean heavily into digital marketing tactics and channels. API-first headless platforms allow users to integrate critical retail systems, email marketing systems, fraud detection services, and build custom applications for even more functionality. This is a “future proof” approach that gives you the freedom to add (and remove) functionality, channels, and services to your existing commerce infrastructure without rebuilding the entire system.
A combination of shopper behavior and advances in technology have created a new type of customer journey. With the right tools and approach, D2C brands are poised to tap into these changing consumer behaviors and preferences.
Kibo Headless Commerce platform: Perfect for D2C brands
D2C eCommerce sales in the U.S. are predicted to reach over $151 billion in 2022, up nearly 17% from 2021. There’s room for lots of growth in this space, with eMarketer noting D2C purchasing accounts for just 2.5% of total sales this year.
The D2C is a retail strategy that’s catching on with legacy brands like Reebok and Jelly Belly selling directly to consumers from product-focused websites. Headless commerce platforms help legacy brands adapt to D2C retail approaches while also helping D2C brands support more traditional retail strategies.
The flexibility, scalability, and agility of headless commerce means you can reinvent your retail ecosystem again. It enables companies to reach consumers directly—across channels, devices, and touchpoints.
Kibo Headless eCommerce platform is the perfect tool for D2C brands because it gives you the agility you need to create custom shopping experiences across every conceivable customer touchpoint.
Kibo supports cutting-edge channels like voice assistants and smart appliances, traditional digital channels like social media and marketplaces, and fully integrates with offline channels like call centers and bricks-and-mortar stores.
We take a hybrid approach to headless commerce, meaning our platform supports user-friendly publishing with site and content management tools. Your marketing and commerce teams can work within a drag-and-drop interface to modify page layouts, create new content, or rebrand an entire website in days.
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