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What is DTC?

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What is DTC?

Direct-to-consumer (DTC) has been one of the buzziest terms in the commerce world of the past few years.

November 30, 2022

4 mins read

Celeste Rivas

What is DTC? 

The model, which burst on the scene more than a decade ago with the launch of pioneering brands like Warby Parker and Dollar Shave Club, saw accelerated growth with the Covid-19 pandemic, as consumers moved online to continue shopping for their favorite brands and explore new ones. As traditional physical retailers were forced to close their shop doors temporarily, many brands took the opportunity to open or expand their online operations to both weather the Covid storm and give consumers the chance to continue shopping with them, with many turning specifically to a DTC model.  

If your brand is a newcomer to the DTC space or you are thinking of opening a DTC channel, below we break down the basics of the model. 

Simply put, DTC means selling your product directly to consumers, minimizing the number of third-party providers in your operations to create a single line from brand to customer. In this model, the brand is in control of all aspects of selling and distribution: from fulfilment and logistics to customer care and marketing, the brand decides on and is responsible for their customers’ entire shopping journey. It’s worth noting though that DTC doesn’t need to be a brand’s only channel: businesses can combine their own-brand ecommerce websites with retail, marketplace and social commerce operations, for example.

What are the advantages of DTC? 

While overseeing every aspect of shopping journey can seem like a big responsibility, DTC commerce can be beneficial for brands in many ways. Firstly, being responsible for your entire operation means exactly that: you are in control of everything from product development to shipping, and you get to decide what is best for your brand and your customer. DTC enables a freedom to dictate what your own distribution or marketing strategies should look like, where involving external retailers may otherwise cause limitations. This also means you are free to take your product to new or different markets should you want to expand your global reach

In a DTC operation, your brand is in direct contact with its customers and is therefore able to build closer and tighter relationships with them, boosting trust and loyalty. And, with the access to first-party data they give brands, DTC channels are instrumental in better understanding who the target consumer is and what their wants and needs are. This in turn means they are central to being able to offer personalized experiences, tailored to customers’ shopping behaviors and expectations — something increasingly important when 71% of consumers expect personalization from the brands they buy from, and 76% feel disappointed when they don’t get it (McKinsey).

What are the advantages of DTC?

What does the current and future landscape of DTC look like? 

According to Statista, DTC sales in the US will amount to $155.7 billion in 2022 and are expected to climb more than 36% to nearly $213 billion by 2024. Both digitally native and established brands are predicted to grow at a similar pace.  

And while DTC is projected to account for just 2.5% of overall retail sales in 2022 (eMarketer), a long-term vision is key when it comes to thinking about the opportunities the model can offer. A survey by Capgemini revealed that 41% of consumers said that they had shopped directly with a brand in the six months prior to November 2021. However, there was a stark difference between age groups: while only 21% of Baby Boomers, born between 1946 and 1964, had made a DTC purchase, 68% of Gen Zs, born between 1997 and 2012, said they had done so. As more and more of this younger generation, who picks the brands they shop with carefully and mindfully, joins the consumer population, DTC can continue to grow as a key channel among these shoppers — one that enables them to buy from like-minded businesses that share their values and beliefs.

How do you get started with DTC? 

Taking your first steps in the DTC world can be both exciting and overwhelming, so partnering with experts is key for a smooth journey. At Ingenuity we’ve been helping brands, big and small, build, develop and optimize their DTC strategies for nearly two decades, helping them to grow their businesses and reach new audiences successfully. We not only deliver DTC at an end-to-end and modular level, but also offer a consultancy service to help brands establish the strategic direction that best suits their individual ambitions in the DTC landscape. Get in touch with us today to see how we can support your business.

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