Direct to consumer (D2C/DTC) brands sell products and services directly to their customers through owned distribution channels rather than through third-party retailers and wholesale channels. This new distribution channel for DTC brands enables them to deliver better customer experiences, own the customer relationship and capture more customer data.
Starting in 2007, direct to consumer brands began to take advantage of the unprecedented consumer access the internet offered them. The internet immediately became a brand new, highly profitable sales channel for DTC brands and allowed them to cut out the traditional retail and wholesale middlemen.
The first direct to consumer brands like Warby Parker, Bonobos, Away, Dollar Shave Club and more were able to quickly scale their brands through digital channels and capture immense amounts of first party customer data. This ability to capture customer data allowed them to rapidly innovate and adapt their products, customer experiences and brand positioning.
The direct-to-consumer (D2C/DTC) market is expected to grow beyond $200 billion by 2024, a massive increase from $128 billion in 2021. Research from the International Trade Association also shows that 55% of consumers prefer to shop directly from brands rather than retailers.
While the direct to consumer business model isn’t exactly a transformational discovery, it still is driving significant change in the retail industry. The model existed all the back in the 1920s when apparel brands created an opportunity to sell products directly to their customers through their own retail locations.
In 2007, Bonobos, one of the original DTC brands, built an entire business focused on selling just one product directly to their customers through the internet and owned retail stores. The concept of direct to consumer has grown rapidly in recent years for two reasons: ecommerce growth and consumer behavior changes.
The direct to consumer model removes multiple steps and friction from the traditional buying cycle for the customer. This allows brands to provide better and faster customer experiences for loyal customers.
Originally, the direct to consumer business model was pioneered by early DTC brands like Warby Parker, Dollar Shave Club, Allbirds, Glossier and more.
The first DTC brands served a digitally savvy customer base initially and expanded to much broader audiences as direct to consumer become more adopted.
D2C Growth Across The World
According to the International Trade Administration, ecommerce sales are expected to reach over $5.5 trillion by 2027. Retail locations and wholesalers are beginning to feel the pressure of ecommerce. Shoppers are slowly starting to no longer venture to physical locations to discover products and shop.
Brands are also ditching the retail and wholesale channel in favor of the direct to consumer model. It’s difficult for brands to stand out in-store when their products are surrounded by hundreds, if not thousands, of similar products. This drives brands to quickly adopt the direct to consumer business model to grow and stand out.
Nike, a traditional wholesale and retail-focused brand, saw 15% of their total revenue coming from the direct to consumer model in 2010. But in 2023, Nike’s overall direct to consumer revenue grew to 43.7% and is predicted to scale beyond 60% by 2025.
Consumer Behavior in D2C
Nowadays, consumer expectations are higher and harder to meet than ever before. If retailers are not able to deliver exceptional customer experiences, then customers will not shop with them anymore. The competition has grown rapidly and the barriers to entry have become significantly less in recent years.
Consumers are now craving personalized experiences, messages and products. Consumers also want to feel personally connected to brands and feel like they’re buying from another human – not a big retail store. This is partly why DTC brands have been so successful in recent years and taken market share from legacy retailers.
The direct to consumer business model works exactly as it seems: DTC brands sell products directly to their customers through their website, digital channels or owned retail locations. Then, customers will receive the product directly from the brand - no intermediaries involved.
The whole process is owned by the brand and the customer, with the brand taking full control over the customer experience and the fulfillment process for orders. The direct to consumer business model relies on building strong customer relationships and creating personalized experiences that prioritize the customer.
DTC brands show a true understanding of shopper pain points and consumer preferences. Many brands use discounts, loyalty programs, robust product reviews, and user-generated content to build customer relationships and drive long-term customer loyalty.
Why Do Brands Go D2C?
Brands adopt the direct-to-consumer (D2C) model to take full control of their operations, bypassing middlemen like wholesalers and retailers. This approach allows them to have direct interactions with their customers, gather first-hand data, and build stronger brand loyalty. The rise of e-commerce, combined with the desire for better margins and the ability to personalize both products and customer experiences, has made D2C an attractive option for brands looking to scale quickly and efficiently.
The direct to consumer business model allows brands to build direct relationships with their customers. This direct engagement leads to a better understanding of customer preferences, enabling brands to tailor their products, services, and marketing strategies more effectively.
Control Over Brand Image and Customer Experience
Brands have complete control over their branding and customer experience. This control is vital in maintaining consistency in messaging, presentation, and customer service quality, which can strengthen brand identity and loyalty.
Data Collection and Personalization in D2C
D2C models enable brands to collect first party customer data. This data is invaluable for personalizing marketing efforts, optimizing product development, and improving customer experiences based on real insights.
Higher Profit Margins
Eliminating intermediaries in the supply chain can reduce costs and increase profit margins. Brands can save on retailer or distributor margins and invest more in product development, marketing, and customer service. D2C brands can also be more agile and responsive to market trends and consumer feedback. They can quickly implement changes in products, pricing, and marketing strategies without the need to coordinate with third-party retailers or distributors.
Subscriptions, Memberships and Marketing
The direct to consumer model facilitates innovative add-on models like subscriptions, memberships and product customization. DTC brands that offer these benefits are able to strengthen customer loyalty and relationships.
The growth of e-commerce and digital marketing tools has made it easier for brands to reach consumers directly. Online platforms like Meta, Google, TikTok and Snapchat offer scalable and efficient channels for marketing, sales, and distribution.
A lot of top brands use a wide range of different Shopify apps to power their tech stacks and improve their Shopify SEO. You can browse the best 500 Shopify Apps right here (and see what brands use them).
Unlike traditional models where retailers handle customer acquisition, D2C brands must actively drive traffic to their websites. This is typically done through organic search (SEO), social media, and paid advertising. Social media, especially among Gen Z, is crucial for building brand awareness, while paid ads provide quantifiable insights for optimizing acquisition costs.
For D2C brands, every customer interaction is a direct touchpoint, which makes it vital to focus on these strategies to get potential customers to their websites.
Influencer Marketing
Partnering with social media influencers like YouTubers, TikTokers, and Instagrammers is an effective way to reach new audiences - especially when you link to customized landing pages or shops. Influencers in your product space can provide a significant boost in visibility and credibility, introducing your products to their followers. This approach is akin to a media buy but aligns well with the DTC ethos of cutting out middlemen.
Referral Marketing
Utilize your loyal customer base as brand evangelists. Referral programs incentivize existing customers to spread the word about your products, creating a powerful word-of-mouth marketing campaign. This strategy can organically grow your customer base and enhance brand loyalty.
Leveraging Customer Feedback and Reviews
Displaying transparent customer feedback and reviews, including negative ones, on your ecommerce platform and product pages builds trust and authenticity. Respond to negative reviews to provide context and manage customer expectations. Honest feedback helps set realistic perceptions of your products and can guide future improvements.
Paid Social Customer Acquisition
Paid social is essential for D2C ecommerce growth. Platforms like Facebook, Instagram, and TikTok give brands precise targeting options to reach the right customers based on their behavior and interests. It’s a direct way to drive traffic, build awareness, and convert users into paying customers.
The focus should always be on strong creative and offers that resonate with the audience. Retargeting is especially effective for bringing back visitors who didn’t convert the first time. Constantly testing ad creatives and refining targeting helps maximize returns.
Paid social also gives us valuable data on how customers interact with our ads, which informs future campaigns. Lookalike audiences are another key tool—allowing us to efficiently scale by targeting new customers who resemble our best buyers.
D2C Packaging - Is It Important?
D2C packaging is more than just a delivery vehicle—it’s an extension of the brand. Well-designed packaging enhances the unboxing experience, creating memorable moments that encourage social sharing, particularly on platforms like Instagram.
Custom packaging also reinforces brand identity and can even reflect the brand’s values, such as sustainability. Additionally, packaging designed with the end customer in mind can be cost-effective, while still adding perceived value to the product.
The direct to consumer (D2C) industry is experiencing several big changes in recent years, largely driven by evolving consumer preferences, technological advancements, and shifts in the marketing landscape.
DTC brands are also starting to place a greater emphasis on enhancing the customer experience. This includes everything from improving website design and functionality to offering personalized customer service. Brands are leveraging data to understand customer preferences and behaviors, enabling them to tailor their offerings and communication strategies.
While the D2C model offers great control, it comes with operational challenges, including customer acquisition, distribution, and scaling. Brands must handle fulfillment, shipping, and returns, often competing with established retailers. Effective digital marketing and solid logistics strategies are essential for success, though they can be quite expensive.
While the DTC model inherently focuses on selling directly to consumers online, many brands are expanding their presence through omni-channel strategies. This includes pop-up shops, permanent brick-and-mortar stores, and partnerships with major retailers. These strategies help brands increase their visibility, reach a wider audience, and provide consumers with more ways to interact with and purchase their products.
Leveraging Ecommerce Tools
Technological advancements are playing a crucial role in the evolution of the DTC industry. Brands are using artificial intelligence (AI) and machine learning to enhance personalization, from product recommendations to customized marketing messages. Brands are also leveraging AI and automation tools to drive real operational efficiency in their business - if you can integrate AI and automation into your D2C brand properly, then perhaps you don't need as big of a team and can automate a significant portion of your operations. This allows you to scale further and faster with less.
Product Innovation and Diversification
To stand out in a crowded market, DTC brands are continuously innovating and diversifying their product offerings. This includes limited edition releases, collaborations with influencers or other brands, and expanding into new categories. Brands are also focusing on creating high-quality, unique products that meet specific consumer needs and preferences. One of the key benefits of the D2C ecommerce channel is that you get direct access to your customers. This allows you to acquire direct feedback from them and have your customers themselves dictate your product roadmap.
Data-Driven Decision Making
Data is at the heart of the D2C model, enabling brands to make informed decisions about everything from product development to marketing strategies. Brands are investing in data analysis tools and expertise to gain insights into customer behavior, market trends, and operational efficiency. Since D2C brands are native to ecommerce, data and analytics are at the forefront of everything they do.
Community and Brand Loyalty
DTC brands are focusing on building communities and fostering brand loyalty through engaging content, exclusive offers, and personalized experiences. By creating a sense of belonging and connection, brands can encourage repeat purchases, positive word-of-mouth, and a strong brand advocacy among their customer base. Having a dependable community can also help brands drastically lower their customer acquisition costs over time and get rapid product feedback.
Several direct to consumer (D2C) brands have made significant impacts in various categories and built themselves into global brands. But a lot of D2C brands are facing some serious headwinds, especially the D2C brands that are publicly traded. Some of the biggest and most well-known D2C brands include:
Warby Parker offers stylish, high-quality eyeglasses and sunglasses at affordable prices. Their glasses start at $95, and the company also provides a free Home Try-On program that allows you to test five pairs before making a purchase. They sell blue-light lenses, progressives, and other lens options to suit various needs.
Warby Parker was founded by students from The Wharton School who were frustrated by the high cost of glasses. By designing their own frames and selling directly to customers, they disrupted the traditional eyewear industry, providing an affordable alternative. Additionally, for every pair sold, they donate a pair to someone in need through their Buy a Pair, Give a Pair program. Since launching in 2010, Warby Parker has distributed over 15 million pairs of glasses globally.
Casper focuses on making high-quality mattresses designed for better sleep. Their products are engineered to address sleep issues like overheating and discomfort. The brand offers various options, including their signature "The One" mattress, hybrid mattresses with advanced support, and Snow Max mattresses for cooler sleep. Each mattress is rigorously tested and comes with features like breathable foam, zoned support, and pressure relief. Casper provides a 100-night risk-free trial, free shipping, and easy financing options to make purchasing seamless.
Dollar Shave Club makes grooming simple and affordable. With high-quality razors, handles, and shaving creams, they offer everything you need for a smooth shave. You can bundle products to save more, and every order over $18 comes with free shipping. Plus, they offer a 30-day money-back guarantee. Their razors are designed for comfort and precision, and they offer a variety of grooming kits for different needs, from skin care to gym essentials. Join their club for easy, convenient shaving and grooming at home.
Dollar Shave Club is known for their viral D2C marketing video featuring their founder Michael Dubin. To this day, Dollar Shave Club's original marketing video is still one of (if not the) most popular advertisements ever made. The video has 28,000,000 views on Youtube alone.
Glossier is all about creating beauty products that make you feel good in your own skin. With a focus on skincare first, they offer simple, effective products that prioritize healthy skin, like their famous Milky Jelly Cleanser and Balm Dotcom. They believe in enhancing your natural beauty with makeup that complements, not covers, your skin. Glossier’s approach is all about celebrating individuality and making beauty accessible with playful colors and straightforward packaging. Founded from the community and real-life feedback, their motto is clear: Skin First. Makeup Second™.
Everlane offers premium, ethically produced clothing designed to last. The brand emphasizes Radical Transparency, openly sharing the true costs behind each product, from materials to labor and transportation. Everlane partners with top-tier factories around the world, focusing on ethical practices such as fair wages and safe working conditions. They source high-quality materials like Grade-A cashmere and Peruvian Pima cotton to create timeless, long-lasting pieces.
Everlane’s mission is to make sustainable choices easy by prioritizing ethical production and durable fashion, steering clear of fast fashion trends.
Away creates travel products that are practical and stylish. Their suitcases and bags are made with durable materials like polycarbonate and nylon, built to last through frequent use. Every item has thoughtful features to make traveling smoother, such as easy-to-maneuver wheels and organized compartments. Away focuses on blending functionality with a sleek design, offering products that help travelers move with ease while keeping everything in order.
Conclusion
The D2C model has changed how brands sell to customers. By cutting out retailers, brands can control their customer relationships. This allows them to create personalized experiences and improve their products faster. As more people prefer to shop directly from brands, D2C will keep growing. With tools like e-commerce platforms and data analytics, D2C brands have more opportunities than ever to succeed.
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