Woolman

DTC! What is direct-to-consumer and why is it the next big thing in e-commerce?

DTC! What is direct-to-consumer and why is it the next big thing in e-commerce?

In the past few years observers of the e-commerce sector will have noticed a few American online retailers who have grown to be huge. Such stores as Allbirds, Warby Parker and Dollar Shave Club are familiar to many people working in online retail. They’ve already managed to change people’s consumption behaviour. 

In Finland, at least, these names are unknown to a wider business audience. You often hear the question: why should I be interested in someone overseas selling a lot online?

It’s an excellent question, but the answer is just as good: because of their business genius. Direct-to-consumer online retailers for the most part sell their products directly to their customers, without intermediaries. That means no resellers, wholesalers or distributors.

In this model, things are done differently, especially when we examine the retail structure. With no reseller or wholesaler involved, the product can travel directly from the store’s own warehouse to the customer without intermediaries. The model enables direct contact with potential customers. That means you can take advantage of customer data, for example when profiling potential new customers.

The brand calls the shots

The business model is interesting for several reasons. Firstly, with the help of this model, the brand owner can sell their products directly to customers. That way, the owner can directly control the range and product pricing. Put simply, they can sell the same product to the customer for less and make a better profit than if a reseller was involved.

Secondly, each sales transaction leaves a digital trail with the seller, and the seller can, if it wishes, communicate the customer directly.

Thirdly, this business model allows you to run the kind of store that would be financially too challenging to run using more traditional distribution channels.

But the model doesn’t bring automatic success: you have to be able to apply it correctly.

The most successful DTC retailers traditionally focus on one product or product group, for example. Many of them, such as Trunk Club, Barkbox and Quipp, have combined it with a new service model. A reasonably priced, monthly home delivery solves an everyday customer problem. A busy gentleman gets just the right outfit he needs right out of the package.

Moving the masses with a sensible amount

The most crucial challenge has traditionally been to attract potential customers to your store. However, the brick-and-mortar retail world is also going through the pain of this challenge. The media already speak of Helsinki’s “drying up fashion high street”, for example. Online, though, visitors alone leave a digital trail, which is more important than brick-and-mortar stores. This can be used to further develop customer acquisition.

From the Finnish DTC online retail perspective, the most challenging thing is to get large numbers of consumers moving for a reasonable cost. You will probably have to go after customers elsewhere, and this is where international customer acquisition expertise is needed. This expertise is unfortunately very limited compared to Swedish, German or Dutch e-commerce. If you’re thinking about starting your own DTC online store or developing existing e-commerce, don’t hesitate to contact us. Our experts will help you refine your store’s business.

Mikko Rekola, Growth hacker, Woolman

 Read more:

Subscribe to be the first to know