A large part of sales is increasingly taking place via e-commerce, the growth is steadily increasing, for companies digitization is no longer an option, but a duty for a long time. One of the options of the future is D2C e-commerce, the direct marketing of products to the end customer is forecast to dominate the market in the next few years.
What is behind it and why the forecasts are so good will be examined in more detail below.
A boom in e-commerce – D2C is on the rise
The world of shopping has changed permanently as a result of the Corona Pandemic. Many companies only became aware of the importance of digitization in 2021, and the number of new e-shops has increased more than ever in the last two years. The D2C distribution channel in particular plays a decisive role here. In 2021, around 46 percent of all consumers opted to buy brands directly online, without intermediaries, without leaving their own four walls. The main target group is between the ages of 25 and 34.
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D2C easily explained – what is behind it?
The D2C e-commerce model is based on the fact that manufacturers sell their own brands directly to consumers without detours. Intermediaries are completely dispensed with. The transaction must therefore be carried out directly by the seller. So far, one of the most well-known standards has been that goods were sold indirectly to the customer via wholesalers and retailers, the B2C model.
The task of the brand manufacturers was to find suitable intermediaries and then to go into large-scale production. In the B2C model, products are resold to retailers, and consumers go to the intermediary retailer to purchase the goods. There is no direct contact between manufacturer and consumer.
But now it seems as if D2C is becoming more and more important and in fact well-known brands are increasingly relying on direct sales. Millennials could be partly responsible for the trend reversal, as a recent study has shown. It is above all the young age group that can gain a lot from the new form of marketing.
Brand control back in the hands of the manufacturers
If a brand is sold through intermediaries, the manufacturer has little control over it. While packaging and marketing activities can be influenced, manufacturers have little or little control over how the retailer itself markets the product. While they can provide relevant promotional material and rent space in the hypermarket, it is still up to the retailers themselves to implement the instructions they want.
There is no way for the manufacturer to get in direct contact with the consumer, to get criticism, to get to know their needs and thus to find out for themselves which marketing strategies could be worthwhile. The move to D2C business puts control of active consumer engagement and brand messaging back into the hands of the manufacturer itself.
Innovations and opportunities that the D2C model holds in store for retailers
Retail distribution is always the same. Intermediaries prefer to use proven brands and products because they can assess the probability of sales. “Hot goods”, which have potential but are not yet predicted to be big sellers, scare many retailers and lead to hesitant ordering. A failure for the manufacturer, because when a new product is made, courage in retail is one of the prerequisites for positioning the brand.
In D2C sales, the manufacturer has the opportunity to carry out small test runs with new products and thus find out directly from the customer what potential there is. No manufacturer wants to risk a sales flop, but retailers have too often had the experience of failing after buying large quantities of a product. The possibility of finding out more about the interests and opinions of consumers themselves increases security for manufacturers.
In addition, direct access to consumers also involves the transmission of data. E-mail addresses, social media profiles and purchasing preferences make it possible for the manufacturer of certain products to optimize the existing offers and, from the customer’s point of view, to offer perfect goods that actually reflect the needs of the target group.
More opportunities in the market, more accessibility to products
Geographical constraints, which pose a problem for manufacturers as they distribute their product line to retailers, are completely eliminated with D2C distribution. Every manufacturer has the opportunity to sell their own product not only regionally, but nationally and even globally. This not only brings a significantly broader customer base, but also an associated increase in sales.
However, in order to actually be able to serve the needs of global customers, there must always be a reaction to inquiries. Strategies need to be optimised, buying behavior needs careful analysis, because only if the consumer himself does not experience any disadvantages in the D2C model will the new bond between manufacturer and buyer actually prevail in the long term.
Optimizing profits for manufacturers of certain products
If a manufacturer sells his product to an intermediary, he receives the goods at the purchase price. The retailer now generates the sales price, the actual producer only has the option of naming the recommended retail price. Direct sales means that the goods are not passed on at the purchase price, instead higher profit margins can be achieved. However, it is crucial for a long-term advantage that the sales figures in D2C sales do not decrease, but at least remain the same, if not even increase.
How successfully a manufacturer can bring its product lines onto the market and strengthen its own branding largely depends on motivation and marketing. Today it is more important than ever for consumers to consume transparently and to always have a contact person available if necessary. Buying from intermediaries is becoming less and less important, because queries or complaints are not always treated with the necessary care.
If the manufacturer now has the opportunity to react to the customer’s difficulties and thus achieve a strong bond, trust in the brand grows and with it the reputation. Since the competition on the market is becoming ever fiercer and more oppressive, there is hardly any alternative to D2C sales for success-oriented manufacturers if they are interested in positioning their own brand in the long term. The dangers that the retail trade will market its own product more poorly, but instead emphasize the competition, continue to grow almost parallel to the increasing variety of the offer.