What is ‘Direct to Consumer’?
‘Direct to Consumer’ is a bit of a buzzphrase in Ecommerce, and has been for the last 3 or 4 years. Sometimes you’ll see it written as ‘D2C’. The basic concept is: Rather than creating products to be sold through Amazon, or Walmart, or Tesco, or any other retailer, some brands start up to sell directly to consumers themselves, cutting out distributors and third party retailers.
Is selling direct to consumers a new thing?
Actually no – it’s not new at all. The history of commerce is in ‘direct to consumer’ – craftspeople, farmers, fishermen, creating, growing, and catching produce to sell directly to those who would consume their goods.
As commerce industrialised, and mass marketing took hold, much of this remained, but an increasingly large share of the market became taken up by distributors, and resellers: Buying goods from the originators, passing them through ‘the channel’, to retailers who sold products from hundreds or thousands of similar originators.
Then how is this different?
The ‘D2C’ category is a very loose category, defined organically by people working in companies where they felt they were creating a new model, and by venture capitalists who wanted to group a particular type of company, and by writers and marketers who like to categorise things to make it easier to talk about common elements between them.
Whereas ‘B2B’ (business to business) is a very clearly defined category, or ‘automotive’ is quite a clearly defined category, ‘direct to consumer’ is a little looser, and companies one person would consider to be D2C may not be naturally thought of as such by someone else.
Generally when people speak about D2C brands, they tend to have a few commonalities:
- Usually, these brands launch with a single product, or within a single narrow category containing just a few products.
- Usually, they start up selling directly via the web.
- Usually, their intent from the start is to sell direct to consumers & primarily stick with that sales channel. For example: Dell is not a D2C brand, as their aim is selling directly to businesses rather than consumers. For example: Levi’s is generally not spoken about as being a D2C brand because they sell vast amounts through third party retailers, as well as direct. (even though, of course, their long history begins with Levi Strauss & Jacob Davis selling riveted jeans direct to consumers).
- Usually, they have a heavy brand focus. For example, a company selling generic craft supplies would usuall not be spoken about as a D2C company; a startup launching a narrow range of heavily brand-led pens sold direct via Instagram ads pointing to a Shopify store on the other hand likely could find themselves written about as a hot D2C startup.
‘Direct to Consumer’ is interesting for manufacturers, as it offers them the opportunity to bypass retailers and sell their brands directly. As retailers buy at a much lower price from manufacturers than they sell to consumers, this offers much higher profit per unit sold.
(for example, if a manufacturer makes a razor for 10c, and sells it to a retailer for $1, and the retailer sells it to the end consumer for $5, the manufacturer makes 90c per razor. If the manufacturer makes the razor for 10c, and sells it direct to the consumer at $5, they make $4.90 per razor. This ignores the complexities of selling direct, but illustrates some of the appeal).
Example D2C Brands
The Internet Advertising Bureau (IAB) put together a list of 250 D2C companies they consider to be D2C brands. As this is essentially a category defined by its constituents, we thought we’d include that list here as a useful resource to be able to click through and understand some of the common elements between them, as well as some of the facets that make them different.
Alcohol Direct to Consumer Brands
Apparel/Fashion DTC Brands
Clique Media Group
Fame & Partners
Five Four Group
For Love & Lemons
Frank & Oak
Lolly Wolly Doodle
Ministry of Supply
Monica & Andy
Mott & Bow
Rockets of Awesome
Shoes of Prey
The Black Tux
Automotive DTC Brands
Food and beverage DTC Brands
Dirty Lemon Beverages
Halo Top Creamery
Home & Appliances DTC Brands
Boll & Branch
Everything But The House
Keetsa Mattress Store
Tuft & Needle
Function of Beauty
Harry’s Razor Company
Oars + Alps
Revitin Natural Toothpaste
Rodan + Fields
Walker & Company Brands
GeneralRetail DTC Brands
It’s worth noting that there are a few strange ones in the list there. For example ‘FarFetch’ is listed, when really FarFetch is a marketplace/reseller. Most of the ‘retail’ section above is similar: Perhaps that helps indicate how loosely people use the phrase ‘direct to consumer’ – two large respected bodies (the IAB, and Dun & Bradstreet) put together a list of the top 250 ‘direct’ brands, and even they have included some who don’t neatly fit the category.