Of the many different business models, the D2C or Direct-to-Consumer model has rarely been the favoured route for the manufacturing sector. Most producers have been using an elaborate distribution network to reach their customers. However, this may finally be changing as D2C models catch on fast in India. With more and more companies now taking the online route for directly reaching out to customers, D2C may soon become the norm rather than the exception.
The recent growth of the D2C model is primarily fueled by the growing preference for online commerce. According to a 2020 report, there has been a 65% increase in brands developing their own website with a whopping 88% growth in order volume. This growing trend has received a further fillip during the pandemic. As the market was crippled by the lockdown, the internet came to the aid by providing both the producers and consumers a means to connect with each other. While we do not have the figures for this year, it is safe to assume that this volume has gone up further given that we are still staying in an online mode. In fact, one report expected online shopping to go up by 2.5 times in the next five years.
The D2C Revolution
There are many good reasons the D2C model picked up steam during the pandemic, coming to the rescue of a market severely immobilized by the repeated lockdowns. However, there are many other reasons for this model’s viability and success.
Exclusion of middlemen
Traditionally, most manufacturers have relied on a host of middlemen, including wholesalers, agents, distributors, and retailers for their marketing and distribution network. The obvious result of these multiple parties is the additional cost incurred at each stage, which ultimately drives up the cost for the consumer. The D2C model where companies can reach out directly to the consumers, cuts out all the middlemen, thereby removing distribution costs and increasing their share of the profit margin. It allows the producers to keep their costs at the most reasonable levels while consumers benefit from the lowered prices.
Evolution of omnichannel
Manufacturers who have taken the D2C route are seldom confined to the digital space. While some smaller producers may have started with a digital platform, most of them have expanded or plan to expand to physical stores as well. Hence, the emergence of the D2C model parallels the evolution of the omnichannel approach with more and more manufacturers now using both online platforms and offline stores to expand their base. As we move towards normalcy, these omnichannel will be further strengthened as consumers toggle between both the mediums when making their purchases.
Better turnaround time
One of the biggest advantages of the D2C model is the remarkably shorter turnaround time. The traditional model can take as much as 10-12 months from the initial production to the time it reaches the end customer. The longer time span is because of the multiple middlemen and associated approvals. In comparison, a company can start its online sale almost immediately after internal approvals. In fact, many producers also use the model for pilot projects, reaching out to a small group of customers for gauging market reaction.
A D2C approach narrows the focus towards the consumer. With no other stakeholders falling in between, the manufacturers have direct access to their end consumers. This allows them access to immense data that is not filtered through other parties. Many companies are leveraging technology to collect the data, track consumer behaviour, and analyse it. They can gauge consumer expectations, any rise or fall in sales, and collect direct feedback. Since, the marketing revolves completely around the buyer, it facilitates a consumer-centric approach, from improving user experience to investing and evaluating product innovation.
A boon for smaller businesses/sellers
For many small businesses and startups, this model has been extremely useful. Traditionally, a business’ success often depended on its ability to establish a network and nourish it by building relationships and offering incentives. This requires money, effort and time. D2C platforms cut down on all these intermediaries, streamlining the process. For small resource-strapped businesses, all it needs is a viable digital platform and some smart marketing.
While there are some obvious advantages of D2C marketing, it is not without its challenges. For brands to ace this model, they must leverage technology, not just to improve user experience, but also to facilitate their own operations, from data analysis to gathering consumer insight. As this space becomes more competitive, we will see greater personalisation with brands increasingly moving towards catering to specific consumer expectations. It’s a win-win where both manufacturers and consumers stand to benefit.
Views expressed above are the author’s own.
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