For many years the end-to-end delivery of a product from the manufacturer to the customer involved a multi-stakeholder value chain comprising manufacturers, distributors, logistics enterprises, retailers, and other stakeholders. In recent years, an alternative model is emerging, which involves the centralization of value chain activities around a single company. It is the Direct to Consumer (DTC) business model, which is giving rise to the notion of DTC brands. DTC brands control the entire value chain of product manufacturing and delivery, including marketing, sales, and other consumer-facing activities.
Most DTC players were established during the past decade, when many DTC brands entered the consumer-packaged goods space. Leveraging the DTC approach various successful startups managed to disrupt incumbents with a new business model that sells products direct to consumers at a lower price point and with a better customer service experience. Nowadays, the DTC model is becoming very popular due to its ability to serve customers better than legacy value chain models. At the same time, DTC brands seem to have a bright future, as they will leverage modern digital technology to provide further improvements to the customer experience. Specifically, they will use a combination of data, automation, and human touch to accompany the customer beyond the initial transaction. In this way, direct-to-consumer brands and the DTC model will continue to grow and will disrupt the traditional retailing industry. This is already visible in the significant number of new DTC entrants, including famous companies like Apple which is now selling watches direct to consumers and Tesla which sells cars directly to its customers. These companies are aggressively positioning themselves in the direct-to-consumer space based on investments in Direct to Consumer Marketing and omnichannel outreach to their customers.
Direct-to-consumer brands and e-commerce sites will continue to shine and disrupt the retail industry. This will be largely due to their ability to limit distribution costs and to personalize interactions and relationships with customers. In this context, existing and prospective DTC retailers must look at optimal ways for deploying and fully leveraging the DTC model. In this direction, they must take advantage of multiple channels to address a variety of customer segments. However, they must also evolve based on proven best practices that lead to DTC success. These best practices include:
The future of DTC will be technology-driven. Specifically, recent technological advances will be used by DTC brands to improve their offerings and grow their revenues. Some of the most prominent examples of technology influence follow:
Overall, DTC brands are growing in popularity, as consumers turn away from traditional brands. This shift has focused on the interaction between consumers and the brands they buy. However, there are still some reservations concerning the DTC business model that companies need to address before a successful rollout. With technological advances and consumer trust, DTC brands will become able to relax these reservations and to ensure that their model will continue to grow in popularity.
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