Why DTC Model is a Better Choice for Small Businesses?
Large retailers potentially generate $100 million in annual revenue mainly because they have switched to a DTC model for sales. The DTC system, which stands for Direct-to-Consumer, is a model where manufacturers or wholesalers build customer relationships by selling directly to customers.
The DTC model eliminates the need for a middleman such as retailers by interacting directly with customers. Large retail brands such as Nike, Tesla, Bonobos, and Harry's have incorporated more of the DTC model into their marketing strategies. And these large brands are focusing on establishing more direct brick-and-mortar stores while simultaneously building their eCommerce presence.
Nike, for example, has experienced a $9.4 billion increase since it switched to DTC sales in 2015. If large businesses can make substantial revenue by interacting with customers directly, small businesses can do the same.
Why Are More Brands Using the DTC Model?
More brands are gravitating toward the DTC model for the following reasons:
- Consumers Want Direct Purchasing: Consumers have always held power over the marketplace, and the age of eCommerce has only amplified that power. Consumers could, potentially, make or break a brand with social media, especially with bad reviews traveling faster than good news. Consumers want direct purchasing to have clear interaction with those responsible for product manufacture. Direct purchasing allows consumers access to first-hand information about the product creation process and access to manufacturers for complaints.
- Omnichannel Commerce: The DTC model allows small and large businesses to market their products through different means. By eliminating the middleman, businesses are open to more physical and online storefront interaction with consumers. The DTC model allows brands to set up a limitless eCommerce store that consumers can access via smartphones, desktops, and laptops. Omnichannel commerce creates room for consumers to have access to their favorite brands anywhere they are. It makes shopping on the go to another level.
Why is the DTC Model Better for Small Businesses?
Independent research conducted by eMarketer showed that the DTC model generated $17.8 billion in the eCommerce market in 2020. The research proves that consumers continue to choose direct buying over purchasing from middlemen. Consumers preferring direct interaction with product manufacturers is one of the many reasons why the DTC model is better for small businesses. If that is not convincing enough, below are more reasons why the DTC model is better for small businesses.
- DTC Model Creates a Better Consumer Experience: Consumers want a better and seamless shopping experience — whether through traditional or eCommerce stores. The DTC model provides a better consumer experience by establishing communication pathways. Businesses previously relied on retailers to ensure that consumers have a satisfactory shopping experience, but the DTC model changes that and provides businesses a say in the consumer's experience. With the DTC model, businesses can employ tactics to ensure that consumers satisfaction is guaranteed with each sale.
- DTC Model Extends Market Reach: Businesses can launch new products faster by creating testing groups within a specific audience range with the DTC model. The feedback process of the DTC model is relatively faster than middleman businesses. With the DTC model, small businesses quickly understand consumer expectations and dissatisfaction with the products. It is easier to implement the required changes as a small business because you are not catering to the interest of retailers and the company board.
- DTC model Allows Brands to Collect Data: The DTC model provides small businesses with consumer data. The data that these eCommerce businesses collate can help tailor personalized consumer shopping experiences and increase consumer satisfaction.
- DTC Model Enables Brands to Build Direct Relations with Consumers: The DTC model provides small businesses the opportunity to create a perfect brand image in the eyes of consumers. A persuasive brand experience can foster loyalties with consumers. Most consumers want to feel a connection through their sales without communicating with an automated response system.
- DTC Model Improves Overall Profit Margins: Businesses that go through retailers tend to lose out on profit they could be enjoying with the DTC model. The DTC model eliminates the middleman and increases profit margins. To be marketable to retailers, businesses would reduce the price of the products. Retailers would sell the products to consumers at a higher price, making more profit than the manufacturers themselves.
The DTC model shakes up the traditional retail market by encouraging more eCommerce-based presence over physical storefronts. This model is inclusive to small and large businesses but is better for small businesses as it provides them with a chance to build a strong customer base. The DTC model relies on digital marketing, and small businesses can key in on this with the right eCommerce developer like AllValue.
AllValue is an eCommerce software tool under the Youzan Group, dedicated to creating a thriving eCommerce market presence for business owners. AllValue handles all aspects of eCommerce, such as website creation, product procurement, creation of payment platforms, and multi-channel marketing.
The features of AllValue show that the brand can use the DTC model efficiently and scale up small businesses. Success as a small business does not have to take years. Begin your DTC experience today with AllValue, where your business values are our business values.