Direct-To-Consumer companies through new retail channels are driving two fundamental changes in the business models fueling next-level growth. 1) Offer shoppers ways to cut out physical store visits avoiding traffic, 2) Enable bypassing middle-man distributors. Innovation in DTC e-commerce and Omni-channel strategies is playing a key role in retail business sustenance and growth. DTCs primarily focus on designing and selling apparel, accessories, and many more directly to consumers through their own online channels. DTCs offer a superior shopping experience, higher-quality goods, cheaper products or greater convenience overcoming the constraints of incumbents monopolistic companies. Let us examine how DTCs enabling next-level growth with few use cases below.
1) Legacy companies usually sit on large profit pool and accustomed to doing business one way being constrained to pivot and think outside the box. Take a closer look at Warby Parker from its emergence in 2010 as it redesigned customer experience featuring home try-on and dramatically reduced price points as compared to dominant industry players. Warby Parker succeeded in establishing a business model to directly reach consumers.
2) Razor market is another classic example. As Gillette having cornered the retail market and established high price points, a DTC subscription model got emerged with upstarts like Dollar Shave Club and Harry’s which succeeded in bypassing the retail channel completely, which enable them to offer hugely discounted prices. And despite Gillette trying to play catch-up with its own DTC offering, its prices are still higher as compared to new crowd favorites.
3) Dental hygiene is a tough market, with just a few familiar consumer brands from which to choose. Goby has circumvented traditional distribution channels by aligning itself with dentists who have come to recommend the product. Goby is aiming to change that paradigm, offering the first subscription-based DTC rechargeable electric toothbrush that’s simpler and half the price of retail brands
4) Fresh start of DTCs enables them with innovative B2C marketing strategies. While Huggies and Pampers have been the diaper mainstay for generations, for example, Honest has been giving them a run for their money, thanks largely to its superstar spokeswoman and brilliant marketing tactics.
5) Take a look at Wine industry. Vying for customer attention with digital-first brands in a highly fragmented industry where brand loyalty is notoriously low. Penrose Hill, which is reinventing the wine club experience through homegrown wine brands offer improved value, selection and convenient delivery formats direct to consumers.
One key take away is DTC companies are less shackled by the legacy technologies, risk-averse cultures that large companies so often are, but on the other hand established players will need to do far more to emulate their DTC counterparts if they want to tap into high-growth market opportunities. The next post in this series focus on DTC business model innovations.