WHAT IS A D2C DIGITAL BRAND AND 5 REASONS WHY THEY RULE

D2C digital brands are becoming nowadays a standard among small digital sellers. To define it in just four words, we can say that a D2C digital brand is basically the “disintermediation of digital commerce”. But to make it easier for non-english native speakers like me, let’s say it’s just the art of doing everything yourself. From conceiving the product or service to the delivery to customers, everything is integrated in one entity. This means having full control over branding and strengthening the capability to develop an emotional connection with customers as a barrier of entry.

Knowing what is a D2C brand let’s move on to its 5 pillars, which I see as 5 competitive advantages of going for this model.

1. Customer experience.

Extremely important when operating in highly concentrated markets. It allows building a relationship with the customer from the very beginning. Having full control over the entire chain brings this type of businesses the possibility to fully customise the shopping experience for a specific target market (always ensuring that there is a significant Total Addressable Market). For this purpose, it is crucial to engage with customers and to adapt to their needs so we can become the most convenient choice. Also crucial is having a pricing strategy accorded to the experience provided and appealing in terms of value for money.

2. Differentiation

The internet is full of small businesses competing with large established brands, so strong differentiation is a must. Carefully studying the market to find the unique value proposition missing for a substantial number of people can guarantee success. Take Red Bull as an example (and I know Red Bull is not precisely a D2C brand :D), there are plenty of energy drinks focused on sports, but when you think of extreme sports, Red Bull is the first energy drink that comes to mind. Red Bull has become part of this community by sponsoring events, professionals and initiatives which are meaningful for extreme sports fans and has invested profits into a media platform that connects this growing community. However, there is no need to have Red Bull vast resources, it’s all about having the storytelling that connects you with the community. D2C digital brands have an advantage over traditional brands as they have the same online tools to build strong relationships, but don’t have their overheads. Besides, these brands have expertise in the best channel to target small market niches, digital commerce.

3. Growth and defensibility

Digital commerce is a fast-paced sector, where digital business can grow fast and shut down even faster. That’s why having full control over the entire chain and delivering an outstanding experience is crucial in order to not just grow but also retain customers.
Keep in mind that building a strong sense of community around the brand will not only increase repetition but also turn loyal customers into brand ambassadors. This way the business guarantees sustainable growth with increasing marketing margins and strong lifetime value. In other words, happy customers don’t just buy more often but they also speak well of the brand, thus bringing in new customers at a cheaper CPC.

4. Profitability

Owning the process end-to-end translates into maximum flexibility in terms of costs. Obviously, this is not possible for all types of products and services but it does work with the most common stuff we can get from the internet. The biggest advantages of D2C digital brands in terms of costs are:

1. Maximum control over the inventory as the brand controls production and logistics.
2. As well as the savings on physical stores and retailers margins.

5. Scalability

From the sales perspective, not depending on opening new stores or signing deals with retailers makes the business more scalable. Another important factor for the business scalability is its inventory capacity which requires resources, good logistics and capital, thus attracting investment is crucial. Of course, potential scalability varies depending on the type of product or services being sold.
To conclude, I believe these 5 pillars, which make up what is a D2C, are actually 5 competitive advantages against most of the big brands out there. Obviously, D2C digital brands are limited in terms of total sales comparing to any big name, but what really matters is that they can compete in the same field (the internet) and achieve higher customer lifetime value with a much smaller marketing budget. That’s because D2C build solid relationships with their customers that allows them to grow organically, just like traditional business used to do.

 

If you found a mistake or you have any concern don’t hesitate to comment, all points of view are welcomed.

 

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Source: Customer Love Framework: what we look for in digital brands

 

Techno-Human Intelligent Systems:

 

The title of this post might sound like some sort of new sci-fi movie but sadly is just a new business term, an interesting one though.

 

To get started, take a look at the past, when successful businesses were focused on creating internal knowledge through applied sciences in order to develop new technologies and to be more efficient than their competitors. Now look at the current context of rapid changes and fast paced environments, traditional rational-based principles and technology assets are essential but insufficient. New gadgets and the internet have made technology and knowledge incredibly accessible, making it very hard for companies to keep innovation within the organisation walls as a competitive advantage. On today’s open environment, applied knowledge is openly shared and new technologies are quickly available for anyone to market them. Thus, competitiveness relies more than ever on the creativity needed to turn all the knowledge and technology available out there in outstanding products and services, effective business models and innovative business solutions.

As rational knowledge and technology assets alone are not enough, it is necessary to integrate them with the emotional features of human life and understand that emotions play a fundamental role in the organisational life and in the pursuit of business excellence (Schiuma Journal of Open Innovation: Technology, Market, and Complexity (2017)). Technologies guarantee efficiency and control, while emotions bring creativeness, art and personality. The integration of the latest technology, the available rational knowledge and human emotions is what is called Techno-Human Intelligent Systems. Emotions refer to the feelings and artistic thoughts of employees or even stakeholders in general, well managed emotions can bring innovation into the company. We are not just referring to the kind of innovation based on new technological enhancements. Emotions can produce disruptive innovation, effective business models, new approaches to markets and a resilient brand image, all determinants for business success.

Take as an easy example Apple, they haven’t been the first ones to market most of their devices, but they have developed a relationship between their products and their users emotions. Apple has a focus on how technology can intersect with humanities, and they encourage their employees, as well as their customers to be emotional and to turn their emotions into art by using their products as a tool. What they have achieved is embracing all this creativity into to their brand and into the organisation, what allows them to make their products stand out for their aesthetics and creative features.

Other tech companies like Google or Microsoft encourage creativity among their employees as well, but they are far more open companies that share their projects before they’re finished and complete them with external help. They follow what is called Open Innovation, consequently, as their products are already public while being under development, their launching doesn’t get the initial impact that Apple’s products get. However, as Microsoft and Googles’ new devices are polished and gain market share, they increase their aesthetics and creative features as well.

 

Feel free to leave any comment.

Shenzhen

The maker movement

From a fishing village to the biggest manufacturer of gadgets in the world, Shenzhen has radically changed in half a century. A Chinese region which once had less than 300.000 inhabitants, today has millions. It is said that this city could have over 20 million inhabitants, but that is something difficult to estimate due to the high number of commuters. Indeed Shenzhen is incessantly growing; driven by its buoyant economy, the city is becoming one of the main business centres in China.

Its fast-paced environment is characteristic of Shenzhen. Indeed, this is evidenced in the velocity in which new products can be not just manufactured but also created and launched to the market in this region. Because Shenzhen is no longer just a poor manufacturing city, it is becoming a place for innovators. That being so, “The maker movement” is the best example of what can be done by its unquenchable work force. Employees at manufacturing factories have learnt a lot from churning out gadgets for notorious brands. And although at first they had just been using that knowledge to produce cheaper copies of these gadgets, it did not take long for them to realise what they were capable of. Today, numerous inventions are launched every month in Shenzhen, a city driven by incessant “makers”.

Using large companies’ creations as the base for their own creation allowed manufacturers to thrive. Because the use of existing products to improve them or come up with new stuff is part of “The makers movement”. However, not everybody welcomed this movement with enthusiasm. Large corporations like Samsung, Apple and so on received it as a threat. If truth be told, these employees are using corporations’ intellectual property for their own benefit, something not allowed in Western countries. Nevertheless, there is nothing to be done to stop these outsiders who are now calling western entrepreneurs attention. Tech corporations know the importance of adaptability in this industry. Fighting against something that seems to be the new tendency is wasting precious time that can be used for adaptation. In fact brands like Apple or Microsoft are embracing the idea of Open Source which allows consumers to be more than users, and to become creators. And at the same time Open Source makes it easier for companies to find new ideas, because these are given directly by their customers.

What started in Shenzhen as a way to survive, producing forgeries could become a point of inflection for the tech industry, in which established brads had to choose between competing or partnering mere individuals thinking outside the box.

I wrote this post based on a very interesting documentary from The Wire. Here is the link: Shenzhen: The Silicon Valley of Hardware (Full Documentary)