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
Diego Banks :) 