The direct-to-consumer business model has experienced tremendous growth in the U.S. and disrupted the economic landscape of large retail stores. The direct-to-consumer model allows companies to manufacture, market and sell products straight to consumers. By cutting the middleman out of the process, these companies often have higher profit margins, more control of their manufacturing and supply chains and better access to consumer data.
Although the direct-to-consumer model doesn’t generate as much money as retail in overall sales, consumer trends indicate it may be the way of the future. Public relations agency Diffusion PR found in their Direct-to-Consumer Purchase Intent Index that as many as 81 percent of Americans will make at least one purchase from a direct-to-consumer brand within the next five years.
Examples of Direct-to-Consumer Success
Many direct-to-consumer brand success stories have these three things in common: they deliver a high-quality product, provide excellent customer service and streamline supply chain costs. Effective and creative marketing is also a common factor among successful direct-to-consumer brands. Here are some examples of direct-to-consumer success.
Since its founding in 2014, Casper has upended the traditional mattress market with its streamlined product approach. After discussing the convoluted and confusing process involved with buying a mattress from a traditional retailer, Casper’s co-founders realized the market needed to be simplified for customers. Instead of offering hundreds of different mattresses, Casper offers only three, and it ships the products directly to the customer’s home.
The pain-free shipping policy added to a 100-day trial period and attentive customer service enabled Casper to become successful in its industry, having made the mattress-buying process easier and cheaper. An easy exchange process and affordable prices don’t keep Casper from being profitable, though. In fact, as of 2018, Casper had earned $600 million in total revenue.
To make its direct-to-consumer model work, the company focused on creative customer marketing. Jeff Brooks, the company’s chief marketing officer, felt that consumers were tired of in-your-face mattress adds on traditional media. Thus, Casper adopted a “whimsical” and “approachable” voice and ditched the traditional marketing routes. Casper sent trucks full of sleep pods to various cities so people could take a mid-day nap on its mattresses. In 2018, Casper took the campaign one step further and opened The Dreamery, a napping center in Manhattan where people can rent sleep pods for 45 minutes at a time. These campaigns promoted the company’s products while customers interacted with them directly.
For years, most companies treated socks as if they were a throw-away item. Until Bombas came around. Founded in 2013, Bombas sells socks through its website and other online retailers. Bombas’ founders spent two years before its launch designing the comfortable socks, and their sales numbers show that was time well spent. In 2017, Bombas earned almost $50 million, Business Insider reported.
With a direct-to-consumer approach, Bombas concentrated on promoting itself through email and digital channels. According to marketing company Email Aptitude, by focusing on the quality of the socks and the company’s social mission to donate socks to homeless shelters, email marketing revenue tripled between 2015 and 2016.
In addition, Bombas took advantage of new technological advancements to efficiently stay aware at every stage of the supply chain by partnering with Flexport, a web-based supply chain manager. Working with Flexport, Bombas saved time that allowed the donation of 1.2 million socks and saw a 90 percent drop in email exchanges regarding freight.
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Warby Parker undercut the prescription glasses market by offering unique designs at low prices, but it went further than other online eyewear retailers with its Home Try-On option. Customers can select up to five pairs of glasses to try on that Warby Parker will ship to their home. Whichever pairs they like, they keep. What they don’t like, customers can return free of charge.
Warby Parker uses its innovative Home Try-On offering as part of its direct-to-consumer marketing strategy. In their shipment of glasses, the company encourages their customers to post photos of themselves in their glasses with the hashtag #warbyhometryon so the community and Warby Parker stylists can weigh in on which glasses look best. This ensures user generated content is added to social media continually and adds a fun and helpful step to the buying process.
Thanks to a creative marketing strategy and delivering its product directly to consumers to try with no strings attached, Warby Parker earned more than $300 million in revenue in 2017, according to PitchBook.
Not only are digitally-native brands succeeding, but established brands have created direct-to-consumer sales pathways as well. Per projections from 451 Research, an IT research and advisory company, the e-commerce market will grow to $5.8 trillion by 2022, and major brands are taking note.
In 2015, Nike announced a goal of reaching $50 billion in sales by 2020, and to do so, it would be focusing on increasing e-commerce sales. Fashion of Business reported that direct-to-consumer sales accounted for almost one-third of Nike’s global sales in the 2018 fiscal year.
Nike isn’t the only one integrating direct-to-consumer strategy into the business plan of an established brand. Disney announced in 2018 that it was looking to break into the video streaming industry with direct-to-consumer options. As of early 2019, Disney offered additional sports offerings through a subscription streaming service called ESPN+. Later in 2019, it’s expected to launch a subscriptions service, which will provide consumers with Disney content they can’t find anywhere else along with numerous beloved classics from its film and television libraries. Moving into direct-to-consumer pathways is a new source of revenue growth for the company in the fast-growing streaming industry. A report from Grand View Research estimates the video streaming market will be worth nearly $125 billion by 2025.
6 Steps of Implementing a Direct-to-Consumer Model
Moving to a direct-to-consumer sales model is achievable for most businesses, especially if there is room to grow in the industry. Here are some key steps to follow:
1. Conduct Market Research
One of the keys to knowing whether a direct-to-consumer sales model is right for your company is what is revealed through your market research data. Determine if there are any market inefficiencies in your industry that you feel you can exploit. By better understanding your market and customers, you’ll know which products will perform best with a direct-to-consumer approach.
2. Create an Online Store
By providing consumers with an easy-to-use online store, you have something you can promote through your marketing campaigns. Using one of numerous free or reasonably priced website builders, brands can engage with customers online through a professional and reliable site.
3. Improve Brand Awareness
If you’re building your brand awareness, focus on digital marketing channels to grow your audience. Tap into what your audience values, and if you can, link that to your company’s unique products and mission in a helpful and unobtrusive way.
4. Provide Quality Customer Service
Few things generate more one-star reviews than poor customer service. By focusing on the customers, you’ll develop a returning base that leads to regular business year over year and will gladly recommend you to friends and family.
5. Control Supply Chain and Manufacturing
With more control over the end-to-end supply chain for your product, you can adapt more quickly to changes. With a growing direct-to-consumer brand, flexibility and awareness is essential when it comes to controlling your manufacturing process.
6. Learn More About the Basics of Direct-to-Consumer Sales
As you consider shifting company resources to a direct-to-consumer model, it’s important that you have a full understanding of your strategy and how it can benefit your company. Learning the principles of business management and leadership can make all the difference in the outcome of your direct-to-consumer attempts. One way you can learn more is by earning an MBA.
Point Park University, listed by U.S. News and World Report as one of the top regional universities in the North, offers a flexible online MBA. Our degree was designed for working adults. Our online platform that enables you to balance your education with your busy life. Study business strategies, management techniques, and more with professors with real-world knowledge.