D2C, a commerce model where the manufacturer of a product is also the retailer, is not a fad, but a growing and lucrative trend. The U.S. D2C market was USD $128 billion in 2021 and is expected USD $212.9 billion by 2024, a growth rate of 66%. D2C brands that sell everything from shoes to underwear to hair coloring are disrupting the traditional retail model—and gaining market share—over brands that have enjoyed market dominance for decades.
D2C e-commerce sales in the U.S. from 2019 to 2024—Source: Statista
Warby Parker, one of many companies that are nailing D2C, sells stylish, affordable glasses. They have a socially responsible mission—to provide accessible vision care for everyone—which appeals to their customers. They initially launched in 2010 as an online-only retailer, but now operate in over 200 physical locations throughout Canada and the U.S.
As of March 2023, Warby Parker had a market capitalization valued at USD $1.1 billion. While this is a small percentage of the USD $170 billion global eyewear market, it’s big enough to make an impact in the eyewear sector and demonstrate the potential of D2C models.
In this article, we'll address the importance of D2C commerce for traditional manufacturers and retailers, including what it is, why it's beneficial for both customers and businesses, and how to create a D2C marketing strategy. Our aim is to illustrate how legacy manufacturers and retailers can begin building a sustainable D2C brand clearly.
D2C commerce is a retail business model that involves selling your products directly to consumers through your website and other (mostly digital) channels. With D2C, you don’t rely on third-party retailers, distribution partners, or wholesalers to sell your products to the end customer. This gives you more control of your brand image and messaging, pricing, marketing, and customer relationships.
Here’s an overview of what you’ll need if you want to start a D2C business or implement a D2C strategy with your legacy brand:
While D2C companies have been around for a while, the concept of direct-to-consumer retail has seen an explosion in recent years, driven by changing consumer habits and preferences. Today’s shoppers are drawn to authenticity and purpose, making it harder for legacy brands to compete with emerging brands like Warby Parker through traditional channels.
Because of this, the D2C commerce model offers some distinct benefits compared with the traditional model that uses middlemen to get goods from the manufacturer to the consumers.
D2C commerce offers some distinct benefits compared with the traditional model that uses middlemen to get goods from the manufacturer to the consumer. These include:
Making the transition to a D2C model can be challenging for legacy brands thinking about how to start a D2C business. Traditional companies typically face hurdles around adopting new technologies, managing customer expectations, and building trust with younger consumers. Knowing what brands are going to D2C—and being successful—is a great motivator. Companies like Nike, Patagonia, and PepsiCo are embracing D2C (and crushing it).
Challenges include:
D2C commerce has been around for more than a decade. As noted above, Warby Parker launched in 2010 as an online-only eyewear brand. Other brands like Everlane (a clothing retailer), Mamaearth (organic skincare and beauty products), and Allbirds (wool footwear loved by tech nerds) were launched in the early to mid-2010s. The success of these companies demonstrates that there are effective approaches your traditional brand can employ when strategizing how to start a D2C commerce business.
Purpose and value—informed by customer feedback—are what guide D2C strategy and inform innovation. Consumers want brands to care about the same things they care about. In a survey of 30,000 consumers by Accenture, 63% of respondents said they preferred purchasing from companies that “stand for a purpose that reflects their own values and beliefs.” These same respondents said they actively avoid companies whose purpose doesn’t align with theirs.
D2C helps you identify and align with what your customers care about. It’s like a perpetual feedback loop. Selling directly to consumers allows you to better (and more quickly) understand their needs. You can then adapt your products and approach to meet those needs. By successfully connecting your brand to a need or purpose (or both), your products and company become meaningful to your customers.
Real-world example: In 2022, Nike’s D2C division, Nike Direct, accounted for 42% of Nike’s total global brand revenue. Nike obviously wasn’t a fresh-faced startup. They leveraged their 165 million social media followers to expand into the D2C commerce space. But it wasn't just about reach. Nike has been able to lean into its brand mission and purpose, which is “to do everything possible to expand human potential” to create a unique brand experience that resonates with customers.
According to Deloitte, 70% of digitization initiatives fail because of people, not technology. Even when companies get it right, it can take several years before a company successfully competes in the digital market. Pivoting or expanding to D2C is a long game and that requires commitment from your company's leaders.
Expanding into D2C commerce requires a significant shift in your company’s business model and culture. D2C relies on the right technology and company infrastructure to support this selling approach, but it also requires you to have a customer-centric business model. That's why you need buy-in from executives, board members, team leaders, and everyone involved in driving your company’s culture.
Real-world example: Coca-Cola has been experimenting with D2C commerce by expanding online platforms like Coca-Cola En Tu Hogar ("Coca-Cola in Your Home"), which was launched in Mexico during the pandemic. The platform allows Mexican customers to order products directly from Coca-Cola for at-home delivery with no minimum purchase amount required. To support this service, Coca-Cola needed to fully digitize its legacy call-centre system, a huge initiative driven by Enrique Negrete, Coca-Cola's DTC LATAM Senior Director. In 2021, Negrete received Adobe's coveted Experience Maker of the Year award for the program. The award is given to individuals whose leadership in the areas of marketing, advertising, and commerce demonstrate exceptional creativity, innovation, and impact.
A top must-have for achieving breakthrough growth in D2C commerce is having the right talent and skills in place to support D2C. According to McKinsey, misalignment of talent and culture can create roadblocks, delays, and misunderstandings - all of which can derail your D2C goals.
When looking to fill in skills gaps, it's important to consider hiring an experienced D2C leader while giving existing team members the information they need to develop and execute the new initiative. Providing the right training and upskilling helps your team navigate the nuances of selling directly to consumers and ensures you'll develop a sustainable D2C marketing strategy. Also, when hiring for new roles, make sure to use a values-based approach when recruiting.
Real-world example: Patagonia, a pioneer of selling directly to consumers, has been successful in expanding its existing D2C commerce business by hiring people who share their values and mission of trying to save the planet. Anti-consumerism is a core marketing strategy for the company, with its billionaire founder pledging to give away ownership of the company to support initiatives that combat climate change.
Patagonia also recently purchased startup D2C brand Moonshot, a snack company that uses regenerative agriculture to manufacture its crackers. In this case, Patagonia already had a strong D2C technology infrastructure which includes their website and retail stores. Their acquisition of Moonshot demonstrates that a commitment to values-based talent and culture is essential to competing in the D2C commerce space.
It's important to align your retail channels and distribution partners with your D2C strategies, particularly since some partners may feel threatened when a traditional brand pivots to the D2C space.
You can work with retail distributors and merchants in several ways to reduce anxiety around your D2C initiative. Make sure to inform them about your initiative and incorporate ways to work with them. One way to do this is to give your retail partners exclusive merchandise and let them offer discounts on certain items which aren't offered on your D2C channel.
You can also demonstrate how your D2C channel helps sell more of your products, for example, by launching new products on your website, gathering data, and then rolling them out to retail partners after price and viability are proven.
Real-world example: Nike, again, is a great example here. They made a major bet on the potential of D2C when they launched their Nike Direct e-commerce platform in 2017. To avoid alienating their retail partners, they worked with them to co-create a seamless omnichannel experience for customers and have seen tremendous success as a result. Nike made USD $18 billion in total sales in 2022. Their sales from D2C were 42% of that. This proves how successful a company can be when both D2C and traditional channels are aligned.
A strong online presence starts with the right commerce technology and this is particularly important if you're already selling directly to consumers from physical stores. An omnichannel commerce platform that connects inventory, fulfilment, customer data, and analytics is essential for managing orders across multiple channels.
Technology also helps you understand what works best for your customers when it comes to product discovery, online marketing campaigns, social media strategies, content management, and customer service. Over time, you'll be able to use your D2C to optimize your approach and create a truly customer-centric D2C business that delivers personalized experiences to customers regardless of how (or where) they interact with your brand.
As we touched on above, your online presence extends to social media platforms which increases brand awareness and lets you engage customers with content that is authentic, relevant, and meaningful. A strong social media presence also enables you to respond quickly to customer feedback and quickly address customer questions and issues.
Real-world example: Casper, a mattress manufacturer, is a great example of a D2C brand that's using its strong online presence to be successful in traditional retail spaces. They use the content on their website and social channels to promote subject-matter expertise around sleep, comfort, and all things mattress-related. They give customers a $75 amazon gift card and a 10% discount for every successful referral, which motivates people to share reviews and stories. They post customer testimonials in ads and on social media, which connects their social media presence to their website. Casper now sells pillows and sheets through Target, and they have over 60 retail stores, most of which are located in the U.S.
D2C commerce presents an exciting opportunity for traditional companies to increase sales and build customer loyalty. We've touched on many of the strategies that traditional companies can use to be successful in the D2C space. To figure out the capabilities you need to start a D2C business, it's important to assess your goals and resources to determine the best course of action. From there, you can start planning and executing a strategy that works for your business.
Traditional retail companies and manufacturers looking to drive eCommerce capabilities can browse some of the topics in our eCommerce Learning Directory. Our lessons cover eCommerce essentials and best practices focused on helping traditional organizations identify opportunities, understand shoppers, and meet consumer expectations around D2C experiences.
