For decades, producers have been avoided dealing with sales to customers. The situation has changed due to dynamic e-commerce development. Recently, trading in the D2C (Direct to Consumer) model has become a very popular trend. The Internet has shortened the distance between the seller and the end customer, which has enabled producers to return to retail sales. It has resulted in significant transformations in the forwarding industry. Find out what D2C is about and how it affects logistics processes. Learn about the benefits and risks when you do not involve intermediaries.

What is Direct to Consumer?

D2C is eliminating any middlemen such as retail chains, distributors or wholesalers in your distribution process. It happens that the D2C sales channel is identified as the same as B2C (Business to Consumer). In both cases, sales take place directly to the end customer. However, in the B2C model, the seller may be a producer or an intermediary while in the D2C model the seller is also the producer of the goods offered. D2C is a subset of B2C.

 D2C sales often involve  a flagship store. The name comes from naval traditions, meaning the leading ship in the fleet  and refers to the most notable brand-owned retail store. It is a large, well-stocked, spacious shop. It is usually located in a big city’s high-end area. Its task is to offer customers an enhanced purchasing experience and to physically represent the retailer’s brand with its essence and key values.

The main disadvantage of the D2C sales channel is investment risk. You have to arrange forwarding and sales points and employ competent employees. For many manufacturers, this may be a very difficult challenge with a high risk of failure.

That is why producers used to choose the B2C model where they used the services of intermediaries. The development of e-commerce has enabled a change. Improved internet tools for trading make it easier for producers to establish direct trade relations with customers. Complex online stores (trading platforms) that do not require a brick-and-mortar counterpart  are perfect as flagships. Sales using social media are also developing better.

Direct to consumer e-commerce requires much smaller investments than a traditional physical chain of stores. As a result, the relation of potential benefits to costs becomes much more attractive.

What are the advantages of the D2C model in e-commerce?

The D2C model enables manufacturers to have full control over the offered goods and have direct contact with the customer. Thanks to this, they may enjoy the following benefits:

• better knowledge of customers – selling directly to customers you may obtain reliable information about their expectations and preferences which may enable better matching of your offer to certain groups of customers, faster reactions to changes in demand and knowledge of customers’ emotions and reactions during the purchase process (to be used to improve user experience);
• greater customer loyalty – better matched offers and good communication allow you to earn the loyalty of customers who may grow from being buyers to your  brand ambassadors;
• full control of your brand message – you control the form and content of brand communication: you create your own image and shape relationships with customers.

Close partner relationships with customers improve the authenticity of your message and the credibility of the brand which may result in increased sales volumes.

D2C in logistics

Using the D2C sales channel translates directly into changes in logistics. Warehouses are subject to the most significant changes. They must be prepared for completing orders and handling returns (reverse logistics).

Expanding the functionality of a warehouse has become a widespread practice. They are no longer just places for storing goods and completing orders, but also retail outlets. Showrooms, where customers can examine products on site at the manufacturer’s facility are becoming very popular.

The Direct to Consumer model is beneficial, however, it also involves great challenges. The manufacturer takes over the management of the entire forwarding process: packaging, shipping, returns and storage of goods. D2C is best suited for selling exclusive goods. In the case of many companies from the fast-moving consumer goods (FMCG) sector, creating such  a sales channel from scratch may prove unprofitable. 

Communication is both the best opportunity and also the biggest challenge in all models where you sell directly to end customers. You can gain a lot  but also, due to order fulfilment problems, lose the trust of customers.