Along with the development of SNS, etc., a business model called “D2C” is attracting attention. This time, I will explain D2C, which many companies including startups are entering.
In addition to the characteristics of the business model and the background of its increasing attention, it also summarizes the points you want to know when introducing it, so please use it as an introduction when incorporating it into your company.
Table of contents
- What is D2C business?
- Background of the popularity of D2C business
- Characteristics of D2C business
- Key points when starting a D2C business
What is D2C business?
D2C is an abbreviation for “Direct to Consumer”, which is a business model in which “the manufacturer conducts transactions directly with the consumer”. A D2C company refers to a company that sells products under this model.
In D2C, it is common to sell on your own EC site instead of retail stores or large EC malls. Some of them are sold at real stores such as pop-up shops and directly managed stores.
Since there are no wholesalers or tenants in between, there are no commissions, and direct communication with users is possible. One of the characteristics of many D2C brands is that they use social media (SNS) to communicate directly with users.
It is attracting attention as a global trend, and in Japan, many D2C brands are expanding sales, including apparel, household goods, home appliances, furniture, and food.
Background of the popularization of D2C business
The reason for the rapid spread of the D2C business model is that the proportion of millennials born between 1980 and 1995, followed by Gen Z born between 1996 and 2015, has increased among all consumers. increase. This generation is a so-called digital native who has been familiar with PCs and mobile phones since childhood, and is characterized by having no resistance to shopping on the Internet. We use social media on a daily basis, and collecting and sharing information has become a part of our lives.
In addition, the background of the shift in consumption needs from ownership to experience throughout the world has also boosted the development of D2C. Until now, we have encouraged people to purchase products by stimulating their desire to own things that are superior in quality and functionality. Today, there is a growing tendency to enjoy the consumption experience, including purchases, and place importance on the value of use.
D2C, which uses social media for marketing, has many brands that appeal to the world view of the brand and the background behind the creation of the product. It is. Another major factor is the development of EC platforms and SNS, which has made site management and PR easier.
Characteristics of D2C business
What makes the D2C business so different from the traditional product sales model? Here, we will explain the features of D2C.
Sell directly to consumers
The biggest feature of D2C is that it has its own sales channel centered on EC sites and deals directly with customers. Usually, when selling through large e-commerce malls, etc., it is difficult to pick up the voices of users, and the acquisition of information on their behavior on the site is limited.
On the other hand, with sales channels that you manage, you have full control over user behavior. In addition to being able to analyze user trends in detail, such as what kind of people purchase products and how often, it is possible to speedily reflect any points for improvement. In addition, since we manage everything from product planning to sales and shipping in-house, we can absorb real voices at each step.
Do content marketing
Another feature of the D2C market is that there are many brands that actively engage in content marketing. By regularly transmitting high-quality and fulfilling content that is beneficial to users, we aim to cultivate prospective customers, leading to purchases and contracts.
We distribute content in various ways depending on the brand, such as owned media, SNS, e-mail magazines, video and audio distribution. Content is also important as a measure to express the world view of the brand.
Sell goods cheaply
The D2C business model is basically a direct transaction between the brand and the user, without intermediaries. As a result, you can significantly reduce the cost of opening a store in EC malls and intermediate margins for wholesalers and retailers.
The lower the cost, the higher the profit margin and the lower the price of the product. One of the reasons why D2C brands are gaining popularity is that there are many inexpensive and high-quality products.
Sell stories and worldviews
Traditionally, many brands have sold products that are functional and of high quality. However, there is a limit to how much we can differentiate our products from those of other companies.
In D2C brands, in addition to the high quality of the product itself, the mainstream method is to sell it as a valuable consumption experience, including the story behind the development and the world view of the brand. In fact, many D2C brand sites and SNS clearly state why the product was created, and what kind of experience and lifestyle they want to offer by incorporating it.
Also, when going through a major e-commerce mall or retail store, there are cases where it is difficult to unify the world view or appeal the story. Compared to that, in D2C, the company’s own channel is the main channel, so it is easy to fully present the image.
Sellers will be required to build an attractive worldview that attracts users, and to master the use of owned media and SNS.
Buyers become fans
In the conventional sales method, buyers were positioned as customers of retail stores and EC malls. However, with D2C, the person in charge of the brand communicates directly with the consumer, so it is also a big advantage that it is easy to become a fan. In order to establish many points of contact with users, SNS comment sections and live distribution can be used.
If customers fall in love with the brand’s products and world view, the number of repeaters will increase, and LTV (Life Time Value), that is, “customer lifetime value” will increase. LTV is a term that refers to the total profit earned from a customer over their lifetime.
Even if you are a brand that handles large items that you rarely have the opportunity to replace, if you prepare peripheral products that match the world view, you can expect continued use.
Key points when starting a D2C business
In order to launch a D2C brand and put it on track as a business, it is necessary to hold down three points: “product selection”, “financing” and “attracting customers”.
First of all, it is important to select products that are suitable for 2C as merchandise.
For example, consumables that are expected to be used continuously are suitable for D2C because it is easy to encourage consumers to become repeaters. There are many options, such as products related to health management such as supplements, green juice, and Chinese medicine, cosmetics that must be replenished at certain times, and coffee and tea that people who like them drink every day. Don’t forget that these can be deployed as subscriptions (regular purchases).
At the same time as product planning, think about how to raise funds. In recent years, crowdfunding is also gaining popularity. Since it is a method of attracting fans by appealing the story and world view behind the product, it is a good match with the D2C business model, and it is also attractive that even start-up companies have a low hurdle to enter.
D2C products do not use retail stores or large malls, so it is important to make users aware of their existence. Consider attracting customers using owned media and SNS, and be conscious of product design that makes people want to spread the word.
Many brands are adopting live distribution, diffusion using hashtags, and marketing using influencers. At the same time, it is also important to choose the one that matches the characteristics of the product and the target audience from among the many SNS.
With the D2C business model, it is possible to directly incorporate consumer feedback and improve products and services that better match their needs. In particular, it will be a great advantage for consumer goods manufacturers and others to be able to communicate interactively with users. How about adopting a new style like D2C as a business that fits the times?