Businesses increasingly have to be sensitive and come up with business methods to reach customers more deeply. To change the distribution of products through many intermediaries, businesses / companies have applied the D2C model to sell directly to customers. And this model has proven to be effective for many businesses. So what are the characteristics of the D2C model? What is the difference between this model and traditional models, please follow the article to get the answer right away!
Learn what is the D2C model?
D2C stands for Direct to Customer, which means direct to customers. The D2C model is known as the direct sales model of products from the seller to the buyer through the business’s website or at the store itself.
The D2C model has eliminated distribution through intermediaries such as wholesalers/wholesalers, retail stores, brokers, etc. Some business lines that have shown high efficiency when applying the D2C model include: cosmetics, fashion, home appliances, etc. These are usually compact products, customers can experience and learn about products on the online environment.
The normal D2C buying process will be customers accessing the direct distribution link of the brand’s products and placing an order. After that, the staff will call to confirm the order and exchange some necessary information between the seller and the buyer. Finally, the order will convert to successful order status.
In the world, the famous shoe brand Nike has successfully applied the D2C business model. Currently, in Vietnam, fashion brands such as Juno, Canifa, Saffron health care products, LG Cosmetic cosmetics, etc. are also applying this model.
The significance of the D2C model for businesses
This direct-to-customer business model is showing a very fast growth rate, about 34%, and reaching 13% of the total e-commerce market . So what is the meaning of the D2C model , why should this model be applied?
- D2C helps businesses keep close relationships with customers. Moreover, it can make it easier for businesses to collect and manage customer data more closely. Then you will get more intuitive and accurate feedback. With these genuine contributions, it helps to improve our business processes to satisfy the “gods”.
- More than 40% of customers want to buy products in the form of D2C and 81% intend to buy again according to Shopify ‘s survey . Therefore, it can be seen that the D2C model in the future will continue to grow and play an increasingly important role in the worldwide retail industry in general.
- In Vietnam, businesses are now moving towards digital transformation , applying technology to business activities. Thereby, businesses when applying D2C to directly reach customers, cut marketing costs, especially in the distribution stage. Therefore, the model will help connect customers closer to businesses, reduce the influence of distribution intermediaries and optimize profits.
Opportunities and challenges of the D2C model in business
Through the concept of what is a D2C model and its meaning, surely you are very interested in understanding in detail the opportunities and challenges when choosing this business model? Indeed, besides the positive effects on the development of businesses in the new technology era, the D2C model still has many outstanding challenges that company / business owners need to face.
Development opportunities from the D2C . model
“Knowing people know me, a hundred battles a hundred wins” so before going to the challenges that you need to face, let’s take a look at the promising scene of the future D2C model.
- Helping businesses save a large amount of money when they have to find middlemen to distribute, not having to discount commissions for intermediaries. And the D2C model also helps to avoid conflicts between distribution intermediaries.
- Help customers have more confidence in the product because it is distributed directly from the manufacturer, avoiding buying fake goods. Since then, businesses can limit the cost of brand advertising and control goods in the market.
- Businesses can collect a large amount of customer data, capture their preferences, behavior, and consumption habits to perform the most effective remarketing . Or when customers are not satisfied with the product, businesses have a database to analyze, improve or innovate the product that best suits their needs.
- Enterprises can control all interaction activities and the entire process of providing services to customers, without worrying about unprofessional distribution intermediaries affecting customer psychology.
- Businesses can identify touch points with customers, collect information about the shopping experience.
Challenges when applying the D2C business model
To have a more comprehensive view of the D2C business model, you cannot ignore the challenges and difficulties it brings such as:
- For businesses that have just converted to a D2C business model, it is necessary to unify the customer experience from production, distribution to pre-, during and post-purchase care. The customer experience must be truly complete at every stage, avoiding “the head of the elephant and the tail of the mouse”, a mistake in one step can affect the entire reputation of the brand.
- For newly established businesses and immediately apply the D2C model, the D2C model requires large capital to invest in the Online sales system (website, fanpage, e-commerce page) and Offline (system of stores). retailer’s products, etc.).
- Competition among brands in the same industry will increase.
The development of D2C does not exist on a theoretical basis, but it has been effectively verified by the numbers sent by Viet Bai Xuyen Viet as above. Nike, HIMS or Away are famous brands that have successfully applied the D2C model. How about you? Once you understand what the D2C model is as well as the opportunities and challenges it brings, do you dare to try?
Please note that in order to be really successful with it, you need to prepare a source of capital to avoid the risks caused, and to own a solid source of knowledge about the D2C model in particular, or general business knowledge. Don’t forget to follow me for more useful information!