Deep Dive into Global D2C Brands: 5 Brands Making A Difference
Blog: MattsenKumar Blog
Over one-third of online buyers have bought products from a D2C brand in the recent past. The practice of manufacturers selling directly to customers is gaining popularity. To build upon the momentum, 78% of Global D2C brands have increased their marketing budgets.
The advent of evangelical technology and the grand success of online selling has enabled brands to go solo. With decreasing dependence on marketplaces, D2C sites are now taking center stage. A study suggests, 55% of users prefer buying it directly from the brand rather than marketplaces. Customer pain points like seller malpractices, logistic challenges, and payment frauds are prime reasons why users are flocking towards D2C stores.
What is A D2C Brand?
D2C, aka Direct to Consumers, is a business model used by companies that produce/manufacture their products and sell them directly to customers. In such business models, there’s no place for marketplaces, intermediaries, and affiliates.
A D2C brand invests in product innovation, design, and manufacturing. It builds a distribution channel unlike marketplaces, where manufacturers store their products at warehouses and marketplaces to take care of packaging and shipping. D2C brands are revolutionizing the online shopping experience because it is banking upon the shortcomings of B2C stores.
A D2C brand can decide to sell across or on selective channels only. Some of the top channels D2C brands are leveraging are:
A Full-Fledged Online Store: Often built upon Shopify or Ship-rocket, small businesses are now making their e-commerce store. Such theme-based stores can be designed, up, and running within days.
Social Media: Both Facebook and Instagram now allow businesses to sell their products. In fact, with WhatsApp pay becoming popular, companies can now showcase catalogs on WhatsApp and take orders, receive payment, and provide customer support through it too. So devise an effective plan that allows you to market products on Facebook, take charge on WhatsApp, and you won’t need an e-commerce store.
Retail Stores (Hybrid Model): When Amazon started expanding in India, it realized that involving retail stores will increase its reach and simplify product deliveries. Banking upon the existing practices, D2C players are now going hybrid model, where they have stores in cities from where they receive huge orders.
Here’s an example, AllBird, a D2C brand, has its store in Boston. The large spacious store boasts of minimalistic design and offers an exceptional shopping experience.
Pic Courtesy : boston magazine
What are the benefits of D2C E-commerce?
Well, why D2C is a genuine question. Everything that D2C offers was already available on all leading marketplaces. Fulfillment facility, escrow payments, catalog support, quality seller experience, incomparable product management, and e-commerce analytics for further growth.
If we look closely, we can identify reasons why global D2C brands decided to go solo instead of selling on popular marketplaces. But, it won’t be wrong to say, all that is wrong on the market is right on D2C stores.
No Cap on Number of Products: Leading marketplaces do not allow sellers with a lesser number of products to sell on their platform. Amazon is perhaps the only among the top players that will enable sellers with just one product, even if it’s a self-published book, to sell on its platform. All the other leading brands want sellers that have at least 5-10 products to start with.
No Monopoly of Resellers: All popular e-commerce stores have their preferred reseller partners. These partners import products on behalf of e-commerce stores to avoid legal complications. As a result, small sellers are coaxed to sell their products through these resellers.
No More Shadow Ban: When operating with limited capital and small team, bootstrapped organizations fail to match the speed of global giants. Many marketplaces cancel orders if they are not shipped within 72 hrs. In the future, an account of sellers who fail to ship 3-5 products is banned or put under a shadowban. The only option left for these sellers is sending their inventory to the fulfillment center or selling through an experienced reseller. Either way, marketplaces make money, and small brands lose out on numerous opportunities.
What are the Challenges of D2C E-commerce?
D2C model is gaining momentum because it can be applied to all industries. For example, in multiple countries, wine manufacturers have started selling directly to the client, enabling end-users to acquire quality products at a discounted price.
While the developing business model is promising and expected to double its customer base in the next five years, some challenges need to be addressed. Getting rid of these challenges will allow global D2C brands to offer users an experience similar to Amazon or Flipkart.
Credibility Management: Customers buy products on Amazon and Flipkart by relying on their brand, robust return policy, and quality customer support. When brands decide to go solo, they need to build credibility first. Since these brands are unknown and websites are also new, customers will have a tough time trusting them with their credit card info.
Customer Acquisition: A good number of D2C brands first launched on Amazon, Flipkart, and Myntra before building their e-commerce store. By offering access to quality products at a discounted price, these brands built an unmatchable reputation and then started their dedicated online stores.
This route allows businesses to bank upon the reputation of existing marketplaces; once customers have used your product and are satisfied with it, they won’t shy from procuring it directly from your site. 50% of users prefer visiting brand websites before looking for products on marketplaces.
Retail Competition: The rise of e-commerce has coaxed small-scale retailers to improve their game. Now, these shop-owners are listing their products on e-commerce platforms, giving all global D2C brands a run for their money. Moreover, since local retailers are popular in a particular region and rely on the marketplace’s reputation to sell products, they have an advantage over the D2C players.
Customer Service: Offering quality customer support is a prevalent challenge for global D2C Brands. Many of these brands are either bootstrapped or functioning on series A funding, prioritizing investment in product management and innovation, leaving them with no funds to focus on customer service. Outsourcing customer support to players with demonstrated history can work in favor of global D2C brands.
Top Global D2C Brands
1. Casper: Bed-in-a-Box Startup
Casper recently debuted on Stock Market. In 2019, its valuation was $1.1 billion, but in the recent past, it has dwindled. Lockdown, reduced demand, and increased popularity of frugal mindset have affected the business.
Well, when Casper started, it disrupted a saturated industry. The mattress industry was ridden with big players that enjoyed monopoly without offering end-users many options. Earlier, people had limited products to choose from and a hefty price to pay for mattresses. The founders at Casper had their eyes on this over-valued market, and they wanted to do something about it.
Casper’s queen-sized mattress costs less than $1000, whereas industry leaders are very selling same sized bed for $3000. With no match to Casper’s product, these grumpy ole organizations were reliable on agents and intermediaries, which where the money went.
Here’s how Casper changed the game:
- Started selling directly to customers(D2C), minimizing the commissions
- Relied on consumer data collected directly from them
- Dictated their brand story according to their product and not price structure
- By building an inexpensive supply chain
2. Bonobos: The $310M Brand Started with a Single Pair of Good Pants
Bonobos started in 2007 with just one product. If they tried selling on leading marketplaces, they would have been asked to come with more products. But, again, taking the D2C route working in their favor, Walmart later acquired them for $310 million.
Even after the acquisition, Bonobos continues to be a D2C brand and operates independently. Today’s site houses many men’s clothing ranging from suits, pants, denim, trousers to shirts.
Bonobos became a household name by solving the following problems:
- Fast Checkout & Free Delivery: In 2007, free delivery and free return pickup were a distant dream. People had a tough time shopping online, especially apparel because they feared it didn’t fit well. Bonobos took the problem and solved it forever by offering fast checkout and free shipping.
- First Click to Brick Retailer: Yes, you read that right; Bonobos was the first D2C brand to establish a retail store. Bonobos diversified into retail after establishing an incomparable online presence. Retail presence has equipped the brand with hybrid capabilities, and now users can order products online and pick them up from the nearest Bonobos store.
- Bonobos Made Retail Very Personal: Bonobos called their support agents named “Customer Service Ninjas.” These individuals were hired to offer personalized support. The agents helped people identify the right product. They assisted users over the phone with size, color, and style. Later, these were incorporated in retail stores too, and now it is the brand’s identity.
3. Mamaearth: Beauty & Skincare Products
Mamaearth is a Natural skin product company that promises to plant a tree for every product they sell. The brand has gained enormous popularity in the recent past. After clocking 100 crore revenue in 2020, just after four years of inception, Mamaearth is now a household name.
For everyone who prefers natural skincare and beauty products, Mamaearth is a genuine option. The brand leads in manufacturing goods for skin and hair without relying on chemical ingredients.
Created by a couple in 2016, Mamaearth came into existence when Ghazal and Varun Alagh were expecting a baby. Their search for an herbal and chemical-free product made them realize the vast business potential. In 2020, Mamaearth crossed the 100-crore mark and was among the most sought D2C Brands.
Why is Mamaearth so popular?
- First Asian brand to get MadeSafe Certificate
- It relies on natural, plant-based, or manmade ingredients
- Caters to over 500 cities in India through their online store
4. Noise: Audio Products
Gaurav Khatri, one of the co-founders, is a trained commercial pilot. Gaurav and Amit started Noise in 2014 with an investment of $1 million. Earlier, the duo focused on selling intelligent phone accessories like covers. However, it was easier for them to get back covers of the latest mobile devices manufactured and imported with their counterparts located in China.
With e-commerce players like Amazon and Flipkart starting to host Flash-Sale in India during 2014-15, where millions of smartphone units were sold within seconds, the duo identified an opportunity.
Gaurav and Amit devised a plan, got their Chinese partners on board, and started selling in India. Within the first year, they become best sellers in the mobile accessories category. Today, Noise clocks a GMV of Rs. 25 Crore per month.
How Noise becomes a successful D2C Brand?
- Organized a market with vast potential
- Offered individual customers with the option to access customized products
- Enabled users to access quality products at affordable rates
- Leveraged “Original Design Manufacturers” tag as a marketing tool
Today, Noise is India’s number one tech wearable brand. The company today offers smartwatches, Bluetooth speakers, mobile covers, and a lot more products.
5. AllBirds: Shoe Maker
AllBirds address a prevalent challenge “sustainable shoes at an affordable price.” Earlier, popular brands continued to manufacture expensive shoes without considering the impact on the planet. People continued to consume these products with equal zeal affecting the overall health of the earth.
AllBirds decided to change the paradigm and ditch synthetic polyester for manufacturing shoes. The D2C brand started by making sustainable shoes from natural materials. During the initial days, the organization faced multiple challenges because there was no sustainable manufacturing unit or infrastructure.
Challenges Faced by AllBirds:
- Manufacturing sustainable shoes from scratch
- Making affordable, sustainable shoes
- Building supply chain to deliver directly to customers
- Stopping supply chain cost from affecting final prices
In an interview with Customer Strategist, Joey Zwillinger explains the benefit of the D2C brand “We can’t speak for the whole industry, but at AllBirds, our customers recognize that instead of paying a retailer to sell our products for us, we put that money right into the quality of every pair of shoes—this means that for a very reasonable price, customers can enjoy the excellent, premium materials that we use to make our products. We also believe that the feedback loop between our customers and us is critical, and the improvements we make to our product, as a result, resonate with our customers.”
Some of the highlights of AllBirds journey:
- Over 360 employees working at nine different locations
- $100 million in revenue during 2020
- Stores in New Zealand, the United States, & China
What Lies in Future for D2C Brands?
A decade ago, there were only a few D2C brands; today, over 400 such brands cater to customers directly. Moreover, with studies support the industry to double by 2025, we are all set to see more such brands. Here’s what the future looks like for D2C brands:
A Move Towards Retail: Like AllBirds and Bonobos, Mamaearth can also go the retail way. A retail store is nothing but an opportunity to bank upon the reputation through online stores.
First Cry is one similar brand that started as a D2C brand and now has retail stores in prominent cities of India.
Retail Goes the D2C Way: While D2C brands are eyeing retail stores, existing retail players acquire resources to build an online presence. A hybrid model is undoubtedly in for growing popularity. We are likely to order all our products online and pick them up in coming times while going to the office.
Innovation in Logistics: Unlike Flipkart and Amazon, not all online stores are blessed with the resources to start their own logistic support business and deliver products to all users. All D2C brands are relying on industry leaders to provide products on time. Shortly, logistic players will have to innovate, leverage trending tech like location-based delivery, drone delivery, and verification on point when picking up returned products.
B2B marketplaces are focusing on catalog management, e-commerce analytics, and product management to garner the popularity of B2C players. Similarly, global D2C brands have a long way to go. While they can bank upon leading marketplaces and build an online presence, they must focus on strengthening their online store too.
With affordable catalog expertise and other e-commerce skills, D2C players can build an individual presence and then focus on expanding to the retail segment. While the growth prospect is highly impressive and the willingness of customers to interact with D2C is also increasing, businesses have an enormous opportunity to build upon.
From here onwards, the only thing that matters for D2C brands is execution. How well they execute the already executed paradigms and how they garner maximum benefits of it. With outsourcing support from organizations with a demonstrated history like ours, D2C brands can automate catalog management, customer support, and product management.
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