The unprecedented growth of India’s e-commerce industry over the last few years at a CAGR of 19.24% says a lot about the state of consumers and businesses. A deeper investigation has revealed that the industry is embracing digital-first D2C (Direct to Customer) brands. Around 800 new-age brands have eliminated the role of middlemen. The D2C business model has seen a massive uptick in popularity among the general public.

With young startups challenging established giants in the Indian market for decades, it will be interesting to see how it progresses toward the $100 billion D2C opportunity. If you intend to enter this market, it is critical that you thoroughly understand the various aspects of D2C e-commerce. Let’s dig into the world of D2C.

What is D2C e-commerce?

D2C, i.e. Direct-to-Customer, is a business model where the manufacturing company produces its products and distributes them through various channels. They can sell on their websites, mobile applications, retail stores, factory outlets, or other e-commerce platforms like Amazon or Flipkart. Businesses can also sell on social media, for example, Instagram, Facebook and Whatsapp.,

All online ways of selling products via websites, apps or online shopping sites count as e-commerce.

In short, only the manufacturer exists in the supply chain of the D2C business. The D2C model eliminates the need for wholesalers, retailers, and other middlemen in the supply chain. This reduces the reliance on the third-party marketplace. Hence, D2C is a model where the brand reaches the consumers directly. Besides manufacturing and shipping their products, D2C companies also handle marketing, sales, and customer service.

D2C commerce enables brands to enter a market quickly without facing entry constraints such as distribution and sales costs. With the rise of e-commerce in the country, many businesses have taken advantage of the opportunity to cut out the middlemen and sell directly to their customers at a higher profit margin.

New brands can benefit from the D2C commerce model to jump on board while existing brands can broaden their reach by selling directly to customers. In either case, the core proposition of D2C brands revolves around providing consumers with direct product access.

Why do D2C e-commerce Business Models Work? Know the Benefits! 

D2C business models work because it connects the manufacturer directly to the end customer giving total control of marketing and sales strategies. Therefore, the benefits of D2C e-commerce stores are-

• Cost savings: Cutting off middlemen will reduce the distribution and selling costs, thereby, increasing the profit margins of the manufacturer. The commission paid to other parties for supply and distribution also decreases. Furthermore, the availability of social media channels contributes to lower costs per customer acquisition. Therefore, D2C brands have a higher chance of becoming profitable early on.

• Better Understanding of Consumer Behaviour: As manufacturers deal with customers directly, manufacturers can better gauge customer preferences through the customer database from past sales.
• Command over the Value Chain: If you make a product, you must first figure out how to get it into traditional markets. Since visiting every local store to place your products for sale is neither feasible nor economically viable, you would prefer something that breaks the usual pattern of doing business. You have complete control and ownership of D2C e-commerce. The products manufactured can be branded better as the manufacturer will himself be responsible for products to reach the target customer. You do not have to rely on retailers to establish long-term relations with your customers.
• Brand Visibility: Brand visibility will be higher as competition and comparability from other products on your own website will not happen. Due to the brand presence on various channels, customers can connect through various channels. This is an excellent opportunity to establish brand reach and build a large customer base.
• Low Entry Barriers: A supply chain of any product in a traditional B2C model changed many hands. The manufacturer sells it to a distributor, who then sells it to a retailer, and finally, it reaches the customer. Between all of these stages, the success and reach of your products are determined by each middleman’s effort to push your products out for sale. They are less likely to be motivated to sell it further if they do not see good profit margins. D2C commerce enables brands to enter a market quickly without facing entry constraints such as distribution and sales costs.

Challenges & Downsides of a D2C e-commerce Model

While there are many benefits of the D2C model, there are a few cons, like fierce competition from other brands and large retail chains that are already well-established in the market. Also, businesses now have to multitask in terms of sales, branding, marketing, logistics, and customer relationship teams rather than focus on manufacturing. Some of the downsides of D2C e-commerce and the challenges that they face are 

• Fierce Competition with Well-established or Local Stores: It is challenging to battle these retailers who have a lot of experience in product sales and market reach. Not all retailers want a D2C brand selling similar products in their category online. 

• Order Completion

D2C brands frequently struggle to fulfill the orders received directly from their customers due to logistics and the time taken to ship their orders. In contrast, local retailers and marketplaces provide instant delivery.

• Development and Maintenance of Technical Infrastructure

A proper technical infrastructure must be put in place and maintained for any D2C e-commerce business to succeed. This can be particularly challenging for new D2C businesses.

• High Marketing Costs

Although the D2C model allows you to broaden your horizons, implementing an effective marketing strategy requires significant investment.

D2C E-commerce vs Traditional B2C Business Model

The table below compares the differences between selling products through the traditional business model to selling products through a D2C approach:

Parameters	Traditional B2C model	D2C e-commerce model
Supply chain model	The product from the manufacturer reaches the wholesaler, distributor and retailers who then sell them to the consumer.	The manufacturer directly sells to the consumer without any intermediaries.
Costs involved	High due to the involvement of middlemen	Lower as middlemen are eliminated
Profitability	Low because net profit is less after high costs	High because net profit is more after lower cost
Access to consumer data	Lacks access as various distribution stages are involved	Direct and easy access to the customer data as the manufacturers directly sell the products to the consumers.
Online Marketing impact	Not significant because the majority of sales are made in retail stores.	Significant impact because it relies on online traffic for sales.

FAQs:

What is the difference between D2C vs B2C?

D2C is a model in which the manufacturer directly sells to the consumer without any intermediaries. B2C, however, follows the traditional supply chain where the product from the manufacturer reaches the wholesaler, distributor, and retailers to sell to the consumer. B2C can also involve third-party marketplaces like e-commerce platforms.

Does D2C complicate a business process for the manufacturer?

The D2C model is not as simple as B2C, but when compared with long-term benefits, the D2C model is better. With increased profit margins and direct control of the brand, the D2C model is not very complicated. The first step is to choose the right platform, set up a shop, marketing and branding, working out logistics and customer service will help build the brand much better under the direct control of the manufacturer.