Direct-to-Consumer (DTC) – The Next Trend for Consumer Goods

DTC: A new Sales Model for Consumer Goods Brands

DTC, direct-to-consumer, refers to a business model in which brands directly sell to consumers without intermediary channels. With the help of the internet, brands establish direct connections with consumers and can directly interact with them along the entire lifecycle from marketing to service.

DTC brands are not simple e-commerce companies, even though e-commerce is a popular channel they choose to be closer to consumers. Brands are able to obtain real-time and efficient consumer feedback through internet platforms, so as to acquire consumer insights and carry out product innovation for manufacturing and marketing.

Take Chinese cosmetics brand Perfect Diary as an example: Through the analysis of Tmall data, Perfect Diary found that the eye shadow category is growing but does not have any leading brands yet. Therefore, it launched several eye shadow series co-branded with the British Museum, utilizing content marketing on social commerce to fast capture market share.

Reasons for a Rise of DTC, especially in China

• General development of e-commerce, social commerce, and livestreaming
• New consumer generation pursues personalized and diversified consumer demand
• With giant corporates accounting for majority of marketing share, new brands look forward to breaking the barriers acquiring customers through low cost
• Chinese consumers prefer e-commerce platforms instead of official websites: e-commerce and social commerce are more mature and integrated – however, social media are more diverse and fragmented, resulting in higher requirements for content creation

Operational Difference to Traditional Sales Models

• Traditional model relies on channels: Occupying a prominent position in the supermarket shelfing or widespread outdoor advertising were traditionally considered important methods to catch consumer’s eyes. However, complex sales channels bring challenge for consumer data acquisition.
• DTC mode is user-centric driven by data: DTC brands mostly adopt a OEM/ ODM model, focusing on product development, adjusting their marketing strategy by tracking consumers’ behavior, and intensively managing customers to increase brand loyalty.

Significance for Traditional Brands

Traditional large brands are accelerating their digital transformation to adapt to this emerging trend: For example, Nike, Adidas, and Lululemon emphasize the importance of consumer interaction and utilize digitization to directly interact consumers without intermediaries. On the other hand, DTC brands have also begun to penetrate more traditional channels such as offline retail channels: Pop-up stores and consumer-experience stores are generally their first step for market expansion. Besides, marketing initiatives have gradually shifted to offline and traditional media channels.

Therefore, with the acceleration of the digitalization process and the development of omni-channel sales, the distinction between traditional brands and originally direct-to-consumer brands will blur. Digital development is the future trend of the consumer goods industry, and a customer-centric sales mode will gradually tend to become mainstream.