E-Commerce Trends E-Commerce Sellers’ D2C(Direct-To-Consumer) Utilization Strategy_Part 1

There are key factors that e-commerce sellers must always consider for continued growth in the market. The first thing that comes to mind is the basic, maintenance and improvement of product quality, marketing depending on product type, branding, and increasing customer engagement. These innovative achievements can be achieved through the D2C (Direct-to-Consumer) business model, which directly impacts the business's continued growth. D2C is a type of existing retail sales B2C (Business-to-Consumer) model. It is a business model, distinct from the existing distribution method, that sells its products and services directly to consumers, bypassing intermediaries.

Many companies and brands are utilizing D2C or considering the adoption of D2C as a new business model. What makes the D2C most appealing is customer engagement. As is the case now, the biggest concern for companies and brands in the future is “how to drive customer engagement?” In particular, for e-commerce sellers who do business in an environment where direct contact with consumers is extremely limited, it is worth considering adopting D2C as a market expansion strategy model. In this content, we will learn what D2C is, D2C success strategies and cases, and the existing Amazon sellers’ D2C approach. Understanding D2C: A New Customer Engagement Business D2C refers to a business model where brands sell products directly to consumers through their own online channels without intermediaries. This approach not only reduces costs associated with intermediaries but also allows companies and brands to directly control customer experiences ranging from branding to pricing to customer service. ^[1][2][3]

Many companies and brands are already implementing the D2C model. The model is suitable for the digital-first era and it is what customers expect for a smooth and personalized shopping experience. Above all, thanks to the internet and digital platforms, brands can set up online stores easily without offline stores or various retailers, and sell products directly to customers through platforms like social media. Moreover, brands can directly collect customer data with digital tools and can provide personalized experiences, targeted marketing, and tailored products. These are particularly important factors in the digital-first era. At the heart of the continued growth of companies and brands is a deep understanding of customers. To that end, enhanced customer engagement is essential and the same goes for the future when AI becomes an integral part of our daily lives. D2C is a model based on customer engagement channels and this is why it is gaining attention as the ultimate business strategy at the moment. As more and more customers are shifting to online shopping, it is gaining a foothold as the most appealing strategy to existing brands and new companies when it comes to building a direct relationship with consumers and customers. ^[1][2][3][4]

Strength of D2C Model There are several reasons why the D2C model is quite appealing to companies and the following are four of them.

Control over brand experience: Brands can gain full control over message, pricing, and customer experience. ^[2][3][4] Through complete control, a consistent brand narrative can be crafted.

Ownership and personalization of data: The D2C strategy allows businesses to collect precious first-party data to understand customers better and provide personalized experiences. The data is valuable in the e-commerce world where personalization is the key to improving customer retention and loyalty.

Higher margins: By eliminating intermediaries, brands can retain higher profit margins. Financial advantage is particularly noticeable in a competitive market where the margin is often thin. ^[2]

Agility: Brands that implement the D2C model are likely more agile in responding to a market than existing brands. This is because they can quickly adapt to market trends, test new products, and respond to customer feedback. This agility becomes a valuable advantage in a rapidly changing e-commerce world.

When it comes to making D2C appealing and expanding its business for companies and brands, finding a novel solution is more difficult than any other. It is the way of the world that you have to lose something to gain something in return. When you want to apply a new model to a business, it requires a relevant strategy and the following budget execution. To run a sales system directly, a huge sum of an initial budget is invested, and fixed costs along with marketing costs to advertise sales channels should be considered. Besides, planning for the use of existing resources to avoid duplicate investments, preparing data obtained through the D2C model, and establishing strategic insights utilization methods could be quite demanding. Challenges Ahead for D2C Model Let’s examine four things to consider when adopting the D2C model.

Customer acquisition cost: One of the biggest hurdles of the D2C brand is high customer acquisition costs. Brands have to invest a lot of money into digital marketing, social media, and digital content in order to drive more traffic.

Logistics and fulfillment: Guaranteeing on-time efficient delivery is important in maintaining customer satisfaction. Managing logistics, warehouse, and fulfillment can be complicated and costly.

Brand trust and awareness: A new brand faces challenges in building brand trust and awareness when it applies the D2C model in the market. This is because it is essential to invest a significant amount of money into branding and customer service and spend time building in order to gain customer trust.

Customer retention: It is difficult to attract new customers in the D2C model so it is of utmost important to retain existing customers. To retain them for longer periods, something other than quality product is required. Brands have to establish a long-term relationship with customers by regularly communicating with them through email marketing, royalty programs, and outstanding customer service.

Building a Successful D2C Strategies Let’s examine three key factors for successful a D2C model.

Develop a strong Omni Channel: The fundamental of D2C strategy is a solid online channel. Brand website has to be not only visually appealing but also easy to explore, and have a smooth payment procedure.^[2] This means all the customer-related platforms, including user-friendly interface, mobile optimization, and brands’ social media activities, should be consolidated. As for Amazon sellers, replacing payment and delivery systems with Amazon Buy with Prime program can be one of the alternatives. Amazon Buy with Prime supports payment and delivery service using existing Amazon account so that consumers can shop on e-commerce websites other than Amazon just like shopping on Amazon. ^[6]

Personalized customer service through data utilization: The biggest advantage of D2C is collecting and analyzing first-party data. As mentioned earlier, the data is so valuable when understanding consumers in depth. Through the data, brands get to understand customers better and can offer tailored product recommendations, target marketing, and customized customer service. Personalization is vital in boosting customer loyalty and customer lifetime values. Amazon sellers can apply data-driven insights acquired from the D2C model in Amazon's business. As access to consumers’ and buyers’ data is extremely limited, Amazon sellers will find D2C personalized marketing most appealing.

Customer acquisition and retention: Attracting customers in the D2C setting can be costly. This is because D2C is a new model (sales website) without a customer base, just like a big marketplace. Investment is vital for brands when implementing efficient customer acquisition strategies. The strategies include SEO(Search Engine Optimization), collaboration with influencers, and advertisement. In addition, retaining existing customers is also very important. To that end, brands should be able to offer royalty programs, subscription models, and differentiated customer service from other marketplaces. ^[2][4][5]

Successful D2C Marketing Strategy To execute the D2C strategy successfully, the focus should be on an optimized marketing campaign. Let’s examine marketing strategies suitable for the existing D2C model.

Utilization of social media and influencers: Social media platforms are essential when D2C brands approach target customers. Platforms like Instagram or Facebook allow you to share brand stories and interact with customers in real-time. During the interaction process, product purchase occurs naturally. Collaborating with influencers is helpful when boosting new brand channel awareness and traffic. ^[2][6]

Content marketing and storytelling: Appealing content that can evoke empathy from target customers is the engine that can drive continued performance in the D2C model. Brands can deliver stories through blogs, videos, or social media postings and establish a high-loyalty community with a consistent narrative. Successful D2C brands are building trust by utilizing customer-created content.

Omni-channel experience: D2C is fundamentally online, but you can improve customer satisfaction if you provide omni-channel experiences. Some successful D2C brands test partnerships with pop-up stores, physical offline stores, or some retailers and offer seamless experiences, switching from online to offline.

Many e-commerce sellers are running businesses on Amazon. As the largest online marketplace, Amazon offers a wide scope of sales and convenience but direct control over customer experiences and data is lacking so there are some differences from the D2C model.

Let’s examine the differences between Amazon’s platform selling strategy and the D2C model, and find out the ways for e-commerce sellers including Amazon to apply the D2C model. Seeking for e-commerce sellers’ D2C strategy E-commerce sellers can utilize D2C strategy personally but there are differences between sales on Amazon and D2C. Let’s examine the differences and come up with some countermeasures. Limitations of the Amazon platform

Control over customer relationships: In the traditional D2C model, brands completely control the customer journey from customer acquisition to support after sales. However, Amazon's control is greatly limited. Amazon manages customer service and delivery and owns key customer data.

Brand experience: Brand experience is all about creating consistent and personalized experiences. Amazon provides tools to build brands but it is only done within the Amazon framework. This limitation hinders us from providing unique and immersive experiences of the specific brand.

Ownership of customer data: The key advantage of D2C is to collect customer data, and seek out tailored suggestions and product improvement through analysis of the data. However, on Amazon, sellers have limited access to customer data. This is because Amazon directly manages customer relationships and is in charge of customer service and communication. Thus, sellers can only do personalized marketing and have limitations in establishing direct relationships with customers.

Marketing and promotions: E-commerce sellers can increase traffic by utilizing Amazon ad packages and other promotion tools. However, this is only done within the Amazon ecosystem by complying with Amazon policies and its algorithm. We can hardly expect direct control over customer’s shopping journey by companies and brands.

Applying the D2C model in the Traditional Amazon Platform There are two approaches for Amazon sellers to implement the D2C model by utilizing currently available resources

Build brand stores on Amazon: Amazon sellers can build their own brand stores on the platform. Through this, sellers can release products while reflecting their own brand identity. It is similar to the D2C approach in terms of bypassing intermediaries and delivering brand stories directly to consumers. From the D2C perspective, the biggest strength of Amazon's store is that the ad of competitor’s products is not involved and it is the only realm where sellers’ products can be exposed.

Amazon’s utilization of fulfillment services: Amazon sellers handle logistics, packing, and delivery using Amazon’s FBA (Fulfillment by Amazon). As mentioned earlier in the previous section, Buy with Prime is the external extended version of the FBA service. The objective is to expand the service so that you can purchase products sold on Amazon can be purchased on the brand site. This allows the brand site to operate the payment and delivery system stably and makes it easier for Amazon members to shop.

Amazon sellers’ D2C Hybrid Approach To efficiently implement a D2C strategy when selling products on Amazon, sellers can select a hybrid approach. When various direct channels are utilized including Amazon and brand e-commerce sites, a broader D2C model can be implemented. Operating own brand(e-commerce) sites other than Amazon Operating an e-commerce website along with selling products on Amazon marketplace simultaneously can be seen as an important strategy. This approach helps resolve customer access limit issues on the Amazon platform. Brands can have complete control over customer experiences on the Amazon website and this enables optimization of customer interaction. Collected customer data can be utilized in implementing true D2C strategy including personalized marketing, royalty program, oligopoly-driven product development.

If the cost of establishing and maintaining your own e-commerce website is burdensome, a good alternative could be to focus on increasing interaction and engagement with consumers by operating it as a brand site without a sales function. For instance, you can increase customer loyalty by encouraging customers to experience branded content and write product reviews on your website. Operating multichannel selling Brands can approach a wider scope of customers by utilizing not only a particular e-commerce platform but also multichannel selling. This is fundamental to increasing customer interaction in the D2C strategy. Brands can develop more delicate and personalized marketing strategies through collected data from each channel while increasing the interaction in many channels.

At the same time, multichannel strategy becomes the foundation to create independent product values based on the customer experience acquired from each sales channel. For example, a particular product could be sold limitedly on a specific marketplace, and another could be sold only on your e-commerce website, thereby seeking differentiation from others. In addition, making a linkage with offline stores when implementing an omni-channel strategy can enrich customer experiences.

Another advantage of multi-channel operation is risk diversification. By selling through multiple channels instead of relying on one channel, business continuity can be maintained even if policy changes or issues with a specific platform occur. Customer Acquisition Strategy To complement limited customer data in Amazon, brands can utilize various customer acquisition strategies. One of the most efficient ways is to attract customers so that they invite your website, sign up for a newsletter, and follow social media by including insertions in the product package. These can help you build direct relationships with customers and improve brand awareness outside the Amazon ecosystem.

Moreover, you can also let customers continuously be connected to brands by running special promotions on your website or social media. For example, if discount codes or exclusive access to a specific product are offered when visiting your website, you can encourage customers to engage with your brand’s other channels. During this process, collected customer data can be utilized for customer segmentation and target marketing.

Furthermore, customer loyalty can be strengthened through loyalty programs. For example, it is a good idea to attract customers to your company's channel by linking their purchase history on Amazon to your website's membership program to accumulate reward points, or by providing benefits that can only be used on your website.

# References [1] Direct-to-Consumer (D2C or DTC), TechTarget
https://www.techtarget.com/whatis/definition/Direct-to-Consumer-D2C-or-DTC
[2] Direct-to-Consumer Sales Models Give Companies More Control and Better Margins, Bigcommerce
https://www.bigcommerce.com/articles/direct-to-consumer/
[3] Reinventing the Direct-to-Consumer Business Model, Harvard Business Review
https://hbr.org/2020/03/reinventing-the-direct-to-consumer-business-model
[4] Changing the Topic of the Direct-to-Consumer Conversation, Boston Consulting Group
https://www.bcg.com/publications/2023/engagement-centered-direct-to-consumer-sales-strategy
[5] 3 Marketing Challenges Direct-to-Consumer Companies Face, Harvard Business School Online
https://online.hbs.edu/blog/post/direct-to-consumer-marketing
[6] Amazon Buy with Prime, Amazon
https://buywithprime.amazon.com/ecommerce-service-provider

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