The D2C model is exhausted, how to continue to do well? | The USA Print

The D2C (Direct-to-Consumer) model has really taken off in recent years, allowing brands to create a direct relationship with their customers. However, competition has intensified and acquisition costs have increased, putting some brands in difficulty, as evidenced by the recent compulsory liquidation of, a pioneer brand of this model. How can DNVBs (Digital Native Vertical Brands) remain competitive in this context? What types of actors manage to resist and even pull out of the game?

To try to provide answers to these questions, here are the results of a study with 382 DNVBs, we are going to decipher the main conclusions.

Which product categories are the most successful and why?

The Accessories, Food and Wellness categories outperform

The results of the study highlight the product categories that stand out. We note that the categories Accessories (25%), Food (39%) and Well-being (27%) have experienced the most significant growth over the last 2 years.

What conclusions can be drawn ?

To answer this question, it is important to understand the definition of the D2C model. This model involves selling directly to end consumers, bypassing traditional distribution channels such as department stores or online retailers. By reaching out directly to consumers, D2C brands can avoid distributor markups and offer more attractive prices.

The brands that are most successful in this model are often niche brands, known as DNVB (Digital Native Vertical Brand). These marks have several characteristics that make them particularly suitable for the D2C model.

  • A high purchase frequency and therefore a lower CAC

This first characteristic is directly linked to the nature of the products.

For mattresses, for example, you don’t need them every year, which forces merchants to constantly acquire new customers, which in the current context is particularly expensive.

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On the other hand, for clothes or cosmetics, you will come back to their site several times a year at least, and other sales can stimulate your visits to the site. This high purchase frequency also allows DNVBs to create a stronger bond with the brand and make their best customers ambassadors.

The richness of the product catalog is also a dimension to be taken into account. This allows them to implement actions to generate cross-sell and upsell and thus increase the long-term value of their customers (CLTV).

  • A favorable economic unit

It is also directly linked to the nature of the products.

Some products, such as cosmetics, have characteristics that favor their sale online: light weight, high value, and small dimensions. This means that they are easy to ship and there are few additional costs associated with shipping and handling returns.

The return rate of these product categories is relatively low compared to shoes for example, which also contributes to their success.

Products that have a high return rate are expensive to manage and can turn off potential customers, while products with a low return rate are easier to manage and can create a positive shopping experience for customers.

DNVBs rely on powerful branding and are able to generate particularly high emotional engagement among their customers.

Ultimately, this allows customers to create a bond with the brand that goes beyond simple price comparison. This means customers are more likely to buy regularly and recommend the brand to friends and family.

Strategies to get out of the game

1. Diversify your distribution channels

While the D2C model focuses on selling direct to consumers online, it is increasingly important for brands to rely on a physical presence through permanent or ephemeral stores that allow for a “real” connection. with the end customer.

At this level, the study shows that DNVBs with a physical presence have experienced greater growth than pure players over the past two years: 47% against 33%.

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As mentioned in the introduction, the case of, pioneers of pure D2C players, is quite symptomatic. Founded in 2010, the company has grown explosively at a rapid pace, and completed its IPO in London in 2021. But for, the trend is turning. Indeed, the unfavorable economic environment (declining demand, logistical difficulties, rising inflation) affects its economic model and leads to its bankruptcy at the end of 2022.

This observation should be put into perspective with the overall economic context over the last few years:

  • COVID has been a huge opportunity for online businesses, the return to normal has meant for consumers the desire to return to contact with merchants, in stores;
  • Xi Jinping’s zero COVID policy has brought China to a standstill. Products made in China no longer arrived in Europe, a big blow to the production chain of many DNVBs?
  • Inflation impacts the behavior of more cautious consumers;
  • Rising costs for energy, wages and packaging are impacting e-tailers’ margins, reducing their profitability.

The need to rely on a physical presence has led to the birth of a new type of player: ONVBs (Omnichannel Native Vertical Brands), brands that are natively present both online and in person.

2. Make better use of your “First Party” data

The success of DNVBs is based on their ability to establish a close relationship with their customers, but this is becoming more and more difficult with the evolution of regulations on the protection of personal data.

The GDPR has notably led to the end of third-party cookies. Without this data, businesses struggle to understand their customers’ buying behaviors and target them effectively. This has directly impacted the ability of DNVBs to acquire new customers, but also the cost that this represents.

The main advertising platforms – Meta and Google in particular – have passed on to advertisers the loss linked to the end of the third-party cookie, which has led to a significant increase in online customer acquisition costs. This has almost doubled over the last 2 years.

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To address this issue, DNVBs need to better leverage 1st party, collected directly by a company or website from its own sources, such as contact forms, online surveys, user accounts, etc.

This data may include information such as consumption preferences, browsing data, purchase histories, profile information, etc.

This data is generally used to improve the user experience, to personalize offers and advertisements, and to facilitate commercial transactions. To achieve this, brands can use tools like Shopify and Klaviyo. Shopify is an e-commerce platform that allows brands to create and manage their own online store. Klaviyo is a marketing automation and customer relationship platform that seamlessly integrates with Shopify.

By combining these two tools, brands can collect and analyze valuable data about their customers, allowing them to better understand their needs and provide them with a personalized experience. This deep relationship with customers is critical for D2C brands, which often compete with other niche brands.

3. Better manage your acquisition campaigns

In order to optimize its profitability, it is important for a company to implement an effective management strategy for its acquisition campaigns. However, it can be complex to effectively manage such a campaign for a direct-to-consumer (DNVB) company.

Indeed, with the costs of online advertising constantly increasing, it is increasingly crucial for D2C companies to properly manage their acquisition campaigns in order to maximize their return on investment. This is especially true since the year 2022, the year in which costs per thousand (CPM) and costs per click (CPC) have increased significantly (see the graph below).

To remedy this situation, it is recommended to create higher quality and better targeted ads, which can help improve the conversion rate and offset the increased costs. By implementing such a strategy, D2C companies will be better equipped to effectively manage their acquisition campaigns and achieve their growth objectives.

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