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What is D2C Model?
There are lot of business model which occur traditionally like
But recently one more business model has been evolved which is quite often used to identify certain brands. This model is called D2C (Direct to Consumer) Model.
D2C Model means where you sell your products directly to the customers. Essentially, it means we are selling products directly to the consumers eliminating various third parties like distributors, dealers, retailers or any other network.
D2C model has been recently used to differentiate the brands which are hard to categorize into traditional brands. D2C terminology has been used more recently to differentiate between the various private label brands, local brands and national brands. More specifically, you will see D2C brands are internet only brands.
One of the things which should intrigue us is why new terminology? Whats so special in D2C model that traditional models didn’t had. Well the answer is E-commerce. Yes, because earlier we had national brands like Apple, Nike, Colgate etc. Then you had some local brands like Mohini tea, pataka 555 etc.With the rise of modern organized retail, we saw emergence of private brand which were sold in big hypermarkets like RIght Buy, Aro etc
Recently, E-commerce goliaths like Amazon and Flipkart also launched their fleet of multiple private label brands like Solimo, Amazon Basics, Marq, Adrenex etc . While these were sold purely online their respective platforms stil they are not D2C brands. They are private label brands launched by the aggregated business intelligence of lakhs of sellers
But there are certain brands which gained momentum recently and registered obnoxious sales like Mamaearth, Realme, Wow etc. These are all D2C brands which sell directly to the consumers by the use of E-commerce platforms or their own website and social media handles. They dont have any distributor,dealer or retailer whos is selling but company itself is selling directly to the consumers thus eliminating the various supply chain costs, time and other overheads.
So lets define D2C model simply,
D2C model is Direct to Consumer model. It allows companies to market their brands and sell their products directly to the consumers through E-commerce platforms or their own websites or their social media accounts. Essentially, manufacturer or private label brand owner is selling directly to the consumers via their own platforms or sales channels.
What are D2C Brands ?
D2c Brands are the brands which uses D2C model to market their products and sells via their own e-commerce platforms.
These brands are generally Internet only brands which exploit the power of social media to generally market their brands. Social Media platforms like Facebook,Instagram & pinterest acts good engagement platforms for them. They have widely used various inbound marketing and affiliate marketing techniques to promote their brands.
For example, Mamearth has over 120 products in its portfolio but it has over 990 web pages which helps users to make informed decisions. Their website blog is itself a source to generate a lot of traffic which helps in conversions. They implore a lot of push notifications to share deals,drive traffic and conversions.
Now, you may ask does all these digital ads,social media, inbound marketing or other digital marketing strategies aren’t used by traditional or private label brands?
Well the answer is pretty tricky. Lets check this out:
I can’t find any website or social media page for one of the most popular private label brand Amazon Basics.
I even couldn’t any ad for Flipkart own private label brand Adrenex
If you notice clearly, there is No Website for neither Adrenex nor Amazon Basics. If you notice both SERPs even with more curiosity is that they don’t have any social media channels like facebook, instagram, twitter etc. And, there aren’t any brand videos on Youtube or any other informative blog on their products.
Curious…Why are such internet goliaths aren’t using the power of social media or Google PPC?
Well, the answer lies within them only. They have become so huge and have accumulated such petabytes of data that they feel they have the Right Product at Right Price at Right Place.
Also, if you forgot, the primary purpose of creating private label brands is to get better ROI from these brands. These should help them in generating positive cash flows which otherwise its hard to get from other brands. So, they don’t want to spend time and money on Ads/Social media as these internet goliaths are already spending millions on their own marketing.
But, these private label brands have something which D2C brands generally dont have. That is the sophisticated supply chains to distribute and deliver products across India. While Amazon has over 33 FCs and warehouses, flipkart also has various FCs & warehouses across India. So they do have a slight upper edge on product distribution and faster delivery. That is the reason you will see brands like Wow and Mamaearth quite aggressive on E-commerce platforms
So, now lets refocus on D2C brands and traditional brands. While, national brands or even local brands do also exploit modern digital marketing techniques but they have one thing which is core to their business. They rely extensively on their B2B distribution chains like distributors,dealers,retailers to market and sell their products. While they use Google Ads or Social Media to market their brand or to create brand recall. They aren’t very keen on using them for sales channels. They might use it for social listening but they tend to refrain from direct selling fearing that their distributors /dealers might get upset.
Very often you will see that their national distributors or dealers sell on E-commerce platforms on behalf of brand.Even, to further demarcate the internet market and offline market, most intelligent brands are coming Online only models for E-commerce platforms and offline only models so that both distribution models don’t clash with each other.
Why D2C Model
So the question of the hour is, why D2C model. What are the advantages of this model over other models.
Well,the key to this answer lies in the marketing and distribution side. It has been often seen that MAD costs account for nearly 40% of the price which are paid by the consumers.That means, a huge amount of money goes into marketing,advertising and distribution.
D2C brands essentially try to reduce this 40% of the MAD costs but are still looking to create the brand which can easily be known and accessible to lakhs of users with the click of their smartphone.
Internet penetration was already booming in India. With Covid-19 pandemic, its digital adoption has been accelerated multiple times. Now, even people in semi urban and rural areas are also using E-commerce for buying products.
So actually COVID-19, pushed a lot of brands to think about the D2C route to sell their products and actually to survive.Offline markets completely shut led brands to think digital as medium to still connect with masses. This led to many brands seeing massive sales in their own brand stores.
D2C model actually puts the whole business around your customers. If you are consumer centric brand and has well defined customer personas it can really help you to target and register sales.