What you need to make your D2C company a success
Most D2Cs will fail. There are three common themes that set the winners apart.
Everyone wants to create a D2C company, and why wouldn’t you? It’s a great business model that allows companies to create and distribute their own products without having to share margins. However, many fail to realize how difficult it is to build a successful D2C company, and that the vast majority of them will ultimately fail. There are several reasons for this:
Low barrier to entry: There are many emerging D2C brands, cluttering an already cluttered environment. With every new brand that enters the market, the overall market share gets smaller.
Competing with incumbents: You are competing with giant companies, incumbents who have dominated the industry for years (and Amazon!). They may be slow moving, but they have a big budget, manpower, and important relationships that will help them maintain a powerful position in the industry.
Customer acquisition is expensive: Customer acquisition costs (CAC) are high and always increasing. It costs roughly $11 to capture one customer, a budget many can’t spare. While digital advertising is great in many ways, we live in a very cluttered digital world. A consumer needs to see your ad over and over again before clicking on it, and then several more times afterwards before making a purchase.
So with the odds stacked against newcomers, what can a D2C company do to ensure their best chance at success? What common traits do successful D2C companies have?
There are three things that set winning D2C companies apart from the rest:
They have meaningful relationships with customers
This one may seem basic, but it’s amazing how many companies lack this fundamental element. Customers are key and they need to be able to relate with the brand, whether that’s through engaging social media that captures the attention of your target audience, or appealing to something that they believe in and want to support.Look at the language and visuals your favorite D2C brand uses. Doesn’t it feel like it was curated just for you? They understand their audience so well that they can make them laugh, engage, and buy. They take risks with their messaging and design, and in doing so, stand out.
Shinesty is a vintage clothing brand with an outrageous selection of designs for many occasions. Their brand is perfectly tailored to their audience:
Bold and bright visuals that immediately capture attention
Unapologetic tone that will definitely ostracize some, but their target audience loves it.
Consistency across all customer touchpoints
Additionally, customers want to feel like their voice matters, which can be achieved by excellent customer service. Just look at the relationships the top D2C brands have with their customers - seamless, personal, and human. You can go on their website and chat with a human in a mere minutes, or send an email that is guaranteed to be answered within 24 hours. Don’t like the product you received? Not a problem! Returns are easy and always free.
Bonobos is a men's clothing store that started online but now has brick-and-mortar locations. They are a great example of a brand built on customer service.
They were one of the first companies that provided easy, free returns
They offer 1-on-1 consultations for all customers to help find the perfect look and fit
Everything customers try on is catalogued in a curated profile that saves customers’ sizes/measurements and the styles they liked, making future purchases a breeze
They identified a key, and overlooked, customer need
This can be an insight regarding a broad spectrum of people, or a niche. Many start-ups think that they’ve accomplished this, but most have not. Instead they uncovered something they THINK the world needs, however, many times a similar product/service already exists with an engaged audience, or the world isn’t willing to pay for it.In order to be successful, a D2C company must uncover a key insight that the incumbents missed and, most importantly, has not yet been acted on (or has already acted upon but poorly). This insight will give you an edge that can help your company navigate a crowded industry.
MeUndies is an e-commerce company that sells underwear, loungewear, and other apparel. It identified several key insights regarding the struggle consumers had while purchasing underwear:
The buying process for underwear is awkward and cumbersome with too many choices, leaving customers overwhelmed and not getting exactly what they wanted
Most underwear is boring
At the end of the day, people just want comfortable underwear that reflect their personality
MeUndies created a business that directly addressed these insights:
They simplified the decision making process by creating a questionnaire that would narrow down results for customers and only offer a limited number of cuts
They created fun prints with bold colors and characters their target audience love
They ensured that every cut they offer is comfortable and created with soft fabric that customers rave about.
Look at the insights other successful D2C brands had:
Jot: Casual coffee drinkers want a simple coffee making experience that is versatile and still tastes delicious
BarkBox: Pet owners want to spoil their pets and are willing to pay to do so
Otherland: Organic soy candle lovers want their candle experience to last from purchase to unboxing to tossing
Beyond, "‘customers want a less expensive product with the same level of quality’ (which was the insight for many successful D2C brands), this key insight is hard to find. But if you do find one, you may be on your way to creating the next multi-million dollar D2C company.
They have a powerful brand
Honestly, having a brand that resonates with your target audience is tablestakes. All D2C brands that stand a chance at surviving must have the following:
A beautiful a visual identity, a seamless digital experience
Engaging messaging that resonates with your target audience
A seamless digital experience
Your brand, in many ways, is more important than the product you sell. It is what sets you apart from the incumbents and Amazon. It is usually what incumbents pay for when they acquire a D2C company. Many times, they already have a comparable product (e.g.: Schick acquired Harry’s), but what they’re missing is a brand built off an actionable, key insight that has a loyal, engaged customer base.
In many ways, D2C’s are marketing companies and brand gurus. They take a product that is usually already in the market and add a twist to it, whether that be the price, the way it looks, the experience in which you receive it, the list goes on. That twist, that brand and marketing strategy, is what really makes them pop.
While it may look easy on the outside, building a D2C company is risky and difficult. Without the right strategies and insights in place, a D2C can easily fail to resonate with consumers and fall flat. However, when created with the right foundation, they can disrupt multi-billion dollar industries and change the world as we know it.
Fascinating! Thanks for introducing me to these new brands!