Last updated on 21th Sep 2022
Last updated on 21th Sep 2022
The way manufacturers reach their customers has drastically changed in recent years. Instead of using middlemen like wholesalers and retailers, brands are selling direct to consumers (D2C) either through their own eCommerce websites, or channel partners.
In 2022, 103.4 million U.S. consumers will buy from Direct to Consumer (D2C) eCommerce brands.
This guide explains what direct-to-consumer (D2C) eCommerce is, why manufacturers need it, and also how to do it.
We’ve also listed some real-life examples of famous D2C brands at the end of the guide. These case studies take you through their D2C journey, the challenges they faced, and how they overcame or failed miserably at them.
D2C refers to the practice of selling a product directly to the consumer via a company’s own web store, thus bypassing third-party retailers or wholesalers. — McKinsey
In this model, manufacturers sell their products directly to the consumer through their online store, rather than going from them to a wholesaler, distributor, retailer, and then finally to the consumer. This ultimately allows them to control every aspect of the customer’s journey from purchase to delivery.
The biggest difference between D2C and B2C companies is that D2C companies only sell the products that they manufacture. Whereas B2C companies can sell products manufactured by anybody and sourced through intermediaries like wholesalers, suppliers, marketplaces, and so on.
Direct-to-consumer (D2C) companies sell directly to their end users, without any intermediaries. This allows them to communicate with their customers directly, build lasting relationships, and maintain their own manufacturing facilities, sales channels, and distribution networks.
Business-to-consumer (B2C) refers to the process of selling products or services directly to consumers. Most businesses that sell directly to consumers can be classified as B2C companies.
Despite external factors like the pandemic, manufacturers can build lasting relationships with customers and boost business growth by selling directly to the customer. This approach also works since more than half of consumers visiting a manufacturer's website intend to purchase.
A D2C eCommerce website can do much more than sell products — it can
Online shoppers prefer to purchase directly from manufacturers because they get better prices, fast, and easy delivery, and easy return policies.
D2C customers don’t purchase products from unknown sources. But rather, from a brand that resonates with their own values.
They’re looking beyond tangible products and actually trying to understand what is it that makes the company tick. What’s its mission? What’s its purpose? And what is it actually trying to build for us as a society?
D2C manufacturers have a better chance at selling more of their products through a D2C eCommerce model that builds customer trust and loyalty.
More than half of manufacturers who report selling directly to consumers on their own ecommerce sites report it has had a positive effect on relationships with other sales channels.
Knowing what’s trending in your industry is always a good idea!
These statistics can help you understand consumer behavior, which can help plan a strong D2C eCommerce model for your business.
D2C eCommerce sales in the U.S. reached $111.5 billion in 2020. By 2023, they are projected to reach $175 billion.
97% of consumers now use online media when researching products or services in their local areas.
Millennials and Gen Z (the largest segments of the US economy) are increasingly seeking direct relationships with brands.
73% of US customers have tried new shopping behaviors since the Covid-19 pandemic.
77% of apparel and accessory companies are now DTC.
40% of consumers expect that more than 40% of their spending will go towards direct-to-consumer brands in the next five years.
More than 50% of consumers opt for brand websites rather than retailer websites because they offer more comprehensive information and guides.
While we see a large shift to online consumer shopping, it is evident that consumers now are researching a LOT more before making a purchase. Smart shoppers like these who look for and actively contribute to your online reviews can be the best thing to happen to new D2C brands.
On the other hand, post pandemic sales in physical stores have also made a massive comeback.
For the first time ever, Brick-and-mortar sales grew faster than e-commerce sales in 2021 with physical store sales growing at a rate of 18.5 percent, versus 14.2 percent for e-commerce.
People like going to shops to experience the human element behind it. They get to interact with other people and socialize more. They might also want to post a selfie online, boosting your online presence.
As you can see, the D2C sales model is shaping to be a big part of eCommerce. And for manufacturers, it is certainly one of the best ways to reach their customers.
As a manufacturer looking to enter the direct-to-consumer market, you need a solid strategy if you're going to succeed. And the best way to design a strategy is by breaking it down into smaller parts so that nothing gets missed.
Now, let’s do just that!
A value proposition is a promise of value that you can offer your customers as a motivating factor to make them buy directly from you. And it is precisely what will drive customers to directly buy from you instead of through a chain of supermarkets or grocery stores.
With 2.42% of eCommerce visits converting into sales, marketers are constantly searching for ways to make their brands stand out. And as a manufacturer, developing a compelling value proposition is the first step to convincing prospects to take action and progress down your D2C eCommerce sales funnel.
A strong value proposition is what puts any eCommerce brand above the rest.
To build a value proposition, answer questions like:
Answer these questions in the clearest, most concise, and simple way possible. And this is your value proposition!
The best places to showcase your value proposition are on your website or app homepage, in product descriptions, and on social media ads among others.
Manufacturers that wish to reach direct-to-consumers need to have clear business objectives or goals.
Only when you know what you want to achieve can you devise an actionable plan to achieve them.
Do you want to:
Once you have clearly defined your objectives, it is time to map your goals to a stepwise plan. Next, you must define a time bracket to these goals.
A customer journey map will help you devise strategies to identify customer pain points, improve retention, personalize marketing, and, most importantly—
You must invest in becoming an experience-led business, which means optimizing every customer touchpoint. By understanding the customer journey, B2B companies can stay a step ahead of the customer to lead them on the path for a great experience and quality product or service.
The ultimate goal of the customer journey map is to take your customer from awareness stage to consideration and buying. However, your end goal must be to take your customers to — the loyalty stage. That’s the sweet spot, right there!
The Pareto Principle (80:20 rule) shows that 80% of your profits come from just 20% of the repeat and loyal customers.
Gaining a single loyal customer who’d voluntarily want to keep coming back to your website and buy your products (or even recommend your product to their friends/relatives) is way more valuable than acquiring a new customer who intents to make a one-time purchase.
Think about it. The acquisition cost of a repeat/loyal customer is practically zero!
So, the more detailed and well-crafted you make the customer journey map, the better your customer success will be.
Get to know your audience and target them accordingly.
If you are a manufacturer, it is extremely important to
This will help you to devise a personalized sales strategy to appeal to each of these consumers.
Look at yearly reports, stats and trends on the D2C eCommerce market at the location you wish to target.
Find out who the big D2C players are and what can you offer to customers that can be better than what’s already in the market.
On you’ve analyzed the market, get to try and understand your own audience.
Use user analytics to track first-party data on your website at every digital touchpoint. This can give you better customer insight and help you create more relevant and impactful experiences.
Gathering customer data right from the start will not only help you understand your customers, but it can also help you serve them better as they shop on your website or mobile shopping app.
You can then feed the data you’ve collected into an AI model that could generate personalized product recommendations that are on point!
Additionally, you can also request your existing customers to give you feedback based on their customer experience, so you know what they like and dislike.
A D2C strategy offers marketers the opportunity to understand their own consumers like never before. Simply put, selling directly to consumers enables a two-way dialogue with your customers that is yours alone, generating extremely valuable first-party data.
Moreover, this data can also help you plan the right advertising strategy by revealing how spending each dollar can provide the maximum impact and ROI.
eCommerce trends and technology are constantly evolving and as a manufacturer that wants to go direct-to-consumers, you need to update your sales channels, products, and UX along with these trends too.
By tracking user analytics on your eCommerce platform, you can get an exact understanding of what customers like and dislike about your eCommerce channels and pinpoint areas that you can improve upon.
As a manufacturer who is entering the D2C space, you’ll be competing with retail giants who have been selling direct-to-consumers for years and have a massive customer following. The only way to compete with them is through a solid direct-to-consumer marketing strategy.
Among the best ways to attract website visitors and convert them into leads are through subscription forms, blog posts, well-placed CTAs on social media, and live events.
And when you nurture these leads, you can communicate with your prospects at every stage of the sales funnel more effectively. This direct-to-consumer marketing approach can ultimately help you build a consistent customer base, increase sales and increase retention.
A well-thought-out email marketing strategy is a great way to reach your D2C audience. This DTC marketing tactic can help you drive engagement, increase conversions, and ultimately build a loyal customer base.
And if you automate your emails, you can provide personalization at scale!
If you want to know more about how to build a great email marketing strategy and learn the email marketing mistakes you should avoid, read our in-depth blog on the same.
User-generated content, or UGC, is content created by users themselves. This content can include pictures, videos, audio, blogs, and much more. Not only does UGC promote your products, but it also builds authentic social proof.
This can either be generated by your customer when they post about your products and tag your social media page in it, or through influencers promoting your product. And this DTC marketing approach works because 49% of consumers depend on influencers for their recommendations.
If you start with micro or nano influencers who have smaller, but highly relevant followings, you can keep your budget low as your brand grows. Additionally, you can send them free products instead of paying them money.
This can help you generate a wide range of content like unboxing videos, testing videos, product reviews, contests/giveaways, and much more.
One size fits all approach does not work in the current market. To really resonate with your consumers, you need to give them a variety of sales channels that fit their individual preferences.
These could include your eCommerce website, mobile commerce app, mobile commerce site, social media, and much more.
Sales and marketing automation can be a game-changer for any D2C eCommerce company. It essentially allows your staff to concentrate on building customer relationships and selling while the automation takes care of repetitive tasks like sending emails, messages, and so on.
And if you use AI along with your automation, your emails, newsletters, messages, and everything else can be automatically personalized.
Ultimately, a solid direct-to-consumer marketing strategy is one of the most important parts of your D2C transition. D2C marketing helps you connect directly to your consumers, understand their likes and dislikes, and tweak your products and D2C sales approach accordingly.
Simply providing customers with high-quality products is not enough in today’s market. If you want to succeed, you need to provide your D2C customers with a personalized experience, too.
91% of consumers say they are more likely to shop with brands that provide offers and recommendations that are relevant to them. And 80% of customers are more likely to purchase a product or service from a brand who provides personalized experiences.
With AI personalization in eCommerce, manufacturers can provide each and every customer with products, offers, and information tailored to their needs.
Additionally, you can provide personalized web pages, product recommendation carousels, discounts, and much more tailored to each individual customer.
When it comes to personalization, the scope can be as broad as your imagination can go. And the more innovative your approach, the higher your conversions will be.
Some of the most creative ways to provide product recommendations include:
Product customizations: The customers can personalize the products that they wish to buy according to their needs.
Personalized subscriptions: Customers can choose the products they want or opt for a surprise product in their subscriptions.
Geo-targeting: You can send offers to customers based on their location, proximity to a store, or the weather.
Personalized product catalogs: A MarComm creator lets you personalize products and prices for each customer.
Product recommendations:Showcase more of what your customers would like when they’re shopping
Gamify your store: Collect information about customers in a way that they enjoy and recommend tailored products.
Virtual try-ons:VR experiences drive engagement and customer loyalty due to their easy use and gamification.
D2C brands typically thrive by building strong customer relationships.
Usually, this is accomplished through direct interactions with clients online in order to find ways to meet their needs. And a great way to do this is through AI chatbots and shopping assistants.
Chatbots are projected to generate 454.8 million dollars in revenue by 2027, up from 40.9 million dollars in 2018.
Around 40% of U.S.-based consumers state that they have used chatbots to engage with the retail industry.
Chatbots will result in saving $8 billion in business expenses by 2022.
AI chatbots and shopping assistants are the most practical, efficient, and inexpensive way to improve customer relationships. They let you save the costs of hiring a lot of customer service employees and can also answer any customer queries 24/7.
Ultimately, AI chatbots make D2C customer service smooth and efficient. And manufacturers need this to improve their direct-to-consumer sales approach.
Customers have come to expect an effortless shopping experience, whether they are strolling through your brick-and-mortar store or scrolling on their phone. And to provide this D2C manufacturers need to develop an omnichannel strategy.
Essentially, an omnichannel strategy ensures that you have an integrated customer experience across multiple channels.
An omnichannel D2C strategy puts the customer at the core of your business strategy, instead of the product. It ensures that each shopping channel (eg. eCommerce site, app, brick-and-mortar store, social media, and so on) complements the other to create a seamless customer journey.
With an omnichannel sales approach, you can ensure that your customers have a consistent brand experience in both your online and offline channels. They can find the exact same offers, information, deals, and much more regardless of where they shop from.
Several D2C companies that have added physical locations to their services are experiencing lower merchandise returns and more incredible repeat business than their online-only competitors, according to an article in the Harvard Business Review.
When you're a manufacturer running a D2C (direct-to-consumer) eCommerce business that's just taking off, it's imperative that your fulfillment is prompt and accurate.
After all, the whole point of D2C is to deliver your products directly to your customers.
Customers want their purchases to be delivered as quickly as possible. Be it a big B2B shipment or a new shirt, they want it delivered ASAP. Give customers the option to choose between same-day delivery, overnight delivery, or normal delivery whenever possible.
They expect faster delivery from D2C brands too. If you’re lucky, they might even give you a 5-star review for great customer service.
When it comes to D2C order fulfillment, there are three approaches that you can take.
Choose the right option for you depending on what you can afford, how fast you can deliver, and the size of your D2C business operation. Additionally, research how good the services of your delivery partner are and how their customers are faring in the market before making a decision.
Ultimately, choosing the right fulfillment option for you is one of the most important business decisions you’ll have to take for your B2C operation. So take your time, do your research, and then decide.
Don’t forget to optimize for an omnichannel B2C sales approach.
Ultimately, is the best way to drive growth, expand your community, increase your brand visibility, and meet your customers wherever they are.
Today’s consumers are super tech-savvy and research products online before making a purchase. And this has made sales processes more direct, less dependent on third parties, and way more customized to the end consumer.
To help you reach these consumers in the most holistic way possible, you need a direct-to-consumer eCommerce model.
As a B2B manufacturer, you probably already have a good system infrastructure in place. But if you’re scaling your operations to D2C, you’ll need to make a few changes to your systems and processes.
Ultimately, all of this depends solely on the eCommerce platform you choose. The better your platform, the smoother your DTC operation will run.
With a platform like ewiz commerce, you get easy integrations, 24/7 support, and most of all, AI-powered help that other platforms cannot provide. Be it smart recommendations, Individualized catalogs with a MarComm creator, or AI-enabled analytics dashboard, you get it all!
Ultimately, a solid D2C strategy requires that you evaluate the market, understand it, and use the right technology to reach your customers as quickly and efficiently as possible.
A direct to consumer model can give you a sharp competitive edge with profitable results. Here are five key benefits:
When third parties are involved, you may not have complete access to valuable, first-hand customer data because they interact with the customer. Today, proprietary customer data is essential for continuity of business and marketing activities.
The transformation of cookies is near. That means you need to stop relying on third-party information and start building your own database. You can personalize marketing and communications for audiences using tailored insights with proprietary data.
Owned data is also more secure and compliant since you're acquiring it directly from the customers.
D2C brands are responsible for the entire customer journey when third parties are out of the picture. They can handle marketing and distribution strategy plus execution all on their own.
Armed with proprietary data, you can get to the heart of buyers' needs. This helps create unique brand experiences through personalization and targeted campaigns. You can also extend special offers, tailored products, and try-before-you-buy campaigns for customers.
In B2C models, the manufacturer and distributor are generally separate entities with different responsibilities. The distributor or wholesaler acts as a middleman who also takes a cut of the earnings.
It means you as a manufacturer must set lower profit margins for yourself to ensure everyone gets their share. Here, the lifetime value of each customer will be lower as you add more and more middlemen to the mix.
But with direct to consumer, you'll be delivering products directly to the consumer without any middlemen involved, and so your profit margins will be higher.
For example, if your customer pays you $100 for a pair of shoes, the wholesaler gets $25. Your manufacturing cost is another $25, meaning your profit is $50 (or 50%). But if you were to distribute the shoes yourself, you'll earn $75 (a 75% profit).
Having fewer people in the supply chain gives you more flexibility to test changes.
For instance, you may want to A/B test a product update. With your ear to the ground, you'll get quick feedback from distributors, wholesalers, or retailers without waiting for it.
In a traditional business model, you must expand your distributors' network and gain credibility slowly in new regions. Establishing a formidable, memorable presence could take months or even years.
A D2C model cuts down your go-to-market time, so you can launch your website and sell available products anywhere (depending on your shipping potential).
To retain customers, businesses must build and maintain a good relationship with them. It's easier to stay in touch and respond swiftly to buyer needs or concerns when you're connecting with them directly. This isn't easy when intermediaries are involved.
Consumers also want to maintain personable relationships with businesses They want to know the brand philosophy and how it benefits them. They're more willing to share data in return for value and personalized engagement.
Fully engaged customers also offer 23% more revenue and profitability than the average customer.
While the direct to consumer model has many positives, every coin has two sides. Here are some disadvantages you may face when venturing into this sector:
Direct to consumer has low barriers to entry. So while it's easy to launch operations with minimum resources in this space, the real challenge arises when it comes to scaling.
Businesses need to scale rapidly to increase volumes, maintain profitability and stay in the competition. It's complicated when working with a limited number of employees to oversee multiple processes.
External factors such as rising inflation and shipping costs also affect growth. Take the case of shipments. Container shipping rates from China to the US are 4x higher in June 2022 than in June 2020.
From a customer standpoint, having complete control of your business operations is excellent. But it's also a significant responsibility because it all comes down to you if anything untoward happens.
DTC brands are about so much more than manufacturing goods and selling them directly to customers. It's about handling supply, managing vendor relationships, taking inventory stock, managing shipments and returns, troubleshooting payment issues with portals, living up to customer service standards, and more.
Additionally, you need to ensure you're backed by reliable and legally compliant technical infrastructure. Since online channels are growing in popularity, having a digital platform for eCommerce, content distribution, and analytics is paramount. The technology you deploy should also be flexible enough to scale your growth.
The last few years have forced several brands to go online, and because D2C has low barriers to entry, more and more players are joining the fray.
It means more brands will sell products similar to yours, and it'll be challenging to differentiate yourself from them. These brands will sell products similar to yours, making it challenging to differentiate yourself and leading to higher CAC.
Moreover, major eCommerce retailers like Amazon are strengthening their position in the space. Businesses that don't have a unique value proposition risk losing their footing.
To grow an independent channel means disrupting existing channels and competing with distributors, suppliers and other intermediaries.
Customer acquisition costs will also gradually rise for brands to build a loyal base. It could be difficult to keep up with large brands having substantial marketing budgets.
A possible way to mitigate their competitive impact is to take it slow with one D2C project, then gradually build it into a more extensive operation. You can also opt to expand in markets with little distributor presence or start a brand which doesn’t interfere with your existing offerings.
Without large resellers or retailers standing by you, building a name for yourself from scratch is challenging.
You must work harder to fortify a brand presence in an already crowded industry. It requires extensive marketing (online and offline) and commitment to see your business through.
Digital media is perhaps best suited to reach out to millennials and GenZers. However, with rising popularity, the cost of advertising on this channel has also increased. Facebook ad prices alone have grown 3x since 2020.
An independent poll of marketers also revealed that Google CPCs have increased as of February 2022.
This is one of the significant reasons why D2C brands gradually shift to physical stores, as is the case with Casper (discussed in Customer Success Stories).
30% of the world's population is shopping online. But nearly 75% of customers are also open to new shopping behaviors. And it's not just websites. Buyers are now exploring shopping on social media, too.
However, rising online ad costs push brands to consider physical stores alongside digital.
All of the above means that D2C brands must seriously consider an omnichannel approach. You must also be agile and flexible enough to adapt to new trends quickly.
Let’s take a look at five famous DTC brands that will inspire you.
Harry's started in 2012 as a direct to consumer brand, manufacturing and selling shaving equipment. It gradually expanded to men's personal care through online and offline channels.
The brand is well-known in the US for its subscription service of razor blades, shaving cream, and other grooming products.
It all started when Andy Katz-Mayfield (founder) found it challenging and time-consuming to pick up shaving blades.
For starters, he had to look for the razor section, have an employee unlock the box, show him different options, and select from undifferentiated products.
Andy then teamed up with Jeff Raider to start a razor company having a simpler model – one razor, affordable blades and delivered straight to the customer's door.
Harry's went against the idea that customers need multiple choices for razor blades; instead, they needed something more functional.
With the one type of blade that the brand sells, customers can get refills for about $1.87, rubber handles at $9, and upgrades to metal handles for $20 apiece. And that's all.
Harry's also doesn't aggressively advertise with fancy names like its counterparts. It follows a more humble branding with a "guy's guy" approach.
It's a simple but successful model. By 2015, Harry's was worth $750 million; by 2018, it made $270 million in sales. Building on this success, the organization expanded into men's personal care products.
The brand, founded in 2010, is an American online retailer of prescription glasses, sunglasses, and contact lenses. It started as one of the D2C brands online, but also sells offline today.
Warby Parker is one of the early pioneers of direct to consumer in the US and entirely disrupted the traditional retail model.
For too long, eyeglasses were expensive because one company, Luxottica, controlled several high-end eyewear brands.
Buyers had to pay hundreds of dollars at the optometrist's office, where Luxottica sold most of its products. And these eyeglasses included licensing fees, which were passed on to customers.
Warby Parker took the vertical integration route. The company entirely controlled its supply chain and designed its frames to avoid licensing fees. They also sourced their own raw materials to reduce third-party expenses.
And above everything else, Warby Parker sold its products online, removing display and storage costs.
Customers could select five frames, try them on and see which one they like best. Then, they could submit the final order online, all shipping costs included. Gradually, it evolved into a virtual try-on for multiple frames.
Warby Parker then moved into the eye exam market by introducing Prescription Check (an iOS app), where users can check their eyesight digitally.
A Warby Parker-contracted doctor examines the results and prescribes eyeglasses. Customers can then head to Warby Parker's channel to make a purchase.
Nike needs no introduction. It's an American multinational corporation manufacturing and selling footwear, apparel, accessories, and more. And it shouldn't be a surprise that the brand has been moving to D2C, realizing the model's potential.
Because it's a large brand, Nike has access to infallible distribution. And yet, the company focused on increasing its direct to consumer sales by 250% in 2021. They entered the space with multiple sales channels, loyalty programs, mobile apps, online stores, and even Amazon.
Its D2C model aimed to be more personal for customers at scale. But the road wasn't easy.
Nike faced competition from multiple formidable startups. It also came across another challenge – Amazon's marketplace, filled with counterfeit and unauthorized Nike products. But it quickly overcame this by launching Amazon-exclusive products and expanding its partnership with Amazon to ward off competition.
Its direct to consumer model (Nike Direct) was successful, bringing in nearly 39% of Nike's global sales in 2021.
GIVA is an Indian company specializing in high-quality yet affordable silver jewelry.
The brand noticed that in the Indian market, gold is the preferred jewelry option, given that it's an asset. Moreover, the traditional mindset puts gold ahead of other metals.
Artificial jewelry is another option, but this sector has many players. Even though the country is the fifth-largest jewelry market in the world, affordable pieces are hard to find.
GIVA capitalized on these gaps and launched sterling silver jewelry. Their pieces are an asset, fashionably designed, better than artificial jewelry, and, at the same time, less expensive than pure gold.
In 2019, they started with a mere $12,500 and moved on to raise $675,000 in funding to date.
Their revenue numbers are even more impressive.
Revenue in 2019 stood at around $375,000 and grew to nearly $3.4 million in 2020. In 2021, this surpassed $12 million – all thanks to "direct to consumer"
Starting with its website, the platform is straightforward to navigate, making buying simple. It didn't just rely on the website, however.
GIVA also sells its products on Amazon, Flipkart, Myntra, and Nykaa in India. This setup gave the brand added visibility and provided customers with several choices. GIVA is now moving to offline stores, building on an eCommerce model
The brand tied up with one of India's prominent celebrities to market itself and used the influence to garner visibility.
GIVA retargeted its website traffic on social media channels to drive brand recall. The brand has also recently started media partnerships.
Before Casper, mattress-buying in the US was an ordeal with several options, confusing descriptions, crowded outlets, and pushy salespersons.
People were used to going to a physical store to buy a mattress. They would test it out first, probably laying down on it for a bit. Nobody ever thought they could buy a mattress on an online eCommerce store.
That changed with Casper.
In 2014, Casper changed the narrative as one of the first DTC brands, taking out the intermediaries and, in the process, maintaining decent margins.
To build trust, they offered people a guaranteed 100-day return policy on the mattresses if customers used it and weren’t satisfied with it. This was also a subtle way of saying that they were confident their mattresses were so good, nobody would want to return them!
Casper brought in $1 million in sales in its first 28 days in business.
In March 2015, Kylie Jenner posted pictures of her new Casper mattress on Instagram. That post got nearly 900,000 likes and practically broke Casper’s website with demand.
The reviews were great for Casper’s mattresses. And soon it began partnering with brick and mortar stores that put up Casper’s product on display.
Within just 3 years since its inception, the company's total revenue since inception had grown to more than $600M.
Everything seemed to be going well (or so they’d like you to believe) for Casper. But despite its initial success, Casper is also a case study of how direct to consumer brands can fail.
When the company went public in early 2020, customers and investors found that Casper hadn't made any profit since its inception. And that's despite a near 50% gross margin.
Instead, it heavily put 60-90% of the margins into advertising.
As a result, company expenses like salaries, warehousing, R&D, and more were paid out of the company's pocket.
Casper’s 100-night trial program also cost the company over $80 million in 2018 alone, as the mattresses cannot be reused after being returned. While advertising is great for growth, it doesn't make a business sustainable, and Casper learned that the hard way.
Online advertising became increasingly expensive as Google and Facebook increasing their cost per clicks every year. Casper’s ad spends totaled $114 million in 2019. And in the same year, the average ad spend for direct to consumer brands went up by 50%.
Between 2019 and 2020, retail sales grew by 74%, accounting for 20% of overall revenue in 2021. Compared to D2C (its original model), sales only increased by 20% during the same period.
Casper's initial success attracted several competitors with similar products and marketing models. The biggest competitor being Purple. With growing competition, the brand had no choice but to continue high ad spends.
The lifespan of mattresses is about 7 to 10 years. The long lifecycle meant that the customer won't be back for several years after making one purchase. That leads to low or negligible profit from repeat businesses.
The company moved into the hybrid model at 60 locations in the US, and has planned to open over 200 more physical retail stores until the pandemic hit. And Casper was now sitting on losses of 60 stranded stores.
Even though Casper couldn't keep up with the direct to consumer market, other brands have shown how the space can still promote business growth.
One key differentiator is the customer experience. If you can make the buying process frictionless, your D2C brand has a better shot at success
It's also important to remember that marketing is one way to promote growth, not the ultimate. Eventually, your brand needs to solve a customer problem by using technology and constantly looking out for growth opportunities.
Getting direct to consumer right isn't a hundred percent quick and easy. But it does provide significant rewards if taken on with a sustainable growth approach. Even major brands are going the D2C way to increase conversions and margins and connect with customers directly.
With the strategies in this guide, you can set up a direct-to-consumer business for success.
Want to figure out the best way to go about this? We can help you grow and optimize your brand.Get in touch with us today.