The rise of direct-to-consumer (DTC) companies has been a revolution in business. By cutting out the intermediary, these operations have been able to reach more customers, create unique business models, and offer more options to the consumer. As digital technology rapidly advances, DTC companies have been successful in changing the way goods and services are bought and sold. However, there are many challenges with DTC businesses that make traditional brick and mortar models more beneficial.
“DTC is a growth model – but only if you’re smart about how to grow,” explains BigCommerce. “Successful DTC e-commerce brands are adept at recognizing how effective digital marketing can be and how to best leverage it.”
Gaining and Retaining New Customers
Direct-to-consumer e-commerce offers convenience, flexibility, and affordability, and has been growing in popularity over the past decade. Despite the advantages of DTC, it is difficult and expensive to earn new customers and retain them. To successfully compete in this market, businesses must be prepared to invest in a wide range of marketing tools and tactics to capture customers’ attention and understand their target market better to develop creative approaches to reaching them. To effectively reach, DTC businesses must consider using more traditional marketing tools to help increase brand visibility and connect with consumers in more meaningful ways. They must continue to concentrate efforts on keeping buyers engaged with the brand, requiring a unique, attractive omni-channel presence that drives customer loyalty.
Limited Touch Points
With physical stores, customers are able to see, touch, and test products before making a purchase decision. Without a physical presence, this isn’t possible, leading to a higher risk of customer returns and dissatisfaction. Customer service is a key factor in a successful DTC business. Customers will be looking for convenience and comfort, and with a limited touchpoint, companies have to make sure their customer service experience is top-notch. This means having a well-trained team who can solve problems quickly and effectively, as well as provide customers with helpful tips and advice.
Ability to Return Product
To successfully establish a customer retention approach, DTC businesses need to ensure their customers are receiving a level of service and convenience that stands out from the competition, including offering easy returns, refunds, and exchanges for damaged or incorrect orders. Making it convenient to return items, and responding quickly to customer’s inquiries are also essential elements of effective customer service. Long after customers have placed their orders, businesses must focus on cultivating a lasting relationship with them. Rewarding customers for making purchases or referring their friends to your DTC business with a loyalty program or a points system are excellent ways to enhance customer satisfaction and loyalty.
Earning Trust from Shoppers
Without physical stores, DTC companies have fewer opportunities to build trust with their customers. Interacting with customers in a store creates trust and loyalty, and without it, customers may turn to more established brands. Without physical stores, customers often have to wait longer for products they’ve ordered. This can detract from the immediacy and instant gratification associated with shopping in stores.
Difficult to be Profitable
Direct-to-consumer marketing is an increasingly popular approach for businesses to reach new customers online. However, creating a successful DTC business is not always a straightforward task, and many business owners find it difficult to make a profit due to tight margins they encounter when competing in a competitive and crowded landscape. With so many new companies launching every month, the cost of customer acquisition and the cost of producing goods continue to climb. Additionally, DTC companies have to foot the bill for marketing and advertising. This combination of rising costs and slim profit margins makes it difficult to remain profitable and sustain growth.