Why D2C Brands Prefer Collaboration over Competitive Prices
Why D2C Brands Prefer Collaboration over Competitive Prices

A Direct-to-Customer (D2C) business model is a recent development, which is often confused with conventional supply chains. In a conventional supply chain, a manufacturer creates and sells products to a wholesaler, who then sells them to a retailer. The point of contact between the company and the customer is the retailer. The pandemic has, however, resulted in a pronounced rise in the number of brands that offer their products and services to customers.

As the direct-to-consumer (D2C) retail market grows, so does the competition. According to Statista, D2C e-commerce sales are projected to reach almost $175 billion by 2023, and more brands are vying for a piece of the action.

What Does Direct-to-Consumer (D2C) Mean?

Currently, the best opportunity for innovative brands to establish direct relationships with their customers is through direct-to-consumer (D2C) e-commerce. D2C refers to the practice of selling goods directly to customers through a business' online store, eschewing third-party wholesalers or retailers. Building D2C e-commerce capabilities enable businesses to communicate directly with customers, which supports brand strategy and innovation based on current customer insights. With the aid of these insights, a business can directly address customer needs, increasing lifetime value and brand loyalty.

D2C can be used as a long-term defensive strategy in a competitive environment, but it can also lead to an immediate increase in market share because it reduces the company's reliance on e-giants like Amazon and gives it a chance to expand its share of the expanding online market.

With varying degrees of success, many businesses are attempting to develop D2C businesses. Leaders in this field have succeeded in integrating direct-to-consumer sales into not only their main growth platform but also their core operations. Given the significant portion of sales that come from traditional, indirect sales, others are finding it challenging to shift their priorities to D2C, even though they have experienced some growth in this new channel.

Building a D2C business may be easier for some, as companies differ in terms of their history in direct selling as well as the attractiveness of their brand and category for direct sales. However, companies of all kinds and sizes have been able to make use of D2C e-commerce by scaling their capabilities, or by accessing capabilities such as marketplaces, ready-to-use platforms, and software as a service (SaaS) that facilitate access to the online channel.

Let's examine why D2C is viewed as the retail model of the future and why an increasing number of D2C businesses are seeking brand partnerships.

The Numerous Benefits of D2C

D2C brands have many benefits for both customers and brands. The ease of shopping online from the comfort of one's home, even for expensive items like mattresses and jewelry, is one of these advantages. You can be sure that you'll always order clothes that fit, tasty food, and makeup that matches your skin tone by saving your preferences with a D2C brand. Additionally, D2C brands can save money by shipping directly to customers and eschewing physical retail locations, and they can pass those savings along to customers by providing free next-day shipping, for instance. Additionally, they can provide customers with more practical customer service options like easy returns and shipping updates.

Brands can see the power of D2C because even the major retailer, Nike, ended its partnership with Amazon to concentrate on its D2C strategy. Direct-to-consumer does not involve any wholesale or retail partners. D2Cs make decisions regarding their markets, product pricing, values, and marketing strategies. Due to the D2C brand's total control, they are not required to compete on retail store shelves with comparable brands or products. Owning the customer relationship also improves the D2C brand's ability to customize its offerings.

Scaling Through Brand Partnerships

Even though D2C has many benefits, traveling alone in a retail setting has some drawbacks. D2C companies have a wide range of responsibilities, including manufacturing, marketing, shipping, and customer service. A high-quality brand finds it even harder to stand out due to the proliferation of D2C brands. Companies must come up with creative and compelling strategies to boost their brand without overstretching their resources. This is one of the explanations for why more and more direct-to-consumer businesses are searching for brand alliances with other businesses.

In a successful brand partnership, both parties promote one another to their respective audiences and assets. It's a win-win circumstance that boosts brand strength and perception.

Listed below are a few strategies that can act as the basis for fruitful brand alliances.     

Customer Experience - When customers identify emotionally with a brand, their lifetime value multiplies by four. Offering a compelling brand experience, which is possible through brand partnerships, is one efficient way to strengthen the relationship between the customer and the brand. 

Market Positioning - In many niches, consumer brand competition is fierce. However, a strong competitive advantage can be gained by D2C brands—and even well-known enterprise companies—through the right alliance.

Blending Online and In-store Retail Presence - D2C brands are distinguished by the fact that they launch entirely online, forgoing a physical location in favor of online sales. One drawback is that the customer can't touch or try the product before buying, which helps keep overhead costs low. Many D2Cs seek brand partnerships with established retailers as a result.

Delivery and Fulfilment - How to give customers a positive post-purchase experience is a major challenge for D2C brands. Logistics problems and inadequate third-party services that fall short of their brand promise frequently cause delays during the fulfillment and delivery stage. By locating brand partnerships with suitable delivery companies, D2Cs can create innovative and effective strategies to match the distribution stage with the brand's values and image.

As there are brands, there are as many different kinds of brand partnerships. The identities, target audiences, and niche markets of the two participating brands all play a role in determining the type of brand partnership activity that will be most successful.

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