In this blog post, I will go deeply into some of the most successful D2C companies to show what characterises the best-performing brands.
Whether new to the market or wanting to expand an existing business with a D2C platform, the most successful D2C brands follow four steps:
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Find a niche market where you can do even better/differently than existing brands
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Limit your product range and expand gradually
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Listen to your customers and interact with them
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Make the product and purchase experience an important competitive parameter
Not just born-digital start-ups are successful with the D2C business. A study by the English bank Barclays shows that even before the pandemic, developments in the UK were well underway: 73% of all companies in the UK answered that they sell one or more products from their product range directly to the end consumers. In 2014, the figure was 56%.
Common to the brands that I will describe in this article is that they disrupt an established industry and show completely new ways of branding. They are 'best in class' digitally and manage to create loyalty and long lasting customer relationships. But how do the four steps look in practice at the various brands? I will try to answer this with a number of examples.
1. Find a niche market and do better than existing brands.
In 2019, the brand MagicSpoon went live with a site where they sell a healthy breakfast product that evokes memories of happy childhood summer holidays where, on a rare occasion, you got a package of Kellogg’s Corn Flakes, Coco Pops or Frosties. Through its website, MagicSpoon sells its products directly to customers and now challenges the major breakfast producers.
With a narrow range as a starting point, they are now ready to develop the product line more as demand increases. The same goes for their market, where they now cover the entire United States, but as demand for the product increases in Europe, it will probably soon be traded here as well. The founders, Greg and Gabi, have started the brand as a pure D2C business, but in the long term they want their products to find their way to the supermarket shelves, where they will be a real alternative to giants like Kelloggs and Quaker.
2. Limit your product range and expand gradually
If you feel up to trying your hand at a D2C business model, there is no need to throw yourself from the 10-meter platform. The founder of the Dollar Shave Club, Mike Dubin, among others, realised this. The concept of the company was simply to sell razor subscriptions. By shaving off expensive middlemen, sponsorships and store leases, the Dollar Shave Club can sell razors at a price of one dollar each.
Since they went live in 2012, the company has expanded its range so that today they sell a large selection of creams, shampoos, and other beauty products to men. Both in a shop and as subscriptions.
By starting with a narrow focus, you may as a D2C brand test the market, establish your business and build strong relationships with loyal customers. Once this structure is in place, there is ample opportunity to expand the product range and create business growth. In 2018, the Dollar Shave Club was sold to Unilever for $1 billion.
3. Listen to your customers and interact with them
Since the manufacturer of the HelloFresh meal boxes went live in Berlin in 2011, the company has been in close dialogue with its customers. It is precisely the close relationship and the ability to understand the customers that has led to HelloFresh now being one of the world's fastest growing start-ups with offices in more than 15 countries. The former marketing director of the global company told in an interview with Forbes what the D2C business model means for their innovation and ability to tailor products to the market before the competitors:
“We have this fantastic direct-to-consumer feedback loop. We listen intensely to our customers every single week, and now we have more than six years of data on recipe preferences, culinary preferences, ingredient preferences, spice preferences, and we use that data to improve and customise the product, leading to an even stronger personalisation of the product in the future”.
Whether you are selling a meal box or another product, the D2C model has all the ingredients needed to create a strong customer relationship. The insight that comes with this provides good preconditions for product development targeted for the demand in the market.
4. Create a product and buying experience that sets you apart from the competition
The period from the customer clicking on your website and until the package with a product is opened by the customer is part of the customer journey and experience. Throughout this process, there is an opportunity to influence the customer's overall impression of your brand. There is therefore no reason to slacken attention as soon as the purchase is completed. By making the purchase, the delivery and the unboxing experience into something special, you gain an advantage that often leads to repeated purchases from the same customer.
The clothing manufacturer Reformation has strongly advocated being sustainable under the heading “being naked is the #1 most sustainable option. We're #2”. Yes, in fact, the company aims to be CO2 positive in 2025.
Reformation exudes sustainability across the board from product presentation on the website to delivery. Their packages are thus narrow and light, which limits the CO2 footprint of freight. In addition, their shipments do not contain plastic and the material is easy for the consumer to dispose of in the waste separation.
By having a rigorous expression throughout the customer journey - from webshop to order confirmation and unboxing - the customer gets a stronger experience of the brand, and if you are successful, the customer gets an emotional connection to the brand that increases the likelihood of repeated purchases. This means you get more regular customers and ultimately strengthen your business.
Do you want to know more about D2C?
In our podcast below, you can hear the CEO of Camille Brinch Jewellery, Daniel Brinch, talk about their considerations as a D2C business, and Head of Digital i Kvadrat Marie Kronborg Ellemose's experiences with the B2B company's new D2C platform.
