Direct-to-Consumer (DTC) e-commerce has changed the way customers interact with businesses and shop for almost everything, including craft brews, clothing, and even quality furniture. Even before the pandemic, direct-to-consumer brands were regarded as the digitally native retail segment. Traditional retailers have suffered substantially as a result of this power shift.
Today though we are going to take a look at the food brands that are taking advantage of the DTC model. They account for less than 1% of the global food market, but they are rapidly expanding.
Customers are buying more and more goods directly from producers' online stores. And why is that? There are multiple reasons for that -the global pandemic, the diminished availability of nearby grocery stores, the increasingly long delivery times of typical supermarket e-commerce sites, and more.
Let me explain why direct-to-consumer companies have tremendous potential to reshape the global food and beverage industry, as well as show you some examples of DTC brands.
What exactly is DTC?
Direct-to-consumer brands, or DTC brands, are companies that sell directly to their customers online rather than going through wholesalers or retailers —middlemen who were once required to get a product to consumers.
DTC businesses control most of the processes themselves and do not need to outsource them. The brand is in charge of controlling the stock quantity, sorting, packaging, and shipping the merchandise when an order is placed by a customer. This is an interesting solution, as it makes it unnecessary for the company to depend on other businesses, even though it requires more work. They have complete authority over everything, from start to finish. DTC does not require any middlemen and allows the company to sell their products straight from their website instead of retail stores or pop-up shops.
Direct-to-consumer companies often opt for a subscription-based services, meaning they charge a monthly fee and send their products to buyers on a regular basis. It works great for people who only shop from their go-to brand and would like to receive something regularly.
Brands implementing this model can use first-party customer data to their advantage - personalised and tailored offers for customers can boost revenue growth enormously.
Why are the DTC brands getting more popular?
The DTC retail model is growing in popularity because it brings brands closer to customers. DTC brands interact directly with clients and strengthen the relationships. By going direct-to-consumer, brands gain a better understanding of who is purchasing their products and why. It helps them in future because they already know who their client base is.
Creating solid and lasting shopper relationships is easier with a greater understanding of who the buyers are than with more traditional methods. Brands may reach out to clients in more ways while maintaining a more personalised level of touch, and such actions encourage buyer loyalty. Even the data collected, like shopping preferences, comes directly from the shopper, so it is as realistic as possible.
This creates a unique customer experience, something that was not quite possible in the pre-Internet era. Now, the buyer does not have to even move from his desk to get what he may need - be it a bottle of wine, shampoo or a vegetarian dinner. It also presents people with an interesting twist to regular shopping: monthly boxes of quality products and a subscription service. Nowadays, you can get a selection of groceries delivered to your front door every week or month, without a need to browse the supermarket shelves.
The timeline of the DTC model
It all started in the 2000s-2010s when new companies started to take full advantage of what the Internet has to offer. Brands like Warby Parker, Bonobos, and Everlane set up their digital e-commerce stores, heavily promoting them on social media to acquire customers and sell directly to them. Proper marketing strategy can do wonders, and in their cases, it worked extremely well.
Over a decade has passed and every day more and more people switch to online shopping, digitally native brands and Internet marketplaces. During the pinnacle of the pandemic, just 90 days represented ten years' worth of e-commerce growth! Many traditional businesses scaled down their operations and either decided to sell online or close down altogether.
2020 was a year of a huge boom in eCommerce, mainly because of the crisis that the pandemic brought to so many brands. Many thought of putting their investment money into Internet-based stores - and for mosti nvestors, it was a highly profitable decision.
Third-party retailers are still in business and likely will be in the following years, but selling directly to an interested customer is definitely much more modern. eMarketer research shows that by 2023, online retail will make up 22% of global sales.
Why are direct-to-consumer brands so important for the food industry?
Because you can cut out the middlemen and eliminate the fulfilment fees. Not having to sell wholesalemakes DTC cost-efficient for the brand and consumer alike. Even if you are on a shoestring budget, you can open a Shopify store. Marketing is also less expensive for DTC companies.
61% of online shoppers say individual businesses provide a more personalized experience. Without the limitations of big-box retailers, DTC brands can shine in providing customers with personalized experiences.
The lifetime value (LTV) of those companies is also different. Wine and meal delivery businesses score the highest LTV – $737 and $233 respectively. This may be expected for an expensive product like wine. Ready-made meals, however, benefit from a high retention rate and one of the highest order numbers in the survey.
Examples of DTC brands in the global food market
DTC food businesses are still niche brands, but they are gaining traction in the realm of grocery eCommerce thanks to the adoption of renewable subscription service models. In fact, some specialised food and beverage firms are doing extremely well online. The pandemic especially influenced that market, as fewer people went out to buy their groceries in regular stores. It provided some DTC companies with a unique chance to grow. Here are some examples of successful direct-to-consumer brands.
Luxury foods market
Haus is a DTC brand that sells custom wines featuring various notes and flavours and offers a membership subscription that supplies customers with several bottles a month. By cutting out retail partners, they were able to keep the prices of their products reasonable. It is definitely an innovative product many people love to purchase online.
Olive and Sinclair: Olive and Sinclair chocolates offer plenty of classic flavours to appeal to every generation- candied lemon chocolate, bourbon cacao nib brittle, and duck fat caramels. They have a superior SEO strategy - they know their target audience; make use of the customer data they collect and properly manage their social media campaigns. All that without any retail stores.
Food & Catering
Daily Harvest - this DTC brand provides options for every meal—and every part of that meal, including dessert. Smoothies, harvest bowls, flatbreads, soups, and even ice cream are delivered frozen and ready to prepare within minutes.
HELLOFRESH - With weekly, zero-waste deliveries, consumers can order just the right amount of ingredient packs they need to make nutritious, healthy meals. It proved to be a hit with the online community, especially because of the reduced food waste and the clear subscription model. Consumers online liked their eco-friendly products enough to make them one of the top DTC brands.
Soylent Plant-Based Protein Shakes - Two offers are immediately available to draw in new buyers: free shipping and a 10% discount. Soylent shares educational information including science and research for the skeptical buyer and some good storytelling.
Of course, direct-to-consumer is not limited to the food industry, as there are many top DTC brands from other sections, like Dollar Shave Club selling shaving accessories. Such successful companies have good brand ambassadors and make use of creative marketing to reach the top, but it is the comfort that DTC business model provides that the buyers value most.
DTC companies and their place in modern business
Overall, direct-to-consumer brands offer a customer-centric, hyper-focused approach and extensive use of social media. They capitalize mostly on regular customers, especially those opted for a subscription service.
People love the seamless shopping experience and their product offerings. Even though building a successful DTC brand can take a reasonable amount of time, it gives the seller a very high level of control over the whole product creation and the sale process itself - the company owner is also a supplier and a sales representative.
Setting up a DTC business is also easier than a regular one - and definitely less expensive,as you can do so with just $25,000. If you have a unique concept that you believe may sell well online, this sales model might be right for you.