If you are starting a new business, you are probably studying and exploring about the various ways you can sell your product on eCommerce platforms or marketplaces (e.g. Amazon, Etsy, Tmall or Rakuten) versus your own online shop. Massive website traffic may be attractive and being on a massive branded platform can feel like a safe and obvious option. However, some brands are turning towards a new model with strong margins, higher customer engagement with more room for creativity to fuel brand development – Direct-to-Consumer (or DTC).
Here are 3 aspects to consider before you start selling on an eCommerce platform or marketplace:
1) Increased distributor fees
When you don’t have control of your selling space, there are fees and costs you can’t choose or disregard. Some are hidden, some are disguised, some are rates while others are only revealed when transactions are close to completion. When you start to summarize all the fees, rates and charges that an eCommerce platform may charge, you will find that they amount to a substantial portion of your sales margin. If you add shipping and fulfillment, you’re looking enough of a reason to consider an alternative.
2) Managing multiple sales channels
It’s likely that you’re selling via multiple channels such as eCommerce platforms, your website, distributors or bricks-and-mortar stores. Managing sales across different channels can be challenging as each presents itself with different requirements and can put a strain on resources in terms of time, cash flow, inventory, processing or shipping. Not owning the transaction process has its risks as well, as any errors or challenges experienced on other channels can impact brand reputation and customer satisfaction. From the outside looking in, it may appear that businesses have a far-reaching empire selling its products however a multichannel approach can also be dilutive to a brand and the way it engages with customers.
3) Is competition too close for comfort?
Presence on large platforms or marketplaces would mean selling side by side next to competitors which can help a product’s features outshine the rest, but it can also be a risk if inferior or substitute versions are sold on the same webpage. This downside needs consideration if your product can’t easily stand out, as customers are just a click away from the next option.
DTC provides brands with true autonomy
It may appear to be more time and resource consuming, but having your own online store is a long term strategy to establish a brand’s very own digital property on the ever-expansive internet. Having a website online is more than just a static placement or window to your digital shop but more a medium to deliver your brand in its entirety using design elements, user experience, customer interactivity and connectivity to truly heighten the presence of your business and harness the relationship consumers have with your brand. Essentially, DTC enables a brand to master more of its own fate, personalize its engagement with customers and hold significant autonomy amongst its peers on the internet.
For example, Warby Parker is well known to have challenged industry incumbent Luxottica by directly offering consumers a well crafted and strategized alternative to the reading and sunglasses retail ecosystem, going as far as delivering several frames to try on at home and eventually even launching bricks-and-mortar concepts on its own terms. Without the autonomy that D2C provides, Warby Parker could never have carved its own slice of market share within a competitive product category.
Selling through your own online shop also provides more control over your margins by removing the middlemen and going directly to your customers. However, to drive sales on your online shop and rival those of eCommerce platforms and marketplaces, you need to invest in your online presence. Luckily with the DTC model, the healthy margins and autonomy over your online shop allow you to take charge and invest in your own digital marketing strategy. Having your own digital marketing strategy has significant advantages including the ability to invest in generating traffic, nimbleness to take on competitors, control over budgets, pace your own growth and flexibility to engage with customers.
The adaptability that DTC provides is extremely valuable to a growing business and as technology continues to develop, it never ceases to create and thrive off new opportunities in the evermore digitized world.