Direct-to-Consumer: Should You Cut Out the Middleman?



There is a glaring hole in the things I have touched on in my twenty-something entries in this blog series this year, and that is the direct-to-consumer business model. In a global economy this is a form of business that can only possibly exist with the internet. Direct-to-consumer also happens to be my favorite form of ecommerce if I’m being completely honest. I, as a consumer, greatly appreciate the ability to be directly in touch with the people who are designing and then creating the products I am buying. If I have feedback on the products there is a much better chance my thoughts will reach someone who can actually do something with that feedback than if I buy something from Walmart or whatever. So, what is direct-to-consumer and how does it work? I will tell you, because that is obviously why I am here.


What Is Direct-to-Consumer?

Direct-to-Consumer (DTC from hereon) is exactly what it sounds like; businesses sell their products directly to the consumer. No middle man marketplaces like an Amazon or in person marketplaces like Target. DTC is rapidly growing, having reached over $14B in sales in 2019, and presumably skyrocketing during the pandemic ravaging the globe because everyone was inside buying things, at least those that were able to. This implies that people are realizing that they prefer to buy things directly from the people making the things, instead of through other marketplaces.


Pros of DTC

The pros of DTC for the business are, in many cases, the same as the cons, but we will go into them separately and why they are pros and cons. One of the biggest pros is a pro for both the business and the consumer, and that is the ability to directly interact between consumer and business. This means feedback goes directly to the people that are creating the products, which is incredibly useful for both business and consumer. This means the business can act quickly on feedback and the consumer can see that feedback acted on. Another pro, and the first of pros that can also be cons, you don’t have a middleman. For business this means you don’t have to consider the middleman when setting your suggested prices, you can just sell to the consumer for whatever price you want. This also helps the consumer because you’re not paying the markup that comes from a middleman. DTC also creates more customer brand loyalty because they are dealing directly with you, and good experiences bring them back.



Cons of DTC

The most significant con is the lack of a middle man. This means you have to handle all the entire customer experience on your own. Everything from logistics like shipping and returns and such, to customer service and absolutely everything else. Having a middleman means that someone else is handling all these things for you and makes your life easier in that way. With DTC you also don’t really have a way for you customers to touch the product before they buy, unless you are a large enough brand to start buying real estate, so you have to have a robust return system in place. Which, in fairness, is still part of not having a middleman.


Conclusion

I said it in the opening to this post, but I want to say it again. As a consumer, I really enjoy the DTC model. The products I buy are cheaper because there isn’t a middleman. I get to directly interact with the producer of the products I buy. I’m also just generally a fan of supporting smaller businesses when I make purchasing decisions. The DTC model checks these boxes for me in a way that traditional, middleman models do not. Obviously, my consumer preferences don’t have much bearing on what you should choose for how to run your business. I have, however, given you at least a brief rundown on what the potential of a DTC model would mean for your business, and while I don’t expect to have answered all your questions on the matter, I hope to have given you a starting point so you can make the best choice for your business.


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