- US D2C ecommerce sales have more than tripled in the past six years, growing from $36.08 billion in 2016 to $128.33 billion in 2021.
- We expect it will add almost another $100 billion in the next three years, reaching $212.90 billion by the end of 2024.
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With the growth of direct-to-consumer (D2C) ecommerce, even established, incumbent brands are vying for a share and adopting the retail model. Nike, for example, saw 36.8% of worldwide revenue come from D2C sales after pulling away from wholesale and investing more in owned and operated channels. Nike isn’t the only household name to shift strategies, but rather it is among the many established brands that are reaping the most profit from D2C ecommerce. On the other hand, despite a large and growing market, many newer, disruptor D2C brands are withering under the strain of rising costs related to the supply chain and digital advertising.
But, with D2C selling, both established and disruptor brands have more freedom to control their marketing messages, lower logistical costs, and encourage customer loyalty—and that means more opportunity to quickly adapt to changing conditions.
Here, we explain how D2C businesses work and shed light on the evolving landscape.
What is direct-to-consumer (D2C)?
The D2C model removes the need for third-party manufacturers, wholesalers, retailers, and distributors, in order to sell directly to customers. This gives brands complete oversight of the buying journey, plus it allows for more personalized customer service experiences, hyper-targeted digital advertising strategies, and access to data that informs product and marketing decisions.
B2C vs. D2C
Although the main objective for both the business-to-consumer (B2C) and D2C retail models is to sell to customers for private use—not for wholesale or for businesses—B2C companies may still rely on external manufacturers, retailers, or distributors. D2C brands, on the other hand, bypass these intermediaries to control the full purchasing experience.
Some may consider the D2C model a subset of the B2C model, wherein all D2C businesses are B2C, but not all B2C businesses are D2C. Encompassing both physical and digital retail, B2C brands draw revenue from goods and services that do not have a direct journey to the end customer. These can include businesses across a wide variety of categories and sizes, from furniture sellers to auto mechanics, from big-box stores to fashion boutiques.
The D2C business model
D2C businesses are generally founded on a unique product that resolves unmet customer needs—needs that incumbents have failed to address. Modern branding, fresh packaging, and innovative design are then crucial to capture the attention of highly targeted digital audiences.
Consumers are also drawn to D2C products because of the perception of a higher quality product at a lower cost, justified by a shorter path to purchase. D2C brands are able to pass along the savings to their customers by going straight to manufacturers for a cheaper product and by driving sales directly through owned and operated means, avoiding retailer markup.
Ecommerce enablement platforms play a key role in facilitating a brand’s ability to sell online without needing large-scale retailers to host, checkout, and fulfill orders. Shopify is the most dominant platform to democratize ecommerce, with 65.4% of D2C brands in the US leveraging the technology (including 7.6% via Shopify Plus, its enterprise-level offering), according to analysis from PipeCandy.
To compete with incumbents, D2C brands must reach niche audiences through hyper-efficient digital ads. Data from these ads, largely on search and social, measure and optimize marketing budgets and reflect which audiences are most likely to purchase.
The same PipeCandy study found that more than 90% of US D2C brands of all sizes with a social media presence are active on Facebook and Instagram, proving them as the most popular channels for D2C marketing. TikTok is quickly catching up. In fact, D2C brands spent 231% more advertising on TikTok in Q2 2022 compared to the same period last year, with expenditures totaling $30 million, per analytics firm Triple Whale.
Although marketing on Twitter, Pinterest, and YouTube is more varied, one common element remains critical: influencers. Even established brands such as Adidas and Peloton have found that a trusted personality—with their own cultivated audiences—who will endorse a product helps build brand affinity by cutting through the crowded advertising space in a more authentic way.
D2C brand examples
67.7% of D2C brands are in the fashion and apparel category, with food and beverages a distant number two at 8.1%, according to PipeCandy.
Here are 15 examples of D2C brands across all categories:
- Abercrombie & Fitch
- Blue Apron
- Outdoor Voices
- Victoria’s Secret
- Warby Parker
D2C market trends
US D2C ecommerce sales have more than tripled in the past six years. Insider Intelligence estimates the market will reach $212.90 billion by the end of 2024, up nearly $100 billion from 2021.
Established brands that are adopting a D2C strategy, such as Lululemon Athletica and Levi’s, are accounting for the market’s ecommerce growth—not digitally native vertical brands (DNVBs), like Allbirds or Peloton. There are, however, ways for disruptors to stand out and take advantage of consumer trends.
Many of these trends are generational shifts that have been accelerated by the pandemic and the financial uncertainty that followed. For example, consumers are increasingly putting their dollars where their values are. D2C brands like Rothy’s (shoes made with recycled materials), Blk & Bold (a Black-owned coffee brand), and Gravity (anxiety-reducing home goods) have gone up against industry incumbents by aligning their products and ethos with a social cause. These purpose-driven companies are claiming their share of the market by appealing to the rising number of conscious consumers—a large portion of whom are Gen Zers and millennials with great purchasing power.
In addition, D2C brands would be wise to lean into the ecommerce boom and social media’s role in it. We forecast that US social commerce will rise 24.9% to $45.74 billion this year, representing 4.4% of total ecommerce sales. The ongoing shift to social media channels for both product discovery and purchase offers a growing opportunity for brands.
Lastly, the convenience of automated purchasing is not only attracting younger, digitally savvy audiences, but it’s also providing D2C brands with a recurring revenue stream. D2C brands that specialize in consumer essentials, such as Dollar Shave Club (razors and grooming tools), HelloFresh (meal kit deliveries), and Chewy (pet food and supplies), have found success tapping into this demand for convenience. That may be why a new report by PipeCandy and Rodeo estimates that as many as 75% of D2C brands will have a subscription-based offering by 2023.
Many of these findings are discussed in Insider Intelligence’s Great Realignment webinar, a presentation that covers the ways in which ecommerce, social media, fintech, and other industries are being transformed in this era of uncertainty. To learn more about DNVBs and D2C trends, view a recording of the webinar by signing up here.