Why Direct-to-Consumer Brands Choose Shopify

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Some of the top D2C brands in the world use Shopify for their online stores.

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Here’s a list of the top 4 CPG brands on Shopify based on revenue:

Nescafé – $90.8B
Pantry Shop – $70.4B (Pepsi co)
Kraft Heinz – $25B
Red Bull – $7.9B

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Definition: D2C or DTC stands for direct-to-consumer and refers to selling products directly to customers, bypassing any third-party retailers, wholesalers, or other middlemen.

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These are merchants who sell everything from razors to pet food to mattresses to meal kits. In short, they are disruptors or legacy brands who have seen the writing on the retail wall. If your brand wants to win the direct-to-consumer game, you can’t just fill orders, you need to expertly fulfill the modern digital experience expectations of customers who place those orders, where they place those orders.

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The scary part for legacy brands is that they must now compete against these digitally native young upstarts and offer the customer something different. Just look at the successes of the retail disruptor DTC brands like Harry’s, Casper, Blue Apron, Bonobos, Barkbox, and Warby Parker. Tribe Dynamics found that DTC brands averaged a 12% year-over-year EMV growth from 2017 to 2021, compared to an 8% YoY decline for traditional brands.

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But what is the special sauce for a DTC digitally native brand? According to IAB, the savvy brands that are DTC winners specialize in a few key areas:

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• Convenience (time to purchase, fast delivery, savings-commerce accounts, etc.)

• Personalization (the brand gets to know your preferences and tailors the experience based on your tastes)

• Owning Customer Relationship (rather than a 3rd party retailers DTC brands interact directly with their customer base on an ongoing basis and provide them with content and offers right at the right time – think Goop.com or Glossier.com)

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Defining your DTC goals

Selling direct isn’t just about driving extra sales. It’s about owning the experience at every touchpoint. Find out how to use customer data to fine-tune your products, user experience, and omnichannel strategy to create unique shopping moments.

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Maintaining retail relationships

You can launch out in DTC territory and still keep your products on the shelf of big-box competitors. Learn how to set your brand apart by offering private-label or premium brands, all without losing your retail partners.

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Making new customers for life

The most successful direct-to-consumer brands know how to grow their presence through a devoted fan base of influencers. Find out how to turn your best customers into brand evangelists through loyalty programs, user-generated content, and tiered incentives.

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“Brands either have to adapt or [they will] become irrelevant. Selling direct is not just another channel; it’s a new way to do business and a whole new way for us to sell.” -Lauren Fleischer, Senior Associate Brand Manager, Mondelez International

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Selling direct also helps insulate you against the forces that are ravaging retail. More than 9,300 retail locations closed in 2019. The rate of growth for retail sales was declining into 2020 before going negative as the coronavirus spread. It’s why legacy manufacturers and CPG companies are accelerating their online DTC efforts. By 2021 eCommerce is expected to account for 6.6% of all CPG sales, and the DTC movement accounts for 40% of the sales growth in the sector.

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Better customer experience means better mobile shopping experience

Did you know that 57% of customers won’t recommend a business with a poorly designed mobile website? Half will stop visiting it altogether, even if they like the retailer and the products it sells.

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Not only that, but 15% of US adults are mobile-only—meaning the only internet-connected device they use is a smartphone. An eCommerce strategy helps you reach them, almost certainly delivering a better shopping experience than no experience altogether.

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Plug-in mobile commerce options like those available on Shopify allow DTC eCommerce startups to have a mobile storefront, faster checkout and increased brand awareness and loyalty.

“If you are just starting out or have budget constraints, I would focus on giving your customers a highly polished responsive website experience. Mobile websites are cost-effective compared to native apps, and it will also be easier for you to market and reach your target audience.” —Alex Sweany, Customer Success Lead at Searchspring

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Control the user experience

Delivering the customer experience you want hinges on having data that yields actionable insight and having the back-end infrastructure and digital storefront management completely taken care of so that you can focus on things like content and personalization for your customers. Chubbies, the vintage board short DTC company, explains that,

“With Shopify Plus, Chubbies has the tech side of its eCommerce business covered. What’s left is a lifestyle company unleashed to do in the world what it does best.”

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With a growing email list of 1.5 million “Chubster Nation” members — not to mention a Facebook, Instagram, and Twitter audience eclipsing 2 million — Chubbies was everywhere. Its website was a never-ending ode to the weekend, to the lifestyle Montgomery and his co-founders had once only dreamed of honoring in business.

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Drive recurring revenue with subscriptions

Chefs’ Warehouse, which has been selling steak to chefs and restaurants since 1893, recently began selling DTC through its Shop at Home initiative, giving the brand a recurring revenue stream through its subscription products, which can be purchased directly on the Shopify site. The subscription economy is powered by a broad shift in buying behavior where consumers are choosing ongoing relationships with brands over one-off transactions. Like Netflix and Stitch Fix, these services are highly customized. Likewise, brands selling beauty products, baby items, and food are turning their products into subscription services that can be combined, packaged, and personalized. DTC companies that offer subscriptions also grow faster.

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The Subscription Economy Index (SEI), which tracks subscription businesses on the Zuora platform, reveals that subscription businesses grew revenues approximately five times faster than S&P 500 company revenues (18.2% versus 3.6%) and U.S. retail sales (18.2% versus 3.7%) from January 1, 2012, to June 30, 2019. You can capitalize on this growth by automating your subscription order, billing, and fulfillment processes before you launch DTC. Specifically, you’ll need to integrate your eCommerce site with a Shopify app for the recurring billing management systems, (and a payment provider to process customer transactions).

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