Direct-to-Consumer: Time to leave marketplaces?

The direct-to-consumer (D2C) market has grown rapidly in the last couple of years, despite digital marketplaces like noon.com and Amazon helping brands reach its consumers online.

D2C sales were forecasted to account for $17.75 billion of total e-commerce sales in 2020, up 24.3% from the previous year. This has also brought about the rise of D2C enablers like CNNB, which has seen a 500% growth in the past 12 months, facilitated by the impact of Covid-19, and also by acquiring multiple brands like L’Oreal and Kerastase that have pioneered in adopting the D2C approach in order to establish direct channels of communication with its customers.

“We realised immediately that there were opportunities in the market for brands to develop ‘Direct-to-Consumer’ businesses. Direct-to-consumer is actually developing – what we call – a brand.com, like a nike.com or adidas.com,” said Nicolas Bruylants, Co-founder and CEO at CNNBSolutions.com.

“Using marketplaces like noon or Amazon to retail products is a great tool as brands can reach a very large population. However, there are a lot of shortcomings too. The first thing is owning your customer relationship. Amazon and noon own your clients, and you (the brand) don’t own your client. It is very difficult to communicate brand values and understand customer behaviour when brands can’t own the client relationship,” he said.

According to a study by InstaPage, 74% of customers feel frustrated when website content is not personalised. Surveys by Accenture suggest that 91% of consumers are more likely to shop with brands that provide offers and relevant recommendations to customers. As customers demand more personalisation, retailers have started noticing that marketplaces, while optimal to reach large audiences, fall short in addressing personalisation and customisation.

On the other hand, with D2C, brands and retailers can access and control consumer data, which helps in the process of personalisation and understanding consumer needs. This allows brands to rid themselves of a ‘middleman’ or third-party distributor, which saves cost and helps increase margins.

“Developing a brand.com enables you to own customer relationship, data, increases your margin because it cuts out the middleman, and enables you to expand into markets where you’re not necessarily present”, he concluded.