Why Is It Important To Understand The D2C Business Model For An E-commerce Start-up?


The internet has democratised the tools required to start and scale a business and levelled the retail playing field. With Ecommerce set for exponential growth as brands wake up to the merits of directly reaching consumers using multiple channels and apps, we try to explore why it is important for a start-up to understand the Direct to Consumer (D2C) model which comes with a set of pros and cons. 

The D2C business model offers numerous advantages to the retail entrepreneur. It would not be wrong to say that start-ups have an upper hand as the legacy brands are set in their ways of doing business while sitting on a large pool of profits. Hence, they do not bother to think outside-of-the-box or pivot towards a new direction. This has paved a way for start-ups to ride the D2C wave as they are able to embrace an entrepreneurial culture and are more agile since they can move from ideation, design, implementation to product launch much faster. 

Why D2C works for Ecommerce? 

  • Cutting out middlemen, higher margins 

Ecommerce start-ups using the D2C model could cut out the middlemen inherent to traditional retail and wholesale models—and pass the savings onto the customers, with lower markups. The extra income can also be invested in enhancing the customer experience and strengthening marketing efforts so you can reach and connect with more of your customer base.

  • Easier scaling, scope for experiment 

Owning and operating your own web store allows you to control what customers see as compared to a retail store. This level of control opens up options for data collection and analysis, from buyer behaviour to web traffic, paid advertisements, re-marketing, and much more. This is extremely important for a start-up to create a niche. 

The platforms also have an advantage of reaching a bigger customer base as the geographical restriction is eliminated. This opens up scope for experiment. This clear communication channel between the brand and customer helps build loyalty, understand buying preferences and generate more repeat purchases, if approached right. 

  • Higher customer retention rate 

Because D2C brands directly interact with customers, they can easily make improvements on their offers based on customer feedback. Giving the customer an integrated buying experience where they can browse and purchase across multiple channels, choose from a range of delivery options etc is a huge advantage. 

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This clear communication channel between the brand and customer helps build loyalty, understand buying preferences and generate more repeat purchases, if approached right.

In order to be heard and noticed by your target market, it is imperative to have a D2C specific strategy. The most successful D2C ecommerce start-ups have been able to win through the kind of brand experience they offer to their consumers. 

Any great brand is built when customer obsession becomes an ingrained part of your company’s culture. This requires insights and data.  With the advent of MarTech and tools like Ecommerce customer relationship management (CRM) like Salesforce, Zoho etc, start-ups  are able to leverage the power of data to get deeper insights into their customers’ behaviour. 

Naina Sood
Naina Sood
Naina was former staff at Dutch Uncles, she writes on business-life-cycle, funding, small businesses and start-ups.

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