Direct-to-consumer (DTC) subscriptions benefit brands but are nothing new, with the rise of ecommerce businesses and online shops, DTC subscriptions have never been easier to fulfil. In recent years, the subscription box model has become popular among direct-to-consumer brands. Subscriptions are now a fast-growing strategy in e-commerce.
From startups to large corporations, many businesses are embracing DTC subscription models. This is because they allow them to have long-term relationships with their customers. Consumers, too, have found value in the subscription model as it offers them value and cheaper prices.
It’s much easier for brands to connect directly with the end-user of their products in the digital era. This, along with users’ increasing desire to purchase directly from manufacturers, is the spark triggering the subscription service sector’s astronomical growth.
How DTC subscriptions differ from general subscriptions
As the DTC subscription becomes more popular, its differences with general subscriptions become more evident. Here’s how they differ:
Manufacturers have the ability to become subscription retailers
In most industries, the role of manufacturers is often at the periphery. They make the products and distribute them to retailers who then interact with consumers. This, however, is changing. Manufacturers have become more connected with consumers, who also desire to purchase products from the source. This now gives manufacturers an excellent window to add subscription retail to their catalogue of products and services.
Policies can be more flexible
In a bid to assure consumers and retailers of the quality of products, manufacturers often put in place return policies, money-back guarantees, as well as cancellation procedures. However, since there are many players between the manufacturer and consumer, the risks are significantly higher. As a result, such policies are usually strict and rigid.
By working directly with consumers, manufacturers have more control over their products, and the risks are lower. This affords them the luxury of being flexible with policies.
You may be using a DTC subscription brand without realising
The DTC subscription model has gained popularity in a relatively short amount of time during the pandemic. In the process, many businesses have adopted DTC marketing strategies to build their brands. As such, there are high chance that you may be using a direct-to-consumer subscription brand without knowing it. Some of the DTC brands you may be using without knowing include:
Dollar Shave Club
When it comes to DTC subscription model success, the Dollar Shave Club is an ideal benchmark for most organizations. The brand was propelled to success courtesy of a simple one-minute and 33-second video showcasing its razors. Within the first two days, the video had garnered 4.75 million views, with 12,000 people subscribing to get their razors.
Instead of using the traditional retail channel to get to customers via stores, they opted for the DTC service model.
Warby Parker
Shopping for eyeglasses can be a hassle. This is exactly what Warby Parker set out to do from the word go. Instead of customers going out to shop for eyeglasses, Warby Parker sends them multiple suitable options to choose from, in the convenience of their homes.
Their simple solution, coupled with creative marketing ideas, has seen the brand gain customers in thousands.
Casper
Buying a mattress may seem like an easy task but wait until you hear all about the things you need to consider. Even before you get to the price, you should know whether you need a soft, semi-firm, or firm mattress. Other considerations include size and whether you want gel, memory foam, or a hybrid.
This process can be long and tedious, which is why Casper, a mattress company that relies on non-traditional marketing methods, has become a popular choice for buyers. Instead of going toe-to-toe with the sector’s big boys, Casper elected to target a millennial audience in urban areas. For their marketing, they used social media influencers such as Kylie Jenner, which helped double their sales.
BarkBox
Your furry little canine friend may be a full-fledged member of your family, but taking care of them can be challenging at times. This is especially so when it comes to buying pet food, treats, and toys. BarkBox is an innovative company that addressed this challenge by adopting a DTC subscription model.
Through their subscription service, customers have pet products and services delivered right to their doorstep. Each month, a pre-packed assortment of dog food and treats is sent to the customers.
The benefits of choosing a DTC subscription model
If executed well, a direct-to-consumer subscription model can yield astonishing results. A perfect example of this is Amazon. Before the launch of its Prime Subscription Program in 2005, the company was struggling against online retailers such as eBay.
Some of the advantages of a DTC subscription model include:
No markups
One of the primary benefits of the DTC model is that there are no markups as there are no middlemen involved. This means that goods can reach consumers at more affordable prices, making it a win-win situation.
More control
As a manufacturer, you have a responsibility to your consumers to ensure that goods are high quality, accessible, and delivered on time. Such factors were hard to control with the traditional model as goods are handled by several parties before reaching the end-user.
A wider array of pricing
When products are distributed through retailers and other third parties, manufacturers are forced to sell at low prices to ensure goods reach the market at competitive prices. A DTC approach eliminates markups, allowing you to charge more per product without passing on the burden to consumers.
Recurring revenue
Many businesses fail within their first five years. Though there are numerous reasons for this, cash flow problems contribute to the failure of 82% of small businesses. Cash flow problems do not signify that a business is not profitable, but that revenues are unpredictable.
With a direct-to-consumer model, you can eliminate such unpredictability with your income. Not unless your churn rate is high, it will be easy to project income as you know the number of active clients you have. From this information, it will also be easier to make accurate growth plans. Increased customer lifetime value
Customers who make a one-off purchase are great, but they’re not dependable in the long run. The best way to build a stable and scalable business is by creating a pool of loyal customers. Adopting the subscription model allows you to create long-term relationships with customers, maximizing their lifetime value for your company.
However, for you to capitalise on such relationships, they must be based on trust and reliability, which then becomes loyalty.
