What are DTC Marketplaces?

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Oct 9, 2023

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19 min read

KWs: DTC marketing, DTC e-commerce services, Guide to having a successful DTC brand, SEO services, Social media marketing, Online brand reputation, DTC tech commerce services

Modern commerce has witnessed a profound transformation, with the pandemic acting as a catalyst for seismic shifts in consumer behavior. Ecommerce platforms and direct-to-consumer (DTC) sales have not only soared but have become integral to the survival and success of businesses across industries. Understanding the concept of DTC Marketplaces, or Direct-to-Consumer Marketplaces, is paramount as we navigate this new era.

DTC Marketplaces represent a pivotal juncture in the evolution of retail. These platforms bridge the gap between brands and consumers, offering a direct conduit for businesses to reach their target audience. Essentially, they serve as digital bazaars where brands can showcase their products, leveraging the power of established online marketplaces like Amazon, eBay, or Etsy to connect with customers.

The significance of DTC Marketplaces lies in their ability to provide brands with a ready-made, high-traffic stage to display and sell their wares. These platforms empower businesses to circumvent traditional distribution channels and engage directly with their customer base. In doing so, they facilitate a level of immediacy and convenience that aligns seamlessly with the demands of today’s consumers.

The key features and functions of DTC Marketplaces are multifaceted. They offer robust e-commerce infrastructure, often coupled with sophisticated analytics tools, making it easier for brands to track and optimize their performance. Furthermore, DTC Marketplaces provide access to a diverse and expansive customer pool, allowing brands to tap into new markets without the need for significant upfront investments in digital infrastructure.

In this article, we delve into the dynamic world of DTC Marketplaces, dissecting their benefits and drawbacks and exploring how they can synergize with dedicated e-commerce websites. The strategic decision of whether to prioritize an exclusive website or embrace the reach of established marketplaces is crucial, and understanding the nuances of these options is essential for modern businesses seeking sustainable growth in an ever-evolving retail landscape.

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The Marketplace vs. E-commerce vs. Omnichannel

Before we dive into the nitty-gritty of things, let’s get the basics out of our way by breaking down what each term means;

  • Marketplace: A marketplace is a platform or venue where multiple sellers or vendors can offer their products or services to a broader audience of potential buyers. These platforms facilitate transactions between buyers and sellers, often providing tools and features for product listings, payments, reviews, and communication. Examples of online marketplaces include Amazon, eBay, and Etsy. Marketplaces can cover various industries, from e-commerce to services and even digital goods.
  • E-Commerce Sites: E-commerce, short for electronic commerce, refers to the buying and selling of goods and services over the internet. E-commerce sites are online platforms or websites specifically designed for businesses to showcase and sell their products or services to customers online. These sites may vary in size and complexity, ranging from small boutique stores to large online retailers like Amazon. E-commerce sites typically include features such as product listings, shopping carts, secure payment processing, and order management.
  • Omnichannel: Omnichannel is a strategy used by businesses to provide a seamless and integrated customer experience across multiple channels, both online and offline. This approach aims to ensure that customers can interact with a brand or business consistently and effectively across various touchpoints, such as websites, mobile apps, physical stores, social media, email, and customer service. The goal is to create a unified and cohesive customer journey, allowing customers to transition between channels seamlessly while receiving consistent information and service.

Now let’s compare the former two: DTC Marketplaces vs. E-commerce

E-commerce Websites

  • Brand and Creative Control E-commerce websites offer businesses complete design, functionality, and navigation control. This means they can create a digital storefront that aligns precisely with their brand identity and product offerings. Furthermore, website owners can iterate and update their site regularly based on customer feedback, ensuring a dynamic and customer-centric online presence.
  • Ownership of Customer Data Businesses can collect valuable customer information, including purchase history, preferences, and lifetime value. This data can be used for retention marketing campaigns, personalized product recommendations, and improving the overall customer experience.
  • No Third-Party Seller Fees E-commerce websites don’t entail third-party seller fees. This means businesses can anticipate and manage their operational costs more effectively without being subject to variable fees associated with marketplaces like Amazon. The absence of seller fees allows for more predictable financial planning.
  • Less Visibility to Competitors When customers visit an e-commerce website, they are typically focused solely on the products and services offered by that specific brand. There is no direct comparison with competing products or brands, reducing distractions and increasing the likelihood of conversion.

DTC Marketplaces

  • Built-in Audience DTC marketplaces like Amazon provide businesses with immediate access to a pre-existing and extensive consumer base. This eliminates the need to build a specific audience from scratch. However, it’s important to note that this convenience also brings greater competition with other sellers on the same platform, necessitating a focus on product quality, competitive pricing, and optimized product listings.
  • Customer Service Assistance Marketplaces handle most aspects of customer service, including order processing, shipping, and returns. This alleviates the responsibility of managing customer inquiries and complaints, which can become time-consuming as a business grows.
  • Seller Tools to Maximize Sales DTC marketplaces often provide seller tools and features designed to enhance sales within their platform. These tools can help businesses optimize product listings, manage inventory, and even access advertising opportunities within the marketplace. However, it’s important to note that access to critical customer data may be limited within the marketplace environment.
  • Convenience of One-Stop Shopping

    Customers appreciate the convenience of finding a wide range of products in one place when shopping on marketplaces. This convenience streamlines the shopping process, and customers can often benefit from consolidated, low-cost, or even free shipping options. However, businesses operating within a marketplace must be prepared to compete directly with similar products and brands available on the same platform.

    The choice between an e-commerce website and a DTC marketplace hinges on factors aligning with a business’s specific goals and resources. Many businesses opt for a hybrid approach, leveraging both strategies to capitalize on their advantages. And this is where an omnichannel approach comes into the picture.

    When carefully crafted by weighing the advantages and disadvantages of both a website and a marketplace, an omnichannel strategy emerges as the most effective approach to serve customers wherever they prefer to shop.

    The omnichannel approach offers customers flexibility and convenience. In cases of unforeseen disruptions, such as technical issues on one platform or supply chain disruptions within a marketplace, customers can effortlessly transition to another channel to complete their purchases. This adaptability enhances customer satisfaction and reinforces your brand’s commitment to providing dependable and accessible shopping experiences.

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The Growth of DTC Marketplaces

The numbers don’t lie, and DTC marketplaces have witnessed a remarkable evolution and explosive growth, marked by significant shifts in market share statistics and an array of success stories. This dynamic sector has become a formidable force in the e-commerce landscape, and its potential continues to expand. Let’s explore this in deeper detail.

DTC marketplaces have seen an unprecedented surge in market share, with US e-commerce spending skyrocketing to $870 billion in 2021, an impressive $108 billion increase over the previous year. While this growth has benefited various players, the lion’s share has gone to the big marketplaces, which are steadily increasing their dominance.

The most prominent online marketplaces, including Amazon, Walmart, and Target, collectively make up over half of all US e-commerce spending. In 2021, they experienced a staggering 21% growth rate, surpassing the overall e-commerce spending growth rate. Their ability to capture a substantial share of the market is undeniable.

On the other hand, DTC e-commerce spending has also grown robustly, estimated at around $125 billion in 2021, a 15% increase from the previous year. While numerous new brands and small businesses have launched websites, collectively, they represent approximately a quarter of the size of the dominant marketplaces. Notably, their growth rate is slower, further widening the gap between them and the market leaders.

The Makings of a Successful Marketplace

Before we dive into the nitty-gritty of things, let’s get the basics out of our way by breaking down what each term means;

  • Exposure and Discoverability: A thriving DTC Marketplace enhances brand exposure, helping brands stand out in a competitive online landscape. It often curates brands that share similar values with consumers, making it more likely for customers to engage with and buy from them.
  • Commission-Based Model: DTC Marketplaces typically operate on a commission-based model, charging brands a percentage (usually between 10% to 35%) of sales made through their platform. This model does not require the marketplace to maintain inventory, placing fulfillment responsibility on the brands themselves.
  • Focus on Core Business: Successful DTC Marketplaces enable brands to concentrate on core business activities, such as product development and innovation. Brands utilise these platforms to broaden their reach without spreading themselves too thin.
  • Global Reach: Some DTC Marketplaces offer global reach, facilitating international expansion for brands. These platforms, such as Curated Crowd, open doors to markets like China, providing independent designers with access to new audiences.
  • Add-On Features: DTC Marketplaces are increasingly offering fee-based add-on features that empower brands to enhance their marketing efforts. This includes improving social media and email campaigns to boost visibility and sales.
  • Curation Strategy: Brands often prefer DTC Marketplaces with a curated approach, featuring fewer brands but providing effective guidance to customers. Such curation increases the likelihood of conversion.
  • Social Impact: Some DTC Marketplaces emphasize a social impact ethos. For instance, The Fascination directs a portion of each purchase toward supporting social causes, like championing women and minority founders, allowing brands to align with meaningful initiatives.
  • Holistic Shopping Experience: DTC Marketplaces create a more comprehensive shopping experience by offering diverse products. Brands can reposition themselves in a broader market context, potentially attracting new customer segments.
  • Growth Potential: Brands that utilize DTC Marketplaces often experience significant growth. Over 90% of brands that join such platforms witness growth, with half of their sales increasing by fourfold, underscoring the potential for expansion and success.

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Understanding the Advantages of DTC Marketplaces

The question arises: What explains the remarkable dominance of marketplaces in this landscape? Research has shed light on this phenomenon, revealing that marketplaces often outperform DTC brands in terms of pricing and delivery experience for the same products.

  • Pricing and Delivery Advantage A revealing study found that top DTC brands frequently lose the price and delivery experience battle to marketplaces when comparing identical products. This advantage was exemplified in the case of Olaplex, a popular beauty brand. Customers could purchase Olaplex products at lower prices and with faster shipping on marketplaces like Amazon and Walmart compared to the brand’s own website. Getting Amazon reviews can help build more trust among customers.
  • Marketplaces Win Customer Preference Marketplaces, particularly Amazon, consistently emerge as the starting point for well over half of all e-commerce searches. This means that even loyal customers of DTC brands often opt to purchase from Amazon and Walmart, impacting brand margins and customer loyalty.
  • Price Wars and Margins Marketplaces, known for competitive pricing, also take a referral fee of 5-15%. DTC brands earn less profit per sale on marketplaces and miss the opportunity to cultivate lifelong customers.

So, what does the data say?

The data unequivocally demonstrates that marketplaces, especially Amazon and Walmart, frequently win the price war for DTC brands’ own products. Moreover, they offer quicker delivery through Amazon Prime and Walmart Plus services.

Their dynamism, coupled with a pricing and delivery advantage, has attracted a significant customer base, emphasizing the need for DTC brands to adapt and compete effectively.

Benefits of Selling on Marketplaces: Why Diversify Your Channels?

Diversifying your sales channels beyond Direct-to-Consumer (DTC) Marketplaces offers numerous advantages, including increased exposure and revenue streams. Here’s why it’s crucial to expand your reach and why your e-commerce website should be the central hub for brand identity and control:

  • Match Your Customer’s Journey: It’s not just about the number of channels; it’s about meeting your customers where they are on their journey. Today, customers are spread across various channels, so diversifying ensures you reach them effectively.
  • Greater Reach: Utilizing different marketing channels such as social media, podcasts, blogs, and online communities can help you extend your reach to a global audience, generating interest in your brand and products.
  • Risk Hedging: Similar to financial investments, relying solely on one channel is risky. Diversification in marketing reduces dependency on a single platform, offering a safety net in case of unexpected changes or platform alterations.
  • Be Where Your Customers Are: Understand your customers’ needs and preferences, adapting your marketing efforts to engage with them where they prefer to be, ensuring a personalized and attentive approach.
  • Avoid Dependency on One Channel: Diversifying helps you tap into different customer segments and reduces the risk of being overly reliant on a single channel. This adaptability is crucial when facing unforeseen challenges.
  • Engage Current and Attract New Customers: Diversification allows you to simultaneously engage existing customers and attract new ones through impactful and engaging content, strengthening brand loyalty.
  • Gain Useful Data: Exploring various marketing strategies and channels provides valuable data that can guide future decisions, especially in uncertain marketplaces where assumptions may no longer hold.
  • Platform Independence: Being present on multiple platforms ensures you have alternatives if one platform changes its policies or suspends your account, as we’ve seen with major platforms in the past.
  • Resilience to Market Forces: Relying on a single channel exposes your business to market forces. Diversification makes your business more resilient, reducing vulnerability to shifts in technology or legislation.
  • Pivot in a Crisis: Diversification enables you to pivot quickly in a crisis. Businesses that had already explored different channels were better positioned to adapt during global disruptions.
  • Develop Greater Customer Loyalty: Engaging customers where they feel most comfortable and familiar builds loyalty across different market segments, leading to long-term customer relationships.
  • Exposure from Different Angles: Diversified marketing exposes your products and services to potential customers through various touchpoints, increasing interest and curiosity about your offerings.
  • Unexpected Client Acquisition: Diversification can lead to client acquisition from unexpected channels. Adapting to changing consumer behavior and marketing methods ensures you remain agile and responsive.

Tips for Expanding Your DTC E-commerce Business

Running a successful DTC store presents its challenges, but the right e-commerce strategies can help overcome common obstacles like low traffic, high bounce rates, and cart abandonment. Here’s how you can do it.

  • Implement Shoppable Videos

    Incorporate shoppable videos into your eCommerce strategy to provide customers with an immersive product experience. Statistics show that 89% of consumers are influenced to purchase a product after watching a video. Shoppable videos can be created easily using tools like Videowise, allowing you to monetize videos by embedding them on your site or sharing them in marketing campaigns.

    Ava Estell, an all-natural skincare brand, achieved £743K in revenue with a 21% conversion rate by utilizing shoppable videos.

  • Build Supply Chain Muscle

    Strengthen your supply chain by streamlining sourcing, manufacturing, transportation, and distribution processes. This optimization can help reduce costs, minimize waste, accelerate delivery times, manage risk, and facilitate business scalability.

    Tip: Develop a supply chain strategy, work with reliable partners, invest in technology, and prioritize sustainability to enhance your supply chain’s efficiency.

  • Zero and First-Party Data

    Use the power of customer data to drive your business decisions. Zero-party data, obtained directly from customers, and first-party data, collected through website interactions, can be instrumental in improving your DTC store’s performance.

    Collect zero-party data by understanding customer interests and preferences. Use first-party data to track customer behaviors, such as cart abandonment rates and video engagement, to enhance the shopping experience.

  • Invest in Owned Brick-and-Mortar Stores Despite the rise of online shopping, brick-and-mortar stores remain valuable for building personal connections with customers. Opening physical retail outlets can help you establish trust and offer a level of service that online retailers often can’t match.
    In 2021, 46% of consumers expressed a preference for buying from brick-and-mortar stores.
  • Consider Consumer Feedback

    Always prioritize customer feedback when making business decisions. Act on customer suggestions and demands, as they often indicate opportunities for growth.

    Engage with customers through various channels and gather insights. Use feedback to guide decisions, whether it’s updating your website, introducing new products, or enhancing services. Ryan Mckenzie, Co-Founder & CMO of Tru Earth, emphasizes the importance of focusing on customer experience and investing in customer support to differentiate your DTC store.

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Brand Success Stories

Here are two success stories that can serve as your guide to having a successful DTC brand

Artsabers

  • Origin Created by a dedicated fan aiming to bring the Star Wars fantasy to life.
  • Approach Collaborated with high-quality manufacturers to offer affordable custom t-shirts and iconic Lightsabers.
  • Idea Introduced a unique video shopping experience where fans can explore fictional and real-world content, learn about sci-fi weapons, and make purchases directly within the eCommerce video player.
  • Results Achieved remarkable success with a 25% increase in conversions and recorded €1.1 million in sales. This demonstrates the power of immersive video experiences in boosting engagement and sales.

Ava Estell

  • Origin Founded by Yaw Okyere to address the need for safe skincare products for people with darker skin tones.
  • Approach Customer-Centric Approach that prioritized customer education and engagement
  • Idea Embedded informative videos on their Shopify store to educate customers about products
  • Results A 21% increase in conversion rates and up to £743k in additional revenue. This showcases the effectiveness of using videos to inform and engage customers, leading to improved conversions and revenue.

Strategies for Success

Utilize Social Media to Drive DTC Sales

To effectively utilize social media, start by identifying the platforms favored by your target audience. For instance, Instagram is a popular choice, with 83% of customers using it to discover new products and services. It’s crucial to be present where your potential customers are active.

Once your presence is established, optimize your social media strategy. Provide valuable content that resonates with your audience, such as user-generated videos showcasing your products. Additionally, consider collaborating with social media influencers to expand your reach. Micro and nano influencers, known for their relatability and strong community engagement, are often more cost-effective than larger influencers. Measure key performance indicators (KPIs) to assess the impact of influencer collaborations.

A Strong Brand Identity

Building a strong brand identity is essential for establishing trust and confidence among your target customers. Beyond just social media posts, your brand should evoke positive feelings and perceptions. Tools like Videowise can allow you to embed video reviews directly on your website, helping to convince potential shoppers to make purchases.

Moreover, video storytelling can be a powerful way to create a brand narrative that resonates with your audience. Share your brand’s story, values, and mission through video storytelling, reinforcing your brand identity and making it more relatable.

Monitor and Optimize Marketing Data

To understand your customer well, partner with digital marketing platforms that provide you with specific and clear customer data. Key metrics to track include sales revenue, conversion rates, cost per click, site traffic, and social media engagements. Continuously analyze these metrics to gain insights into what’s working and what’s not in your marketing strategies. Data-driven decision-making is critical to optimizing your marketing efforts and ensuring they align with your business goals.

Explore Offline Marketing

While DTC brands primarily operate online, it’s essential not to overlook potential customers who aren’t frequent Internet users. Some individuals still prefer traditional offline channels. Consider offline marketing methods such as placing posters at bus stops or deploying representatives to raise brand awareness. Remember that measuring offline marketing efforts’ effectiveness can be challenging, but it’s an investment that can help you reach diverse audiences.

The Power of Email Marketing

Email marketing remains a highly effective channel for DTC brands. It offers a substantial return on investment (ROI) and allows you to monitor customer engagement and behavior closely. Use email campaigns to provide personalized content and offers to your subscribers. Show genuine care for your customers by delivering value through email communication. Automated emails can play a significant role in nurturing leads and retaining customers.

Customer loyalty is relatively easy to earn as a DTC business when you demonstrate how much you care about your customers’ needs and preferences. Remember that email marketing is integral to the customer journey, and your efforts can lead to long-lasting relationships.

Trends and Predictions in DTC

As per the current industry standards, these are the top 5 trends that we can expect to grow in the DTC sector;

Homeware

The homeware category has witnessed a notable increase in online sales. This growth can be attributed to the increasing number of millennials buying homes and the growing acceptance of online furniture and appliance purchases due to their convenience. As more consumers realize the ease of online shopping for homeware, this category is expected to continue its upward trajectory.

Fashion

DTC fashion brands have revolutionized the fashion industry by offering high-quality clothing directly to consumers. Eliminating intermediaries helps these brands to experience a surge in web traffic. Notably, four out of the ten fastest-growing DTC eCommerce businesses belong to the apparel and footwear sector. Niche fashion businesses, such as Cubcoats specializing in kid’s hoodies, have also recorded strong sales, indicating the diversification within this category.

Health Technology

Brands like Oura and WerLabs have attracted increased investor interest in recent years. This surge is not solely attributed to pandemic-related trends but also stems from the rapid growth of the $4.5 trillion wellness market. Millennials and Gen Z’s heightened focus on personal wellness further contributes to expanding health-tech DTC eCommerce businesses. People prioritize convenient and cost-effective wellness solutions, so this category is poised for sustained growth.

Home Fitness

DTC eCommerce fitness brands, exemplified by Peloton, experienced a significant 66% increase in sales during the pandemic in 2020. The rise in remote work and freelancing worldwide has led to a preference for home workouts, with 66% of individuals favoring exercise at home. Factors such as gym membership costs, overcrowded gyms, and commuting inconveniences have discouraged some from traditional fitness clubs and gyms.

Skincare

The skincare category is expected to gain more popularity in the coming years. The emergence of products tailored to various skin tones, price ranges, and preferences has contributed to its growth. Online sales of skincare products have doubled as consumers increasingly opt for online purchases. The beauty market, in which skincare plays a significant role, is projected to be worth $128.7 billion by 2030.

Pet Food

Emerging DTC brands in the pet food category offer healthier and safer options than many traditional retailers. With the growing number of pet owners, more individuals are open to buying pet food and other pet-related essentials online for their convenience.

In Conclusion

The advantages of DTC marketing are undeniable, providing brands with the tools to forge a more personalized connection, gather valuable customer data, and adapt swiftly to changing consumer preferences.

But success in the DTC landscape doesn’t happen by chance. It requires a strategic approach, a commitment to SEO services to improve online visibility, and a well-crafted social media marketing strategy to engage with audiences effectively. Additionally, managing online brand reputation is paramount in the era of transparent customer reviews and social media scrutiny.

As the DTC tech commerce services ecosystem evolves, staying ahead of the curve is essential. To thrive in this dynamic environment, consider partnering with experts specializing in DTC e-commerce services. With its wealth of experience in SEO services, social media marketing, and online brand reputation management, Saffron Edge can be your trusted ally on this transformative journey.

Your customers are waiting, and Saffron Edge is here to help you make that direct connection. Let’s embark on this journey together and redefine your brand’s future in DTC marketing. Contact us today to learn more about our comprehensive DTC e-commerce services and DTC Performance marketing. Your brand’s success awaits!