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Direct to consumer

Direct to consumer (D2C) is a sales approach by which manufacturers and e-commerce brands sell directly into the marketplace without going through a traditional distribution network.

In retail, the traditional supply chain starts with the manufacturer. Products get bought in bulk by wholesalers or handled by distributors specializing in certain categories. Eventually the product makes it into retailers’ inventories and from there it is sold to the public.

Direct to consumer breaks the mold by cutting out intermediaries and establishing an open channel between manufacturer and end consumer.

What is direct to consumer’s appeal?

D2C can be highly attractive to both manufacturers and buyers for several reasons:

  • Eliminating wholesalers or distributors can save operational costs. The manufacturer often can increase profit margins while maintaining a lower price point for the buyer.
  • D2C can create opportunities for brands to interact directly with their buyers. Manufacturers can collect feedback firsthand, capture valuable buyer data, and nurture customer loyalty.
  • It offers brands opportunities to share their stories - unfiltered -- with the marketplace.

D2C is increasingly common in business-to-business (B2B) sales too. Buyers like dealing with manufacturers and enjoy the opportunity to ask questions directly of the product’s maker before and after the sale.

The challenges of D2C

Despite its benefits, selling D2C is no walk in the park. Cutting out intermediaries may make aspects of the sale easier. But there’s a lot more work involved that D2C operations must take on -- or risk not selling.

Marketing is one such area. With D2C, brand development is at a premium. A compelling look and feel is critical to differentiating a D2C -- from product photography to its tone of voice. Without the trusted hand of distributors and retailers to promote their products, manufacturers must get good at executing promotional strategies themselves.

There’s also the question of logistics. Product needs to be picked, packed, and shipped. From inventory management to returns, direct-to-consumer brands must offer levels of customer service on par with e-commerce best practice. They must quickly take ownership of client complaints too. When things go wrong, D2C brands have nowhere to hide.

Pricing is another sensitive area. This is particularly true for companies operating a sales model that pairs D2C with retail distribution. Such brands must be careful to avoid creating channel conflict and confusion. For this reason, some large brands have been reluctant to sell D2C for fear of undermining their channel partners and cannibalizing sales.

Not all big brands harbor such reservations. Industry leaders such as Nike and Apple are renowned for their D2C approaches and the caliber of their direct-to-consumer marketing. And though most large brands understand the need to adapt to the changing retail landscape, they may not have the luxury of choice. A bunch of new of D2C start-ups are jockeying to disrupt the retail establishment.

Facing such headwinds, the willingness of manufacturers to embrace direct to consumer as a sales approach will likely only grow.

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