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Key Takeaways
- Align your incubator strategy with corporate goals to maximise ROI by securing C-suite sponsorship and linking it to long-term strategic priorities.
- Choose the right innovation focus (core, adjacent, or radical) based on your risk appetite and market expansion goals.
- Benchmark against industry leaders by analysing 3-5 top corporate incubators and adopting proven best practices.
- Set up a structured innovation pipeline and funding model with clear stages (sourcing, incubation, scaling, exit) and dedicated capital.
- Define governance, key metrics and success milestones early by establishing decision-making authority and tracking venture success KPIs.
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The D2C business model seems to be everywhere these days, with companies like Disney, Nike and PepsiCo all making pivots in that direction with astounding returns.
Startups and corporations alike are leveraging the direct-to-consumer business strategy to connect with their customers, increase profit margins and launch new products quickly. Here are a few interesting D2C stats:
Since then, D2C sales by established brands in the U.S. are projected to reach $186 billion this year, with 70% of Gen Z shoppers now ordering from D2C businesses. Meanwhile, digitally native brands (companies born and evolved online ) continue to drive rapid growth in the D2C space.
The question now is: Can the D2C model strengthen your business?
We’ve put together a list of pros and cons to help you navigate the process, but let’s start off with some basics.
What Is the D2C business model?
D2C or direct-to-consumer is a model that gives companies end-to-end control of every step in the business process, including manufacturing, marketing, selling and distribution. It’s about having a direct relationship with customers.
The strategy enables companiesto embrace a more entrepreneurial mindset and take their business process into their own hands. Everything from ideation, design, building and launching is kept in-house, enabling businesses to cut costs and operate with agility.
What are the advantages of the D2C business model?
In recent months we’ve seen customer habits across every industry shift in favour of vendors that offer convenience and exceptional customer service – both hallmarks made popular by the D2C model.
1. Direct access to customer data
Understanding your customers, their preferences and how they interact with your products and services can enable you to:
- Build better, more personalised offerings
- Optimise existing products and services
- Boost your marketing efforts
A middleman normally has direct access to this valuable data. D2C businesses, on the other hand, have direct relationships with their customers, enabling them to gain real insight into their preferences, their needs and even test new products and services before they launch.
2. Higher profit margins
Cutting out any third parties enables D2C companies to reduce costs that would normally go to wholesalers and distributors. The extra income can be invested in enhancing your customer experience and strengthening your marketing efforts so you can reach and connect with more of your customer base.
3. Scaling is easier
The D2C business model is highly digital, enabling companies to reach customers all over the world and gradually reduce their geographic restrictions as the business grows and expands its operational capacities.
4. Innovation is quicker and happens more often
In traditional B2C models, manufacturers can be restricted in terms of putting out new and innovative offerings because their retailers tend to prefer proven “sellers”. In contrast, D2C companies have the freedom to launch novel, new offerings at a smaller scale, assess their customer’s response and make any needed improvements based on real customer data.
The process can be repeated as many times and as often as needed, giving D2C the upper hand in terms of launching new products and discovering new untapped customer needs.
5. Increased brand loyalty and customer engagement
D2C brands have full control of everything that has to do with branding, imaging, messaging and values. They have the freedom to create quality content and engage with their audience through different channels without having to worry if some third-party seller is mismanaging their image.
This enables D2C brands to interact, relate and empathise with their target audience, creating more profound levels of engagement and connection that keep customers coming back for more.
What are the disadvantages of the D2C business model?
Despite the many benefits of the D2C model, it is not without its cons:
1. Increased competition
The D2C landscape has changed quite a bit in the last decade, with more and more companies leveraging the strategy to compete for the same customers. Not too long ago, there were a handful of startups selling glasses, makeup and a few consumer packaged goods, today it’s corporations like Comcast, Verizon and Amazon making their entrance into the arena.
2. Increased liability
Going D2C gives brands complete control over their operations, but that also comes with increased liability for things usually shared with third parties (e.g. shipping, sensitive customer and financial data, cybersecurity breaches).
3. Complex supply chains
Having complete control over the entire business process definitely has its perks, but it makes everyday operations a lot more complex. You’ll be juggling a lot more aspects of your business (e.g. orders, shipments, transport, payments, returns, customer care), increasing not only your responsibilities but your points of vulnerability.
FAQs about the D2C model
Q. What are the main advantages of a direct-to-consumer strategy?
A D2C strategy offers key benefits like direct access to customer data, higher profit margins, faster product innovation cycles, and stronger brand loyalty through personalised engagement and brand storytelling.
Q. What are the biggest challenges of adopting a D2C model?
Launching a D2C business means brands must manage complex logistics and supply chain operations internally, handle direct customer service, protect sensitive customer data, and compete in an increasingly crowded digital marketplace.
Q. How can established brands successfully pivot to a D2C strategy?
For established brands, a successful pivot to D2C involves leveraging existing customer bases, investing in digital infrastructure, optimising D2C logistics, and delivering seamless, high-quality customer experiences across all touchpoints.
Q. Is the D2C business model sustainable for long-term growth?
While the D2C model drives fast market entry and innovation, long-term growth depends on scaling supply chain operations, maintaining strong digital marketing strategies, and adapting to evolving consumer preferences and market trends.
Q. How does the D2C business model impact traditional retail channels?
Shifting to a D2C model changes how brands interact with traditional retailers, often reducing reliance on third-party distribution while strengthening direct customer relationships.
Q. What industries are best suited for a direct-to-consumer strategy?
Industries like consumer goods, fashion, beauty, health tech, and food and beverage have seen strong results from D2C strategies, particularly where customer personalisation and loyalty are key drivers.
Q. What are the key success factors for building a D2C brand?
Success in D2C often depends on mastering customer experience, optimising digital marketing, ensuring supply chain efficiency, and maintaining a strong brand identity.
Q. How important is logistics and supply chain management for D2C businesses?
Efficient logistics and supply chain management are critical for D2C success, ensuring fast delivery times, transparent tracking, smooth returns processes, and a positive customer experience.
Is the D2C business model right for your business?
For corporations that already have an established customer base and proven offerings, making a D2C pivot is a great way to innovate, cater to new customers and expand beyond their core offerings. Companies like Mattress Firm, John Hancock and Warner Media are already leveraging some of their “unfair advantages” with their own D2C ventures to future proof their businesses and protect themselves from disrupters.
Proper planning, validation and management can help safeguard against some of the challenges associated with this model, unlocking a slew of possibilities for companies to experiment with new products and services.
Ready to find out more about how you can leverage and adapt the D2C business model to suit the needs of your business? Check out these 8 D2C tips to accelerate growth in your business.
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Thinking about taking your venture D2C? We can help you design the right strategy to unlock new markets and maximise revenue.
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