South East Asia is the hot-cake for e-commerce businesses for its spiraling consumerism that accounts for a CAGR rate of 15.08%. The SEA e-commerce market is estimated to touch $53 billion by 2023 from $18 billion in 2019. All this accounts for the buzzing e-commerce trends in South East Asia like expedited shipping, checkout & payment innovations, revived technology support, purchase models like BNPL or BOPIS, etc. The need for a personal touch and niche products by customers is making space for a new trend - D2C (direct-to-customer) business models.
The D2C approach of selling products includes complete routing of manufacturing, marketing and logistics to the customers directly without any third-party marketers, sellers or any other platform. The purpose is to market own products to drive customers to the company owned product stores. Singapore alone has been a cherry on the cake to drive e-commerce sales and accommodate the D2C trend. As per a Statista report, a single Singaporean spends about US $1000 each on online purchases making it way ahead of the global average of US $634. These sales owing to ultrafast internet and young population with an average age of 44 years brings Singapore in limelight for D2C business models.
Before exploring brands that are a hit and miss in Singapore for their D2C models, let us quickly go through the D2C concept.
How does a D2C business work?
A B2C business model has layers in its supply chain before it reaches the customer from a manufacturer. While, a D2C business model eliminates all these layers and digitally markets its products to the customers. And then directly sells to the customers. In further stages, the companies open their own brick-and-mortar stores owing to the customer acquisition rate, customer retention and their own brand value.
Why is D2C the go-to trend today?
A D2C approach is what exactly the customers demand today. Customers look for individuality, niche products and direct connections. A D2C approach keeps all the reins in the hands of businesses for customizing the end-to-end user experience. Companies can narrate their own brand story and address directly to customers' reflex points. There is very authentic communication between the brand and customers and this is how D2C owns its value-chain. It does not merely depend on the third-party sellers or online marketplaces like Shopee & Lazada for example. The customers exactly know who the real product owner/manufacturer is and where they are investing their money.
Overall, the benefits of the D2C business model outweigh the other business models like B2C, B2B, in following ways:
Discounted Rates for Customers & Higher Margins
The D2C supply chain makes it evident that the product reaches directly to customers without any sellers in between. Thereby, the manufacturers gain the advantage of keeping higher margins and customers get the same products at discounted rates as compared to what they get from wholesalers or retail stores. There are no hidden costs involved.
Direct Stakeholder Relationships
The D2C companies are part of the entire customer journey closely unlike the wholesale model. There is a direct relationship cum rapport with the customers that helps them understand the customer experience better. This helps them create an engaging brand value by providing products and services that enhance the entire user/customer experience.
Consumer Data Access & Community Formation
The direct customer relationships provide D2C businesses with customer data, their touch points, shopping habits and much more that helps companies analyze, study, forecast and estimate the customer requirements. This data comes with responsibility for breaching protection and other safety measures. However, the D2C concept helps build more informed, aware and loyal customers. Thereby, it turns out to be a more promising model to opt for by manufacturing companies in highly churning competitive markets.
Is Singapore on the way to ride more D2C Businesses?
Singapore consumerism is way ahead than any other country and is likely to increase. After the US, Singapore market has shown likely acceptance of the D2C Business Model. For example, the Singapore multinational company Grab Holdings Inc. that runs ride hailer app partnered with DON DON DONKI stores - a Japanese retail brand that sells food, cosmetics, electronics, household items and much more. This partnership provides affordable products to customers with extensive shopping experience, by adopting the D2C business model.
Besides, some more brands that made place in Singaporeans shopping list include From Yours (skincare brand based out of Singapore that sells cruelty free products across Singapore, US & Europe that are made from exotic ingredients coming from Swiss Alps); Happy Human (a cleaning product brand with purpose to reduce single-use plastic items), etc. Similarly, such unique brands from different segments are reaching the community formation stage via adopting the D2C business model.
One should not be surprised to know that Singapore’s biggest Venture Capital Company - Jungle Ventures that raised 600 million dollars in the fourth phase in 2022 is mostly inclined to invest in companies that foster consumer technology with D2C business models. Some examples from Jungle Ventures Portfolio include – Mio is a fresh farm produce e-commerce company; Believe is a D2C brand that sells skincare and perfumes for muslim community, etc. Singapore is the bull’s eye for e-commerce investors.
How to start a successful D2C Brand?
The key elements to start a D2C brand that is successful and give perks over the long run are as following:
1. Define USP with Competitor Research
USP stands for Unique Selling Proposition, also at times referred to as Unique Selling Point. This element makes your business stand tall and distinctive from other competitors in the same market.
2. Know your Target with Data Analysis
It is essential to know exactly who you are wishing to sell your products to, instead of waiting to see who will buy your products. It becomes easier thereafter to study the statistics of the Target Market or Target Group (TG) to understand their exact requirements and behavior before reaching out to them or communicating with them. Further, the selling proposition data can be used to revise the target market or rather include special cases and build services around those.
3. Build your Brand Story with TG in Focus
Crafting stories of your brand and how it resonates with the lives of your TG makes it viable for people to relate with your brand and seriously consider it while making a purchase. This is exactly what TV ads use to communicate the message with scripts and casting the right kind of people that adheres to their TG. For example, the Bournvita ad for Indian TG focuses on mothers who take care of kids to feed them with the right nutrition, healthy habits and wisdom in their growth years.
4. Market with the right Martech
Martech refers to the Marketing tools that become a crucial element in a D2C business model where the CAC (that is, customer acquisition cost) is more than the CLV (that is, customer lifetime value). This is because the D2C business focuses on creating a brand value by directly communicating with its TG. Therefore, using the right marketing tools and technology becomes essential to keep both the essentials, that is, CAC & CLV investments in check.
5. Build Trust with your Presence
The D2C business model revolves around an end-to-end engagement journey of purchase with the customers. Thus, it is very essential to tap each and every step involved in the process and hindrances or reviews got on it if any. An exclusive customer experience can be guarded with extensive customer support, reviewing each testimonial or feedback and customer purchasing data. The target is to retain customers while building a healthy brand community as discussed before in this article. This is achieved by constant innovation and gaining the trust or credibility of the customers.
6. Align Manufacturing Processes & Supply Chain
Is the company equipped to manufacture all its products? Or it plans to outsource all its manufacturing to verified OEM units? Or it plans to manufacture a few products and outsource the others? These questions help align the manufacturing plans of the business. Additionally, the company can consider the essential processes and info like raw-materials suppliers, fluctuating rates of the raw materials in the market, machinery, tools, Human Resources and other necessary resources required in the manufacturing unit.
7. Align Manufacturer-to-Customer Journey Precisely
The most profound task of the entire business is to align the channel of D2C business operations. This includes the movement of the product from the manufacturing unit, via fulfillment processes like packaging, storing or stocking, shipping, last-mile delivery, etc. until it reaches the doorstep of the customer.
Into the bargain, the company has to make a tough call to define its fulfillment operations from the two options available – in-house omnichannel warehousing or 3PL, that is, Third Party Logistics. These processes should be cognizant of complying with latest customer expectations like same day delivery or zero shipping/delivery charges. It is indispensable to have these operations aligned in order to achieve brand value and business success. This section of business is now made easy with companies like Hopstack who deliver a complete package of omnichannel management software products for both the warehouses and the fulfillment centers.
Singapore’s high-speed internet, mobile-user outspread and youngest generation cumulative is making the country to be the biggest e-commerce market in the world. In parallel, individuality and desire for niche products/services are topping the customer behavior expectation list, as an addition to expedited delivery at minimal or no shipping costs. This combination has opened the doors to the D2C format of business in Singapore.
The D2C business model has lately made it to the trend, to curb the new needs of the customers and is certainly to stay for the upcoming decade. If you are planning to adopt the D2C business model, reach out to the expert advice from Hopstack for complete inventory, warehousing and other necessary operational management guidance.