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Direct to Consumer Sales Model: History, Trends & Examples

Instructor: Beth Hendricks

Beth holds a master's degree in integrated marketing communications, and has worked in journalism and marketing throughout her career.

Some brands are moving away from retailer partnerships to sell directly to consumers. In this lesson, you'll learn more about this model, what it may look like and some examples of brand doing it.

The Way Retail Was

Throughout history, if a consumer needed laundry detergent, milk or coffee, they would visit a general store (later, we'd just call it a retail store), where providers brought in an assortment of merchandise for customers to choose from.

For years, this is the way it worked: Brands manufactured products and engaged in relationships with retailers, who sold the products the manufacturers created. It wasn't necessarily the greatest relationship because retailers operated on narrow margins and brands longed for the relationship that retailers were able to build with customers.

Fast forward to the past two decades or so and, thanks to advance in technology and the internet, there are more ways than ever for brands to not only communicate with its consumers, but sell to them as well. When personal computers were first coming onto the scene, computer company Dell was one of the first to break the typical chain of brand-retailer-consumer.

Instead, they opted to eliminate the middleman and work directly with customers, customizing computers for consumers' needs and selling directly to them through catalogs and later the internet.

Today, many companies opt for the direct to consumer sales model, which allows them to sell their products to consumers directly without the help or need of a retail outlet.

The Shift to Direct

Apple is a great example of the shift of brands selling directly to consumers. Sure, you can buy an iPhone or an iPad at your local wireless store, but Apple has not stopped there. Not content to let retailers do the heavy lifting, Apple has built not only its own retail stores, but an e-commerce platform where consumers can explore the specs of a variety of Apple Watches or try a hands-on demonstration of an iPad.

Apple stores succeed as a brand using a direct to consumer sales model.
apple, direct, selling, sales, store

Some brands, before entering the retail space, relied on factory or outlet stores where they would sell overstock or marked-down goods to consumers. Today, those brands are also setting up shop right in the middle of your local shopping mall to market directly to shoppers and convert them to loyal customers. It's no longer necessary to visit Macy's to find a Coach handbag, for example, though you still can. But, you can just as easily visit Coach's retail store a few doors down and perhaps see a more complete line of purses and accessories.

Besides being able to market and sell directly to consumers, brands are choosing this route because of store consolidations offering fewer retailer relationships, the dominance of a few key retailers pushing others out of business, and tighter retail controls that limit a brand's visibility. So, brands that opt to go retail have a few options to consider.

Retail Options

Brands that opt for a direct to consumer experience typically do it in one of these ways:

  • Flagship stores - large stores in high-traffic retail locations, like Saks Fifth Avenue's flagship location in New York City
  • Full-line stores - stores that blend brand awareness, marketing and sales. Apple is a good example.
  • Kiosks or ''stores within a store''- Best Buy giving space to Samsung inside its stores is a type of store-within-a-store. This allows brands control over sales and customer relationships.
  • Outlet store - once discount spaces, outlet stores are starting to feel like upscale shopping centers.
  • Pop-up store - more of a marketing strategy than a full-fledged store, pop-up stores help to create buzz over a product for a limited time. Nike opened a pop-up location in Cleveland to sell LeBron James' new LeBron 15 in late 2017.
  • Brand experiences - when brands get involved in extensions of their primary business, such as Harley-Davidson retailers opening cafes inside its stores.
  • E-commerce - allows consumers to connect with brands through their online stores.

Factors to Consider

Brands that want to make a move toward selling direct to consumers have to consider a few important things.

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