Historically, the route from manufacturer to consumer has been a long one, with products passing through the hands of wholesalers, distributors, and retailers along the way to consumers. Each touchpoint has their own sets of restrictions—and takes cuts of the profit.
But during the pandemic—with supply chains disrupted (a trend set to continue in 2024), quarantines in place, and everything gone wonky—consumption shifted online. Retailers scrambled to scrape together curbside and delivery options. Manufacturers sat biting their nails as they waited for delayed supplies to arrive. There were many instances in which it became easier for manufacturers to just set up an online store and move product directly from production to consumers.
It has become a move driven not just by wider macroeconomic factors and supply chain forecasting, but also by customers themselves. According to Statista, DTC sales rose from just under $77 billion in 2019 to nearly $213 billion in 2023. Customers love their DTC brands.
Post-pandemic, many manufacturers who went DTC have maintained their online stores, while many more are getting into the game. Let’s take a look at the motivations for and benefits of doing so, the challenges that come along with this shift, and how to address them.
Why are businesses turning to direct-to-consumer manufacturing?
In a direct-to-consumer manufacturing model, consumers purchase goods directly from a manufacturer rather than through a wholesaler or retailer. This may come in the form of a subscription or a la carte, from a brand that is dedicated entirely to DTC, or from one that pairs a DTC arm with a more traditional retail model.
The general steadying in the US manufacturing industry has contributed to the rise in DTC manufacturing business models. After decades of decline, industrial manufacturing in the United States outpaced that of the rest of the world in 2022.
Reshoring has become a solid trend among large manufacturers, including Apple, which revealed in January of 2024 that their suppliers have steadily reinvested in relocating production from China to the United States, to the tune of $16 billion shifted. The closer the production hub is to its fulfillment centers and customers, the fewer the go-betweens, and the more consumers and manufacturers alike benefit from DTC models.
What are the benefits of direct-to-consumer manufacturing?
The ability to connect directly with customers is an obvious benefit of DTC manufacturing, but the many ways these benefits manifest are not necessarily so.
Lower costs, lower prices, mitigated risks
Cutting out the go-betweens means price reductions that can be passed on to customers. A more direct line to customers also reduces the cost of starting up a new business or product line.
For established manufacturers who already have a brand and digital presence, standing up a new product line can be as simple as adding a new page to their website, then socializing that new product across the web. For startups, testing out a new product idea with a DTC model corrals the costs into that of standing up a website, with products produced on demand. Big or small, old company or new, this helps mitigate the risk of product launches and market expansions, creating a faster path to market.
Better experiences and higher conversion rates
When manufacturers sell directly to customers, they’re much closer to the customer data generated in the exchange.
Selling directly from their online store, manufacturers have eyes into the entire customer journey, from the marketing channels that brought them in to where they browsed and clicked, what they added to their cart, how long it took them to check out, and when and how they ultimately decided to make the final call on a product.
With owned first-party customer data in hand, manufacturers have deeper insight into how to market their products, what channels to sell on, and even the market appetite for a product itself. This helps them sell with more confidence, garnering customers with higher average order values and longer term value.
Direct customer engagement
Selling today is just as likely to happen on TikTok as it is on the shelves of an in-person retailer. Social selling is a force to be reckoned with, connecting buyers through the brands and influencers they trust directly into the products they need. The DTC model allows manufacturers to be where their customers are, threading the knot between marketing and production.
Total control of your business
From production to marketing and distribution, owning every step of the process means having maximum control. It’s no longer “produce it and hope the retailer believes in the product enough to give it a nice spot on the shelf.”
DTC manufacturers control branding, pricing, and strategy. This lets them more quickly pivot in the face of rapid market shifts, changes in customer demand, the sudden appearance of a new competitor, seasonal trends, and unexpected sociopolitical economic events.
Challenges for manufacturers going DTC
Becoming an expert in everything
Having control over it all also means having to do it all. That can be a challenge, particularly when operating outside of your zones of expertise.
Manufacturers accustomed to co-marketing with their retail partners will need to go it alone. For manufacturing startups, this can be a bit of a trial by fire, and it’s important to get a good internal team or agency partner in place to help with the logistics of a cross-channel marketing operation.
However, having control over the marketing also opens up the ability to lean hard into the brand voice. This is where you see standouts like Dollar Shave Club, which is frequently held up as a marketing case study in voice and persona.
Besides marketing, DTC manufacturers also must become their own distributors, including every step of fulfillment and shipping. Getting this right is essential for ensuring a great customer experience—and the bar is high, with speed, cost, and convenience of delivery being the most crucial. Flexible returns are also important, meaning manufacturers must master the tangle of reverse logistics.
Competition with established brands
Many big box stores—such as Costco with Kirkland Signature, Amazon with Amazon Basics, and Whole Foods with 365—offer their own product lines that undercut other brands in pricing.
Take Kirkland Signature, which generated $50 billion in sales in 2022, offering products that were often 20% cheaper than even other established CPG brands, such as Campbell Soup, Kellogg, and Hershey. When heading into the DTC market, it’s important to research the playing field and carve out a specific niche, such as low-cost versus premium. Know your angle as well as your “why” for getting into DTC.
The need for greater efficiency
As with any kind of reduction in overhead, efficiency is crucial to any successful DTC manufacturing operation. Industrial manufacturing is ripe for optimization, automation, and digital transformation, leaving lots of room for opportunity for those who do. Establishing automated flows, whether in the back office or on the manufacturing floor, is crucial. AI-powered technology, whether in robotics or in automated data capturing and processing, can help. Establishing self-serve processes for marketing and sales can also cut down on time and labor.
Managing separate platforms for B2B and DTC
For manufacturers that sell on separate B2C and B2B ecommerce platforms, workflows are complicated enough as it is. If adding a DTC arm means adding a third platform with a third workflow, these complications only increase as you try to patch together sales and inventory data for all channels.
But this is less of an issue with DTC manufacturing itself, and more with decentralized workflows. One easy solution is to centralize on a single platform—a transformation made possible by shifts in the B2B ecommerce market to align more with B2C in terms of customer demands.
As an increasingly millennial B2B buyer base moves into positions of power, they’re bringing all of their B2C buying expectations with them. In fact, surveys have found that 44% of millennial B2B buyers act as the primary decision-makers in their companies. That means it’s worth it to cater to millennial and Gen Z preferences, such as a desire to not interact with sales during the purchase process in lieu of a completely self-serve journey.
In short, the B2B and B2C buying experiences are beginning to merge, taking the best from each world and dropping the rest. B2C buyers want the cost benefits of buying directly from manufacturers, and B2B buyers want the smooth self-serve nature of B2C.
The designer furniture company Industry West is a perfect example of this. As chief marketing officer Ian Leslie puts it:
Architects, designers, internal procurement people for Google, or someone decorating their house in the Hamptons are all generally going through the same buying process: they're all on Instagram or Pinterest. They're all Googling the same things. So I just need to show the pieces in a beautiful manner. If they like it, the difference is in whether they will buy one or one-hundred.
The company differentiates between DTC and B2B experiences by dedicating a section of the site to their trade member programs. Here, they lean into the Shopify B2B suite, selling to their trade members in increments, with quantity discount tiers, and providing them with catalogs curated for their company. On the admin side, it’s easy for the team to manage inventory and B2B draft orders, and provide PDF estimates.
So the challenge here is in having too many disparate experiences on the front and back ends—but on a single platform, it’s easy to overcome.
Going all in too fast
For companies with successful established business models, it’s best to explore and test the market appetite for DTC before jumping in whole hog.
In the midst of the pandemic, news about large companies dramatically expanding their DTC operations dominated the news cycle. Several years on, the evidence indicates that established businesses should test before they leap, making sure they really understand their customers’ habits, needs, and desires before abandoning strategies that have previously been successful for them.
For established businesses, it’s best to think of DTC manufacturing as an arm of their business, rather than the whole business itself, before they’ve had a chance to test the viability of the model. Knowing your “why” for getting into DTC manufacturing is key.
How Shopify can help manufacturers go DTC with unified commerce
Done strategically, DTC manufacturing offers great potential to get closer to your customer than ever before. Shopify is the trusted partner manufacturers need to get them there.
Because DTC manufacturing means “doing it all,” it also brings with it the potential to spin up an entirely new technology ecosystem, with each newly in-sourced service in need of management and integration. This is all the more so when selling omnichannel.
Achieving the goals of unified commerce starts with a unified platform. Shopify is that platform, with all of the features you need to sell directly either built natively onto the platform or available in the app store.
From features that help you establish a digital storefront to those that assist with inventory management and email marketing, Shopify optimizes where, how, and when you market, sell, and fulfill. Plus, you’ll find features and APIs that tailor the buying experience, help you make the most of your owned data, personalize storefronts, and go headless—all within or integrated with your preferred tech stack, such as any established ERP you may have.
Other standout Shopify products include:
- Shopify Audiences, which plugs directly into your social media platforms to drive up two times more retargeting conversions
- Shopify Collabs, which matches and connects your brand with influencers
- Segmentation tools to help you better understand and target your audience
And that’s without even mentioning a whole host of other marketing automations.
Direct to consumer, direct to pocket book
With digital selling on the rise, more and more brands are increasingly leaning into direct selling—and all the benefits that come with it. With the help of a feature-rich commerce platform like Shopify, it’s more possible than ever before to cut out the middle person and develop tighter relationships with customers that keep both them and you happy.
DTC manufacturing FAQ
What is DTC manufacturing?
DTC manufacturing is a business model in which goods are purchased directly from the manufacturer. In this model, middlemen such as wholesalers and distributors are cut out of the equation, with goods bought directly from the manufacturer’s digital store.
What is direct from manufacturer to consumer?
In a direct to consumer model, manufacturers are responsible both for producing items and for fulfillment, distribution, shipping, and returns. They have a direct relationship with the customer.
What is an example of a direct-to-consumer product?
Subscription boxes are among the most common direct-to-consumer products, as they allow manufacturers to produce based on known quantities. Many brands, such as Bombas, Glossier, and Gymshark also employ direct-to-consumer models, as do larger brands who run traditional retail models along a direct-to-consumer arm. /p>
