There are two ways to get your product in front of consumers: direct-to-consumer (DTC) or through retail.

But, which is the best path for your business? It depends on a variety of factors, including your budget, marketing goals, and target audience. Let's break down the key differences between DTC and retail so you can decide which route is right for you.

DTC vs. Retail: The basics

DTC businesses sell their products directly to consumers, without going through a middleman like a retailer. This allows them to build a direct relationship with their customers and control the entire customer experience from start to finish. DTC businesses are often able to offer lower prices than retail businesses because they don't have the added costs of working with a third party.

Retail businesses, on the other hand, sell their products through brick-and-mortar stores or online retailers. This means they need to work with a middleman in order to get their products in front of consumers. Retail businesses typically have higher prices than DTC businesses because they have to cover the costs of working with a retailer.

Now that we've covered the basics, let's take a closer look at the key differences between DTC and retail.

DTC vs. Retail: The key differences

There are a few key differences between DTC and retail businesses that you should keep in mind when deciding which path to take.

1. Customer acquisition costs

DTC businesses typically have higher customer acquisition costs (CAC) than retail businesses. This is because they need to invest more in marketing and advertising to reach their target consumers directly. DTC businesses also need to build their own eCommerce platforms and handle all of the logistics involved in shipping products directly to consumers.

Retail businesses, on the other hand, have lower CACs because they can rely on retailers to help them reach their target consumers. Retailers already have established eCommerce platforms and brick-and-mortar stores that consumers can visit to find products. Retailers also handle all of the logistics involved in shipping products to their stores.

2. Brand awareness

DTC businesses often have to work harder to build brand awareness because they're starting from scratch. They need to invest in marketing and advertising to reach their target consumers directly. It can take months or even years for a DTC business to become well-known.

Retail businesses have an advantage when it comes to brand awareness because they can piggyback off the awareness of the retailers they work with. Consumers are already familiar with popular retailers, so they're more likely to trust a product that's sold through a retailer than a product from an unknown DTC brand.

3. Pricing

DTC businesses typically have lower prices than retail businesses because they don't have the added costs of working with a third party. They're also able to offer discounts and promotions more easily because they control the entire customer experience.

Retail businesses typically have higher prices than DTC businesses because they need to cover the costs of working with a retailer. Retailers also typically require minimum advertised prices (MAP) from the brands they carry, which means brands can't discount their products as easily.

4. Customer relationships

DTC businesses have the advantage when it comes to building relationships with customers because they sell directly to them. They're able to control the entire customer experience and build a direct rapport with their consumers. DTC businesses can also gather customer data more easily so they can better understand their needs and wants.

Retail businesses typically have weaker relationships with customers because they sell through a third party. They don't have as much control over the customer experience, and it's harder for them to gather customer data.

5. Product selection

DTC businesses often have more flexibility when it comes to product selection because they're not limited by what retailers are willing to carry. They can experiment with new products and quickly add or remove items from their inventory based on consumer demand.

Retail businesses are more limited in their product selection because they need to carry items that retailers are willing to stock. They also can't experiment as easily with new products because they need to go through the retailer's approval process.

6. Scalability

DTC businesses often have an easier time scaling than retail businesses because they don't need to rely on third parties. They can invest in their own eCommerce platform and logistics infrastructure to support a growing customer base.

Retail businesses can have a harder time scaling because they need to work with retailers who may not be able to keep up with their growth. They also may need to invest in multiple retail partnerships to reach different geographical markets.

7. Order fulfillment

DTC businesses typically have more control over order fulfillment because they manage their own inventory and shipping. They can invest in their own logistics infrastructure to make sure orders are fulfilled quickly and efficiently.

Retail businesses typically have less control over order fulfillment because they rely on retailers to handle shipping and inventory management. This can lead to longer wait times for customers and more potential for errors.

8. Returns

DTC businesses typically have more flexible return policies because they manage their own customer service. They can offer hassle-free returns to make sure customers are happy with their purchases.

Retail businesses typically have stricter return policies because they need to adhere to the retailer's policy. This can often be less customer-friendly and may require the customer to pay for return shipping.

9. Branding

DTC businesses have more control over their branding because they sell directly to consumers. They can design their own marketing campaigns and website to reflect their brand identity.

Retail businesses have less control over their branding because they need to sell through a third party. They may need to adhere to the retailer's guidelines for marketing and branding.

Using marketing automation for DTC marketing success

If you opt for a DTC business model, you'll need to invest in a good marketing automation platform. This will help you manage your direct relationships with customers, gather customer data, and automate your marketing campaigns.

This is a key component of success for any DTC marketing strategy.

When you have complete control over the customer experience, you need to make sure every touchpoint is optimized for conversions. Marketing automation will help you do that by automating your marketing campaigns and giving you the insights you need to make data-driven decisions.

Tools like AfterShip can help you get started with marketing automation for your DTC business. AfterShip provides a complete platform for managing direct-to-consumer relationships, from acquisition to retention.

It includes features like email marketing, web personalization, and abandoned cart recovery that will help you drive conversions and grow your DTC business.

The right choice for your business

So, which is right for you? DTC or retail?

The answer depends on your business goals and needs. If you're looking for more control over your product, pricing, and customer experience, then DTC may be the better option. If you're looking for more exposure and a wider geographical reach, then retail may be the better option.

Both DTC and retail have their pros and cons, so it's important to weigh all of your options before making a decision. Talk to other businesses in your industry to see what they've done and what's worked well for them. And, of course, consult with a business advisor to get tailored advice for your specific situation.

Now that you know the difference between DTC and retail, you can make the best decision for your business. Good luck!