Direct-to-Consumer (D2C) for Manufacturers: The Complete Guide

Manufacturers face two growing pressures: rising operational costs cutting into their margins and an increasingly fragmented customer base with diverse demands. Traditional retail and wholesale partnerships, though valuable, can hinder manufacturers’ ability to respond quickly to these pressures by limiting their control over pricing, branding, and after-sales service. Reliance on intermediates can also delay or obscure customer experiences, further slowing reaction times. Throw in an unexpected disruption that favors online over in-store shopping, and it becomes apparent why manufacturers are increasingly pursuing the direct-to-consumer (D2C) business model.

What Is Direct-to-Consumer (D2C) in the Manufacturing Industry?

D2C in the manufacturing industry—sometimes called “manufacturer-to-consumer”—is a sales approach in which manufacturers sell their products straight to customers, rather than going through traditional middlemen partners, such as wholesalers, distributors, and retailers. By establishing one-to-one relationships with their customers, D2C manufacturers can maintain tight control over the entire purchasing journey. They can also react more swiftly when customer expectations change, which may potentially unlock competitive advantages and new revenue streams.

Key Takeaways

• Research shows that D2C manufacturers outperform traditional manufacturers financially.
• D2C manufacturing allows for greater margins and control of the customer experience.
• Some manufacturers choose to take a hybrid approach, selling both through third parties and directly.
• Best practices include investing in an online presence and collecting performance data and customer feedback.

Manufacturer-to-Consumer Explained

The D2C ecommerce market is expected to grow 24% between 2023 and 2025—and leap 165% by 2034, according to Market Research Future. This acceleration stems from several converging factors, including the COVID-19 pandemic’s disruption of traditional retail channels, manufacturers’ need to protect their margins amid rising operational costs and inflation, and the increasing number of digital shoppers, who are estimated to spend $4.3 trillion online in 2025, per Statista.

At the same time as traditional manufacturers are adding new D2C channels, D2C-only manufacturers are also expanding into retail environments to reach customers who prefer to shop in stores. For example, a men’s grooming products manufacturer that was founded as an online subscription service later secured placement in national retail chains, while continuing to maintain higher margins on direct sales. Similarly, an eyewear manufacturer that disrupted industry pricing through its online model eventually added brick-and-mortar locations and select retail partnerships.

This kind of hybrid approach allows manufacturers to maintain the benefits of having direct customer relationships while also increasing their market reach through traditional retail channels. However, they must take care not to undercut these third-party parents with lower prices. Many use their D2C channel to sell exclusive products or target different market segments in an effort not to compete. This approach also allows traditional manufacturers to test the D2C landscape without disrupting their everyday business plan.

Benefits of Direct-to-Consumer Sales for Manufacturers

Companies with a D2C channel performed as much as 55% better on factors influencing shareholder returns compared to those without, according to an analysis by McKinsey. For example, car manufacturers that adopted D2C strategies (even those with just partial implementations) saw their stock values grow approximately 6X faster over 10 years compared to non-D2C peers, according to the consulting firm. But beyond growth and returns, D2C sales can also open the door to the followings benefits:

• First-person insight into customer sentiment:

  By directly interacting with customers, manufacturers are privy to unfiltered feedback about their products and related services, rather than having to rely on delayed or possibly biased third-party data. Using data analytics tools, manufacturers can also glean real-time insights into customer service interactions, social media posts, and post-purchase survey results. This direct feedback loop helps manufacturers quickly align their operations as customer preferences and market trends evolve, whether that means accelerating the debut of a new product feature or adjusting production volumes to meet sudden demand.

• Enhanced brand oversight:

  In the traditional manufacturer-to-retail model, the way products are described, priced, and marketed can be inconsistent from one seller to the next. This makes for a confusing customer experience—especially when would-be buyers are comparison-shopping—that, to no fault of their own, reflects poorly on manufacturers. Reputation may be further at risk if items aren’t delivered when promised or arrive damaged. The D2C approach gives manufacturers control of their brands. They can also address complaints and remedy problems faster than when a third party is part of the equation.

• Improved access to new markets:

  direct access to consumers, manufacturers can more easily grow their operations with higher margins and fewer restrictions than is possible through retailer and distributor partnerships. While some D2C manufacturers sell through their own brick-and-mortar or pop-up stores, most sell and market their offerings through a variety of digital channels, such as websites, social media, mobile apps, email lists, and online marketplaces. These platforms extend D2C manufacturers’ reach and facilitate market testing that would be impractical or too expensive through traditional retail channels.

• Increased profitability:

  D2C model eliminates intermediary markups, which eat into manufacturers’ margins by forcing them to sell at lower prices to cover for extra costs added later in the supply chain. The direct sales model not only helps them capture higher profits without sacrificing competitive pricing, but also enables them to build recurring revenue through subscription services or maintenance contracts. For example, an electronics manufacturer might offer automated reordering for replaceable components, creating a predictable revenue stream that delivers greater convenience to customers.

Troubleshooting Direct-to-Consumer Challenges

With full control comes full responsibility. For D2C manufacturers, that means they must possess expertise beyond production to handle the consumer-facing responsibilities typically managed by retail partners. Any shortcomings can negate potential D2C advantages. Among the common challenges D2C manufacturers might face are:

Reaching Target Customers

According to a PwC global survey, 63% of nearly 9,000 consumers have purchased products directly from a brand’s website, with search engines providing their top source of prepurchase information (55%). While many D2C manufacturers opt to license software platforms and related technology, rather than building systems from scratch, they must still be skilled in website design and maintenance, digital marketing, social media management, search engine optimization, and data analytics. Of course, acquiring new customers is just one piece of the puzzle; retaining them calls for prowess in building loyalty programs and other customer-engagement tactics that foster long-term loyalty.

Scaling Inventory Management and Supply Chain Operations

For manufacturers extending or transitioning to D2C, fulfilling individual customer orders means a mind shift from bulk, pallet-based logistics to custom packaging and single-item picking. Managing inventory across multiple channels adds another layer of complexity. Manufacturers must accurately allocate stock to meet demand in each channel—but what happens if one channel suddenly runs out due to a spike in orders? How fast can inventory be replenished? Can stock be reallocated from one channel to another?

To manage these challenges, many D2C manufacturers rely on inventory management software that automates reordering, adjusts allocations based on real-time demand forecasts and stock levels, and more. In the meantime, companies can also close supply chain gaps by partnering with third-party logistics providers while they build out internal processes.

Upholding a Consistent Customer Experience

Managing every step of the sales and order fulfillment process will likely necessitate expanding customer service, returns processing, and post-sale support. A customer service platform that centralizes communication across channels and establishes clear service standards from initial contact to final delivery and beyond is one solution. Self-service options—often preferred by customers—for handling common inquiries and enacting comprehensive return policies can also help strengthen the customer experience without ballooning support costs.

Best Practices for Manufacturers Considering D2C Selling

To build a successful D2C channel or business, manufacturers must understand the complete customer purchase journey from initial discovery to retention. As with any new initiative, they must also assess their current operations and identify specific objectives, such as testing new markets or improving margins. These six best practices for D2C manufacturers can help facilitate a successful launch:

1. Invest in your online presence: Create a cohesive digital ecosystem that meets consumers where they shop, whether that’s on the web, via mobile apps, on ecommerce marketplaces, or on social media. Provide for a seamless experience, as customers often jump from one site to the next.
2. Go where your target customers are: Find prospective customers through market research, existing customer data analysis, and competitive assessment, and then reach out to them on the channels they frequent. For industrial product makers, this might mean investing in search marketing or advertising on business platforms, while consumer goods manufacturers might benefit more from social media and direct email campaigns. After initiating marketing pushes, analyze engagement metrics across channels to assess performance and refine tactics.
3. Look for unique opportunities: Identify and analyze gaps in the market and customer pain points that aren’t being addressed by competitors. For instance, a lack of customization options in retail environments presents an opportunity for manufacturers to provide personalized options through D2C channels. They also have the opportunity to complement their offerings with direct support services, extended manufacturing warranties, and other forms of after-sales support.
4. Mine your data for customer insights: Leverage analytics tools to track customer behaviors, trends, and purchasing patterns. For example, if a tool manufacturer sees that customers who purchase power drills often return to buy additional batteries, it might consider creating tool and battery bundles to increase average order value. Such quantitative insight is also useful for refining product offerings and positioning ad campaigns. As with targeting, be sure to measure and assess the impact of these campaigns to inform future marketing efforts.
5. Tailor customer experiences: Develop personalized communications and recommendations based on customers’ prior purchases, browsing history, and preferences. This customer data is also useful information for creating loyalty programs, which can encourage repeat purchases and word-of-mouth advocacy.
6. Use the right technology: Select software solutions that can integrate with existing systems to better manage every step of D2C manufacturing from inventory and order fulfillment to customer relationship management. Verify that any chosen solution will be able to scale and adapt to future needs. All the better if it can work with or integrate with new technologies that enter the market, such as artificial intelligence.

Stronger Customer Relationships with NetSuite for Manufacturing

NetSuite for Manufacturing helps businesses overcome D2C challenges and strengthen customer support at every step, from initial engagement to order fulfillment. By integrating inventory management, order processing, and customer relationship management into a single platform, NetSuite allows manufacturers to easily track customer interactions, manage individual orders, and maintain consistent service levels, even as they scale. In addition, NetSuite gives manufacturers deeper visibility into their operations by automating data collection and analysis processes, then quickly generating customizable reports. Manufacturing leaders can then use these real-time insights to make the data-driven inventory, marketing, and customer service decisions necessary to implement and maintain a successful D2C operation.

NetSuite’s Customer Dashboard

When manufacturers launch, expand into, or evolve fully to a D2C model, they are in prime position to bolster their bottom lines, strengthen connections with customers, and embrace new opportunities for growth and innovation. However, deploying a successful D2C manufacturing strategy requires significant planning and investment to build a strong foundation of technology, deliberate processes, and a deep understanding of the business’s customers. In an increasingly direct ecommerce marketplace, businesses that harness the right tools and infrastructure will have an undeniable competitive advantage.

Manufacturer-to-Consumer FAQs

How does D2C differ from traditional retail selling?

In traditional retail selling, manufacturers sell products through intermediaries, such as wholesalers, distributors, and retailers. D2C manufacturers bypass these third parties and work directly with end customers.

What are the disadvantages of D2C for manufacturers?

Manufacturers that sell directly to customers have the added complexity of managing the entire customer journey. That means they are responsible for their own marketing, sales, delivery, and support—processes typically handled by third-party partners. Companies that take a hybrid approach will also need a plan that won’t undercut or compete with partners.

Is D2C the same as wholesaling?

No, D2C and wholesaling are distinct business models. Wholesalers buy products from manufacturers in bulk and sell them to retailers or distributors that, in turn, sell them to customers. Pure D2C manufacturers eliminate these intermediaries by selling products directly to customers, thereby controlling the entire customer experience.