PROS & CONS OF D2C (DIRECT TO CUSTOMER) FOR STARTUP BUSINESSES

CONS OF STARTUP BUSINESSES WHEN APPLYING D2C:

1. High competition in the market makes the cost of getting new customers (CAC - Customer acquisition cost) often very high, even higher than the value of the customer lifecycle (LTV - Customer Lifetime Value) not to mention achieving LTV / CAC = 3.

2. In order to reduce CAC, the first phase needs to rely on a highly interactive community and an influencer / KOL / founder with its own charisma. Therefore, in the early stages, it is often depend on the image of an influencer / KOL.

3. The investment costs are often large and there are many steps in the process: finding good production partners ("manufacturing partners"), importing, censoring, warehousing, marketing, distribut



ion, logistics and care customer.

The advantage of the D2C model is that it is able to collect a lot of real user data and continually innovate and improve products based on user feedback, often more accurately reflected from retails.



PROS OF STARTUP BUSINESSES WHEN APPLYING D2C:

1. Gather a lot of real user data and continuously innovate and improve products based on direct user feedback, often more accurately reflected from agencies.

2. Applying ne


w marketing strategies more quickly and more appealing to young users.

3. Standard quality but selling at a more attractive price than other major brands by cutting multiple layers of intermediaries for distribution.

4. Huge profit margin: gross margin is usually not less than 50%, maybe even up to more than 70%, so there is an opportunity to achieve positive EBITDA earlier than pure technology startups.

GENERAL POINTS OF SUCCESS STORIES

1. User-centric: bringing lots of value to users, from quality (clean, organic, ...), price, personal shopping experience (dedicated customer care to each retail customers, products packed meticulously, with customer thanks ...), after sales policy; thereby build a direct relationship between the brand and customers.

2. When a brand is new enough to break the market with innovative products, it will be acquired by a large corporation or invested by individual equity funds (PE - Private Equity). before being listed on the stock exchange (IPO).

Source: vietcetera.com

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