What is DTC (direct-to-consumer)?
What does selling direct change?
You own the shop, the checkout and the relationship. That is the upside. No retailer sits between you and the shopper.
The downside is that nobody else carries the work. You pay for finding the customer, delivering the order, taking payment, handling returns and answering questions. These costs grow with every order. They belong in the margin you plan with.
That left-over figure is what we call contribution margin: revenue minus the variable costs that grow with every order, such as cost of goods, shipping, payment fees, returns and discounts. Sources differ on which costs they include. In our view, you plan marketing against it before marketing is subtracted.
Why does DTC change how you judge marketing?
When you sell direct, every sale carries the full cost of getting it. A strong top-line number can hide a thin margin. So look at order value (AOV), margin and total marketing cost together. For the last one we use MER: total revenue divided by total marketing spend, without splitting credit between channels. For which number suits which decision, see ROAS vs MER vs POAS.
Our view: a direct seller should judge marketing against the margin left per order, not against revenue alone.
Worked example
Easily confused with
DTC vs Wholesale and retail
The brand sells to a shop or distributor, who sells on to the shopper. A third party sits in between, so it is not direct.
DTC vs Marketplaces
Selling through someone else's storefront also puts a third party between you and the shopper.
DTC vs First-party data
Data a brand collects directly from its own interactions with customers, such as orders, accounts and email sign-ups. DTC brands usually collect it, but the two terms are not the same.
FAQ
Is DTC the same as D2C?
Yes. Both mean direct-to-consumer. We use DTC throughout.
Does DTC mean no retailers at all?
It means no intermediary on that route. A brand can sell direct online and through retailers at the same time; only the direct route counts as DTC.
Why does DTC change the maths on ads?
There is no retailer margin to absorb the costs. Everything from delivery to returns sits with you, so break-even moves.
Sources
Let’s find what’s actually working.
Next step. See what your numbers say on explicit assumptions with the Is your ROAS real? calculator.