The 5 most impactful DTC strategies to improve profit margins

DTC growth is great—until margins shrink. Here’s how brands are fixing that with smarter pricing, sourcing, and retention.

Yoda

2 min read
Oct 21 2024

Oct 21
1

A woman receiving an ecommerce package at the door to her apartment building

Direct-to-consumer (DTC) brands saw a significant rise in popularity in the lead-up to 2021. However, maintaining healthy profit margins can be a challenge in the competitive landscape that has arisen over the last 4 years.

Here are five effective strategies to help you boost your DTC brand’s profitability:

1. Optimize your product mix

Identify your best-sellers: Determine which products are driving the most profit and drive more sales to these products.
Focus on high-margin products: Prioritize products with higher profit margins and consider phasing out low-margin items.
Bundle products: Offer bundles or package deals to increase average order value.

2. Improve your supply chain

Negotiate better deals with suppliers: Work to secure favorable terms with offshore manufacturers. Margin Pro recently lowered the cost of goods by 20% for Acquco, a 9-figure multi-channel seller.
Optimize your inventory management: Avoid overstocking or understocking by using effective inventory management tools.
Explore alternative shipping options: Use alternative shipping carriers or negotiate new rates to reduce costs with Margin Pro. Margin Pro recently decreased parcel costs by $3M per year for Modway, a furniture retailer.

3. Enhance customer loyalty

Implement a loyalty program: Reward repeat customers with discounts, exclusive offers, or early access to new products.
Provide excellent customer service: Ensure that your customers have a positive experience from start to finish with Multichannel Pro. Multichannel Pro recently decreased first response time by 97% for Thrasio.
Leverage customer feedback: Use customer feedback to improve your products and services.

4. Utilize technology

Invest in marketing automation: Use tools to streamline your marketing efforts and reach your target audience more effectively.
Implement a customer relationship management (CRM) system: Track customer interactions and preferences to improve customer satisfaction.
Explore data analytics: Use data analytics to gain insights into your business performance and identify areas for improvement.

5. Optimize your pricing strategy

Conduct market research: Understand your competitors’ pricing strategies and customer expectations.
Consider value-based pricing: Rather than focusing solely on cost, consider the value your products provide to customers.
Experiment with dynamic pricing: Adjust your prices based on factors like demand, time of year, and customer behavior.

By implementing these strategies, DTC brands can improve their profit margins and achieve long-term success.