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The advent of video streaming and ecommerce has shed light on the huge success businesses can enjoy with a direct-to-consumer (D2C) model. But how are businesses using D2C to cut out the middleman? This article discusses the issue with reference to Apple (NASDAQ: AAPL), Nike Inc (NYSE: NKE), Shopify (NASDAQ: SHOP) and QYOU Media (TSXV: QYOU) (OTCQB: QYOUF).
QYOU Media (TSXV: QYOU) (OTCQB: QYOUF) operates as a media company. The business produces and distributes content created by social media influencers, artists and digital content creators on television networks, satellite television, over-the-top media and mobile platforms.
On the back of the successful launch of its fifth Indian TV channel through its Q India brand, QYOU Media has released its first D2C app. Q Play is free to download on the Google Play Store for smart TVs or smartphones.
QYOU Media has rapidly built its audience by focusing on collaboration with India’s coolest and most popular social media stars. These influencers have huge followings and a bank of pre-existing content, allowing Q brand channels to quickly build high-quality programming with a massive audience.
CEO and Co-Founder Curt Marvis, commented:
“In less than 2 years we have grown the audience for Q India branded content from single digit millions weekly to over 125 million today. This is a major accomplishment that is driving much of our product development in 2022 and beyond.”
“We call it our “loudspeaker” and we fully intend to use it to deepen our engagement directly with our followers. This also increases our ability to deliver the right kinds of content, brand offerings and ultimately deliver what they want while ultimately monetizing our audience as effectively as possible.”
With the company having recently reported record revenues of CA$6.9m, an increase of 163%, and the launch of several channels targeting young Indians, QYOU Media’s new D2C app could spur further growth.
Apple Inc (NASDAQ: AAPL) designs, manufactures and markets smartphones, personal computers, tablets, wearables and accessories. The company offers payment, digital content, cloud and advertising services. Customers are primarily in consumer, small & mid-sized business, education, enterprise and government markets worldwide.
Apple Inc is one of the most recognisable D2C businesses. The company’s products are available to consumers through its website and its distinctive brick and mortar stores, which are a major part of its brand identity. Indeed, its App Store also allows the business to manage digital sales of its software to users of iPads, iPhones and Macs.
These D2C shopfronts have been enormously successful for the company. It stated in January 2022 that the App Store alone had generated $260bn for developers and that 2021 had been a record year for the platform.
The ownership of this apparatus gives the business a significant amount of control.
For example, the business revealed in September that it is hiking App Store prices in Europe and Asia to combat the impact of some international currencies’ current weakness against the US dollar. For some platforms such a move might be a disaster, but the popularity of Apple Inc’s products indicates that this might be a change that consumers simply have to swallow.
But this stranglehold could break in future, particularly as the cost-of-living crisis begins to bite. Indeed, Apple Inc has already backed down from plans to increase production of its recently launched iPhone 14 in the wake of unexpectedly low demand.
Nike Inc (NYSE: NKE) designs, develops and markets athletic footwear, apparel, equipment and accessory products for men, women and children. The company sells its products to retail stores, through its own stores, subsidiaries and distributors.
Nike Inc has really thrown itself into the task of removing the middleman by embracing D2C tactics.
The company’s fourth quarter earnings, which were released in late June, showed that revenue from direct sales to consumers grew by 7% to $4.8bn during the period as its digital offering showed particular strength.
This led Matt Friend, Executive VP and CEO, to comment:
"Two years into executing our Consumer Direct Acceleration, we are better positioned than ever to drive long-term growth while serving consumers directly at scale."
Nike Inc first announced intentions to improve its relationship with customers back in 2017, citing a need to be “more aggressive in the digital marketplace” and focus on the constantly changing needs of customers.
Despite the apparent success of its direct offering, the company is facing challenges, as dealing directly with customers has not allowed the business to escape supply chain issues. Indeed, the end of September saw Nike Inc’s share price drop sharply after it emerged that shipping difficulties left the business unable to shift large quantities of its merchandise before demand fell.
Shopify (NASDAQ: SHOP) provides a cloud-based commerce platform. The company offers a platform for merchants to create an omni-channel experience that helps showcase the merchant's brand.
While not itself a D2C proposition, Shopify is reaping the benefits of the rise in popularity of the business model. That’s because the company aims to give merchants the power to run their own ecommerce stores, essentially powering other businesses’ D2C offerings.
Indeed, Shopify is championing the idea that businesses must expand beyond the D2C model to a connect to consumer, or C2C, model. The business says merchants must seek to form genuine connections with customers and is tailoring many of its new tools for this purpose.
Whether this kind of experience is the future of ecommerce remains unclear, but Shopify’s offering is clearly resonating to some extent. The business’ most recent earnings update, which covered the three months ended 30 June 2022, saw revenue climb by 16% to $1.3bn as merchant solutions revenue rose by 18%.
However, the business has faced some difficulties recently. These include the business cutting 10% of its workforce at the end of July as CEO Tobi Lutke cautioned that the company’s expansion plans had not been successful.
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