You've Heard Of D2C. Here's Why i2c May Be The Better Way for Cannabis Brands To Go
Free Book Preview Cannabis Capital
In 2011, Dollar Shave Club burst onto the scene. The company was at the forefront of a group of new brands leveraging a direct-to-consumer (“D2C”) model, whereby brands would bypass retailers and sell directly to their fan base. Manufacturing, marketing, selling, and shipping was all executed in-house.
The strategy worked. In 2016, Unilever bought Dollar Shave Club for $1 billion in cash.
D2C models were not new in 2016. Mail-order catalogues have been around forever, and allowed customers to browse and order wares direct from manufacturers. However, modern brands benefited from the rise of eCommerce in general, and the rise of extremely targeted (and affordable) customer acquisition funnels like Facebook and Instagram specifically. All of a sudden, it was possible and economical to target very specific customer bases – so brands could choose to speak directly to Lisa, no kids, late 20s, from Boston – rather than risk being lost in a “sea of same” on retail shelves.
Perhaps more importantly, D2C models allow brands to collect precious consumer data, to iterate messaging and perhaps target Lisa’s friends and family. That data is unavailable when selling via traditional retail outlets.
This all raises the question: Does D2C work for cannabis?
The problem with D2C
D2C models, on face value, offer a compelling proposition to cannabis brands. The ability to bypass competitive and finite retail spaces – some of which are run by owners who like to collect big slotting fees – would perk up the ears of any brand in the space.
There are a few problems, though:
Problem #1: in order to execute a successful D2C model, you have to be good at everything. Producing, marketing, selling, and the last mile (actually getting goods into customers’ waiting hands). Very few companies are good at all of these things. This was painfully evident over the last 24 months in cannabis, as many vertically-integrated operators failed.
Problem #2: Most brands are not part of a vertically-integrated operation, meaning they cannot legally sell directly to the public.
Enter indirect-to-consumer (i2C)
There is a compelling solution that is gaining traction in the space: “indirect-to-consumer” (i2C). How does it work? A brand can make and market things but then leverage their website to seamlessly hand off the actual transaction (for in-store pickup, delivery, curbside, etc.) to retail partners.
This bifurcates the process, allowing brands to focus on the top of the funnel (making and marketing things), while also freeing up retailers to do what they do best: sell things. It also commercializes brand websites, which have historically acted as glorified business cards – lots of pretty pictures, but not much to do or buy.
If you're looking for a great example of i2C at work, Wana Brands is using the model quite effectively by partnering with Jane Technologies, an eCommerce provider in cannabis. Jane powers the front-end on Wana’s site and directs shoppers to partner retailers that have specific products in stock. Customers can check out in a fully contained, Wana-branded environment.
In other words, Wana makes things, markets things, and directs people to their homepage – then lets tech and retail partners take over the selling and last-mile components.
i2C allows a brand to control the look and feel and shopping flow – and to funnel incremental orders to retail partners.