What is DTC?
DTC (Direct-to-Consumer) · Also called direct to consumer, D2C, direct-to-consumer, ecommerce store, online store
Direct-to-consumer (DTC or D2C) means a brand sells straight to the end customer, through its own website, subscriptions, pop-ups or brand-run stores.
What it is
Ecommerce describes selling online. DTC describes who you sell to. Not all ecommerce is DTC: an online retailer can buy your goods wholesale and resell them.
Selling direct removes the wholesale partner, but you take on their jobs: finding customers, customer service, payment processing and fulfillment.
Your revenue is what the customer actually pays after discounts and refunds, not the headline retail price.
Why it matters
Model the whole order, not just the unit. Start with net order revenue, leaving out sales tax you collect. Subtract product cost, pick-and-pack, shipping materials, any postage you pay, payment fees, expected returns and acquisition cost. If you charge for shipping, count that income the same way every time.
Keep first-order contribution separate from repeat-order contribution. Measure customer acquisition cost (CAC) with one written attribution method, and do not charge it twice to the same group of customers.
DTC gives you purchase history directly, subject to customer consent and privacy rules. Use it to understand customer groups and product preferences.
Formula
First-order contribution = Net order revenue − Product cost − Fulfillment and postage − Payment fees − Acquisition cost
Include expected returns and any shipping income you charge, and treat them the same way on every order.
Worked example
Where a DTC order’s money goes
- Assume a $40 order after discounts, with no tax or shipping income.
- Product cost is $10. Pick, pack, box and postage total $9. Payment fees are $1.
- $40 − $10 − $9 − $1 = $20 contribution before acquisition.
- If acquiring that customer cost $25, the first order contributes −$5 before overhead. Later orders can recover it only if they happen and earn enough after their own costs.
Common mistakes
- Treating the retail price as net revenue, without taking out discounts and refunds.
- Leaving out acquisition cost. The first order often does not pay back the ads that won it.
- Setting a free-shipping threshold without testing it against your real basket size and shipping costs by destination.
- Judging bundles and subscriptions on sales instead of contribution and retention.
Common questions
- Is DTC more profitable than wholesale?
- It can be, but not automatically. Compare each channel’s contribution with the same cost definitions, including acquisition and fulfillment, before you decide where to invest.