Musings on market-oriented approaches to International Development
A changing dynamic in Consumer-facing businesses has meaningful implications for Social Enterprises
My earliest shaving experience was around the age of 13. After 10 minutes, reeling from from irritation everywhere, and minimal hair in the sink, I also felt slightly cheated by how much I had spent on the razor.
Across some consumer-facing industries, from shaving cream to mattresses to prescription glasses, a direct to consumer – plus (DTC+) model is leaving an indelible imprint in the Consumer Goods industry, delighting consumers and disappointing long-standing players with equal effect.
The Dollar Shaving Club, which provides members with razors and other personal care products, is one of the more prominent firms showing the DTC model; however Casper and Eve mattresses are other examples, and Warby Parker, providing glasses.
DTC+ Business Model
The conventional primary arenas where major Fast Moving Consumer Goods firms (FMCGs) meets the consumer involve grocery stores or wholesalers (however, online is playing an increasingly important role).
The DTC model is one that excludes third parties (e.g. grocery stores), directly connecting the manufacturer and the consumer (often, online).The ‘plus’ (+) often comes from being able to pass on savings to consumer, either by standardizing the product offering (by limiting customization opportunities) and / or possibly cutting profit margins
An online platform has helped the DTC+ model become a meaningful challenger to FMCGs. In earlier years, size was a key success factor, because efficiencies of scale meant that smaller enterprises couldn’t achieve the production cost of larger firms. Now, a 5 year old business (Dollar Shave Club) can challenge an 80+ year old corporation (Unilever).
Mattresses, Shaving Cream and Social Impact
Of course, elements of the DTC+ model are not new in the field of Social Impact. For example, Bridge International Academies, by virtue of offering a standardized education curriculum, employs an element of the DTC+ model.
That said, there is an opportunity to evangelize this model across the sector, and share the benefits across low to middle class households in the developing world. Of course, DTC+ may not fit for every product (e.g. prescriptions), but there are probably many industries that can benefit from this approach, particularly in the context of Social Enterprises (e.g. electronics or agricultural inputs).
In fact, this is probably one of the most interesting challenges facing Social Impact practitioners – and an opportunity that holds immense promise for the 2.8 Bn. people living under $2/day in the world.