Growth of the D2C Industry in Canada
Consumers around the world want to buy directly from brands – data clearly supports that. In fact, a recent survey we conducted found that nearly 60% of respondents prefer to buy products directly from a brand’s website. This is especially noticeable among younger consumers, with 68% of online shoppers aged 25-34 preferring to buy directly from the brand’s website.
— Matthew Merrilees, CEO North America, Global-e
The direct-to-consumer (D2C) business model has been turning e-commerce on its head in Canada lately. Think subscriptions, sustainability, and a whole bunch of amazing D2C trends. Let’s explore the growth and trends that are making D2C a big deal in Canada.
What Is direct-to-consumer (D2C)?
D2C, or Direct-to-Consumer, refers to a business model where companies sell their products directly to consumers without intermediaries like retailers. This approach lets brands get up close and personal with their customers, scoring some valuable insights and total control over the whole customer experience.
Today, Canada is seeing a rise in the innovative D2C business segment, considering their demand and the gap that exists.
D2C companies come in two flavors. First, you have your digitally native brands, born and raised online. Then, there are established businesses, including mostly your traditional manufacturers and distributors, taking their game online to reach a new audience.
Popular Direct-to-Consumer Brands in Canada
In recent years, D2C has revamped how products connect with and hook consumers in the market, from fashion to your everyday buys. Here are some of the most popular D2C brands in Canada:
1. Blume
Founded in Vancouver in 2018 by sisters Bunny and Taran Ghatrora, Blume is a brand that’s all about giving teens a game-changer in personal care. Its diverse range of personal care products addresses acne, period care, sweat, and more.
2. Province of Canada
The Province of Canada loves keeping things green and clean! They make all their products right here at home, supporting local vibes. With a focus on revitalizing Canada’s textile industry, the brand champions “made in Canada” manufacturing.
3. Rainbo
Tonya Papanikolov, a holistic nutritionist based in Toronto, founded the medicinal mushroom company Rainbo. It teamed up with local mushroom farmers in Canada to grow special kinds like reishi, lion’s mane, and royal sun mushrooms.
4. Knix
Joanna Griffiths launched Knix in 2013 as a leak-proof underwear company, which has since evolved into a leading brand within the undergarment category. Now, it’s a top brand in undergarments. Knix is the sixth-fastest growing company in Canada, changing the game with its cool and clever products.
5. Three Ships
Toronto-based skincare brand Three Ships, founded by Connie Lo and Laura Burget, aims to provide affordable natural cosmetics. They’re on a mission to make natural cosmetics affordable for everyone. With quality products at pocket-friendly prices, they’re all about clean beauty without the hefty bill.
Growth Factors and Popularity Surge: 2021 to 2023
Today’s consumers simply expect products delivered quickly and easily to their door.— Steve Mikulak, President, Wellful’s Nutrisystem brand
More and more people are loving D2C shopping. They reached 64% in 2022. Gen Z is leading the way with 74% going straight to the brands. Millennials are also joining the party, with six out of ten going for direct buys. Even the Gen X crew is getting in on the action, making up 41% of respondents.
A study of 200 D2C brands in 2022, primarily based in North America, unveiled that 77% of these brands were headquartered in the region, with a significant presence in Canada.
By 2023, D2C’s ascension climbed up the popularity charts; it’s now the third most popular way people shop online, just behind big marketplaces and supermarkets. More specifically, 16% of all online sales are D2C in Canada.
Let’s talk about D2C growth → these are the things making it big: subscription services, reaching you everywhere (omnichannel), being eco-friendly, customizing just for you, and expanding into new markets:
- Online shopping changed how you shop. It’s super easy and available all the time. With D2C, brands now connect directly with customers to make things even better.
- COVID-19 sped up the growth of D2C brands, fitting the new needs of a contactless economy. The pandemic pushed these brands to meet our changing needs.
- Better pricing allows brands to offer competitive prices without intermediary markups as D2C saves around 15% from wholesalers and up to 40% from retailers.
- More people use smartphones and super-fast 5G networks, making it easier for brands to connect directly with customers in the D2C space.
- D2C provides immediate access to customers and thus offers opportunities for distributing innovative products, promotions, trials, and subscription models.
Projected Growth and Market Trends
Canada’s D2C industry is projected to blow up big time! Retail online sales are set to hit over $120 billion this year, and by 2027, they’ll skyrocket to $150 billion. The whole North American online shopping scene is booming too, growing by 12.5% every year till 2027. Globally, direct selling is expected to hit $286.7 billion by 2028.
These numbers show just how big the D2C market in Canada is getting. Most D2C businesses in Canada are starting local and going global. Here are some of the recent events and emerging trends in the D2C space:
1. Subscription-based Business
More people are choosing subscription services, changing how businesses sell directly to consumers. For example, Jenny Craig now focuses on selling directly to customers online. Around 10% prefer getting monthly meals delivered, and nearly 1 in 3 like using meal kit subscriptions. This shows that more people want easy and personalized food options.
2. Omnichannel Experiences
Companies are combining online and in-store experiences. An example of this is Mars Food & Nutrition buying Kevin’s Natural Foods. This move makes sure customers have a smooth experience whether they’re shopping on the internet or in a physical store. The goal is to connect the online and offline parts of the business for a better overall shopping experience.
3. Sustainability
With the D2C way, brands can make products only when customers want. That means no giant factories cranking out loads of things and nowhere to put them. So, they can see and control everything in their supply chain.
4. Smart Personalization
D2C brands are getting super smart with personalization. They’re also using advanced tech like data analytics and AI to give customers products that are just right for them. Imagine they know exactly what you like before you even say it.
5. Market Expansion
D2C brands are going big worldwide, just like Papier did when they landed in Canada. Teaming up with Canadian retailer Indigo is a smart move, showing they’re serious about spreading the word far and wide. Papier’s goal is to be in 10,000 stores worldwide in six years.
Read more: Importance of Market Research for Startups in Canada
Conclusion
D2C is giving the shopping game in Canada a major makeover with a focus on direct brand connections. From Blume’s teen-centric personal care revolution to the Province of Canada championing sustainability in textiles, the D2C landscape is brimming.
What’s fueling this surge? Subscription services are bringing personalized goodies tailor-made for customers. Then there’s the omnichannel experience, blending online and in-store brilliance. Smart personalization, driven by data analytics and AI, makes sure consumers get what they want even before they realize they want it.
As D2C changes the Canadian shopping scene, it’s the future of commerce – and it’s happening right now.
