In recent years, the direct-to-consumer (D2C) business model has risen to prominence around the world – Japan included. As the name suggests, D2C is a model where businesses deal directly with customers, bypassing the traditional route of going through retailers, such as department stores, supermarkets or e-commerce shopping centres (e.g. Amazon and Rakuten). Eliminating the intermediary can increase profitability and allow for unique brand marketing and customer experiences. Therefore, D2C has a wide appeal to different business types.

In this article, we explain how to start a D2C business in Japan, including advantages and disadvantages. We also detail the kinds of products most suitable for this business model and provide some successful examples of D2C businesses in Japan.

What's in this article?

• What is D2C?
  
• Advantages of D2C
  
• Disadvantages of D2C
  
• What are some products commonly sold through the D2C model?
  
• What are some examples of successful D2C businesses in Japan?
  
• How can you start a D2C business in Japan?
  
• What platforms can be used to make a D2C e-commerce site?
  
• What are some keys to a successful D2C business?
  
• Stripe for D2C businesses in Japan
  

What is D2C?

D2C – short for "direct-to-consumer" – is a business model where manufacturers sell products and services directly to customers.

With D2C, manufacturers engage directly with customers through e-commerce sites, social media or physical stores. The manufacturer handles everything from marketing to sales. Some D2C businesses operate physical stores; some operate e-commerce sites; and some do both.

How are D2C and B2C different?

A similar business model is the business-to-consumer (B2C) model. B2C is a form of direct marketing in which businesses provide products and services to customers and it has many similarities with D2C.

However, there is one important difference between D2C and B2C: B2C is based on transactions between businesses and customers, but in the traditional B2C model, it is common for retailers and distributors to act as intermediaries. As a result, the product goes through several intermediaries before it finally reaches the customer. In contrast, the D2C model eliminates the intermediary and has manufacturers marketing and selling products directly to customers.

Advantages of D2C

Here are a few benefits drawing Japanese business owners to the D2C business model:

High profit margins

The most obvious advantage of D2C is the ability to secure a high profit margin. Instead of using wholesalers, retailers or e-commerce shopping centres, manufacturers sell directly to customers, either online or in stores. This can help reduce distribution costs and margins. Additionally, D2C businesses carry less risk of involvement in price competitions common on e-commerce shopping centres. This can make it easier to earn a stable profit.

Flexible management

In the D2C business model, the business can set its own prices and marketing strategies. This allows D2C businesses to set a competitive price while still securing a profit. In contrast, the price in the traditional retail sales model typically increases because the intermediary adds a margin.

Additionally, e-commerce shopping centres and similar platforms have regulations and restrictions on marketing that the business must follow. The D2C model allows a business to bring its message and story directly to the customer.

Fast business development

D2C businesses can respond to changes in the marketplace quickly by using digital marketing. When transactions occur directly with customers, collecting customer data and analysing trends in customer needs can happen in real time. This means it's possible to implement personalised advertising and adapt products and services to trends as they emerge.

Disadvantages of D2C

D2C businesses have many advantages. However, there are some disadvantages business owners should also consider:

More responsibility

In the D2C model, the business deals directly with customers, so all operations are the business' responsibility. This means product manufacturing, inventory management, delivery, customer service, marketing, etc. must be handled in-house. Thus, a D2C business can have a higher operational burden than a traditional business.

Brand recognition

Since products are sold directly to customers without an intermediary, D2C businesses can't rely on the customer-drawing power of e-commerce shopping centres or promotional sales events. All marketing must be done internally and establishing brand recognition can take more time.

It will also take time to increase awareness of the business. A new D2C business will likely need to devote a lot of resources to advertising strategies and campaign measures. As a result, it can take a while to attract customers, increasing initial costs.

Security management

Because a D2C business has to manage customer and payment data in-house, tight security measures are important and must be well implemented. These include measures to prevent unauthorised access to personal and credit card information. If a data breach does occur, there is a significant risk of damage to the brand's reputation and there's also the possibility of legal liability. D2C businesses must ensure solid security measures and react very carefully in the event of any security issues.

What are some products commonly sold through the D2C model?

The D2C model is particularly popular for businesses where it's easy to build a direct relationship with customers, such as:

• Cosmetics and hair care
  
• Supplements and protein
  
• Food
  
• Clothing and fashion items
  
• Technology
  

The D2C business model is well suited to items that are difficult to find in physical stores. This model also fits well with items that customers want to compare with other options. For example, finding a specific supplement in a physical store can be difficult because the aisles are lined with many similar products. However, on a D2C e-commerce site, customers can search for a product and find it quickly. They can also easily compare the price and quality of similar products.

What are some examples of successful D2C businesses in Japan?

Here are some examples of Japanese businesses that have succeeded with the D2C business model:

Medulla

Medulla develops custom shampoos and treatments for their customers' specific hair types. The business uses social media marketing to increase awareness of its products, generating wide appeal among younger customers. By encouraging ongoing customer use through subscriptions, the company has improved customer lifetime value (LTV).

Valx

This protein supplement brand is run by legendary bodybuilder and powerlifter, Yoshinori Yamamoto. Having won several competitions in Japan and overseas, Yamamoto's business used his name to stand out and generate brand recognition. The business caters to a wide range of customers, from casual gym goers to serious martial artists and celebrities.

10YC

10YC creates clothes with a simple, durable design that is supposed to last for 10 years. This business uses a made-to-order production system so it doesn't have to hold unnecessary inventory. As a result, the company can provide high-quality clothing at reasonable prices.

How can you start a D2C business in Japan?

Developing a plan is key to starting a successful D2C business. We suggest the following steps to starting a D2C business in Japan:

• Develop a business plan
  
• Manufacture the product
  
• Build an e-commerce site with popular payment methods
  
• Market and sell the product
  

Develop a business plan

Market research is important for any business. Be sure to have a thorough understanding of the industry, including market size and competition. This will help to clarify the direction of the business. To increase the brand's appeal, define the target demographic as specifically as possible.

To differentiate your business from others, it's important to communicate clearly and demonstrate your brand concept. Be sure to reinforce your business' philosophy with a statement that explains why this product is necessary.

Manufacture the product

After developing a business plan, it's time to begin developing and manufacturing the product. Select a manufacturing partner you can work with, considering quality, cost and production capacity. The final product will be developed through repeated prototyping, testing and refinement. During this process, you'll also determine the packaging and design of your product.

Build an e-commerce site with popular payment methods

E-commerce sites are typically the main sales channels for D2C businesses. For this reason, it's important that businesses have an intuitive and user-friendly e-commerce site. Designing a website that is easy for customers to use while also showcasing the brand concept is key.

The first step in designing the website is to decide which platform you'll use to build your e-commerce site. Next, decide on the actual design of the site. In Japan, many people use their smartphones to shop online, so make sure your e-commerce site is responsive and mobile-friendly.

You'll also need to prepare a shipping system and payment processes. Be sure to incorporate as many of the popular payment methods as possible, including credit cards, cashless payments, mobile carrier billing, bank transfer and convenience store payments.

Market the product

Because D2C bypasses the intermediary and deals directly with customers, marketing strategies are important even after sales have begun. Use a combination of social media and advertising to build brand awareness.

What platforms can be used to make a D2C e-commerce site?

When designing the business' website, you might want to use a platform that specialises in developing e-commerce sites, such as:

Shopify

This e-commerce platform is widely used around the world and is also rapidly gaining popularity in Japan. It's easy to set up and the design is highly flexible. This can make it easy to express your brand's philosophy. Shopify also features advanced marketing and analysis tools that can help promote sales.

BASE

With BASE's standard plan, businesses can open an e-commerce site with no up-front or monthly fees. BASE is popular in Japan – especially with sole proprietors and small D2C brands – because it's easy to get started. Whether you use a computer or a smartphone, you can create an e-commerce site on BASE without knowing any code.

Makeshop

Makeshop is a Japanese company that offers a variety of functions for businesses to build e-commerce sites that match their business models. Although there are initial and monthly fees, there are no fees or commissions on sales. As your sales increase, so do your profits. In addition to running e-commerce sites, Makeshop also provides support with marketing and sales management. This makes it a suitable choice for running larger e-commerce sites.

Stores

Simple and easy to use, Stores makes it easy to set up an online shop. The platform also offers a free plan, lowering the barriers for business owners who are building their first e-commerce sites. The templates they offer are easy to edit, so you can intuitively customise the design without any special knowledge of hypertext markup language (HTML), cascading style sheets (CSS) or other coding.

Wix

Wix offers more than 900 free templates, all of which can be easily customised. Businesses can create websites quickly because of the integration of advanced design functions and AI technology. There are also search engine optimisation (SEO) functions to help refine the site and improve search rankings.

Color Me Shop

This Japanese platform offers all the important features for running an e-commerce store. It includes more than 350 functions and customisability options that could help your business grow. Another advantage of using Color Me Shop is that you can set up WordPress on the same domain as your online store without having to sign separate contracts for a server or domain.

What are some keys to a successful D2C business?

The key to success for D2C businesses is forming a direct connection with customers. It's important to take initiative to improve branding and customer experience, rather than just selling products. Here's how:

Unique brand story

The best way to differentiate your business from competitors is to communicate and share your unique values and perspectives with customers. Explaining the business philosophy or sharing the specific processes that went into the development of the product can help you generate a fan base that cares about your brand.

Strong marketing strategy

Use digital marketing techniques – such as SEO and social media advertising – to increase the number of searches that lead to your site.

Operational efficiency

By adopting a platform customised for your business, you can automate inventory and order management. In addition, you can strive for stable management and business expansion by reviewing workflow, strengthening team structure, balancing marketing strategies and improving the customer experience.

Stripe for D2C businesses in Japan

For D2C businesses to succeed, it's important to effectively manage every aspect – from product development and sales strategy to digital marketing and operational systems. Among these, choosing the right payment methods and implementing strong security measures are especially important for building customer trust.

Stripe undergoes rigorous annual audits by an independent PCI-certified assessor to ensure full compliance with Payment Card Industry Data Security Standard (PCI DSS) requirements and to maintain a high level of security. Stripe Payments supports a variety of payment methods suitable for D2C businesses, including credit cards, cashless payments such as Apple Pay and PayPal, convenience store payments, carrier billing and bank transfers. It also offers a suite of tools to simplify transaction processing and revenue management, helping to improve business operations and support seamless day-to-day activities.

With Stripe, you can enjoy benefits such as simplified payment processing and reduced operational costs. By offering flexible payment options, you can enhance customer convenience and maximise sales.

If you're looking to improve the payment experience for your D2C business, don't hesitate to contact Stripe. We'll help you find the best payment solutions customised to your needs.