Manufacturers, who had traditionally only sold to other businesses, slowly embraced the Direct to Consumer (DTC) model. The high returns, better relationships, buyer loyalty, customer support, and other benefits have made them look outside the legacy model in place. For this reason, many manufacturers, at some point, will establish a full-blown online store.
More manufacturers may adopt the eCommerce ecosystem and the other technologies in its periphery. This will help them realize operational excellence and optimum digital experience. Their future roadmap will integrate a wide range of digital solutions on various levels. The idea is to realize a successful DTC model.
What Did the Landscape Look Like?
Accessibility wasn't always an option, but the ongoing digital transformation has made it possible to reach everyone anywhere. Unlike 15 years ago when acquiring an end-customer in another state seemed impossible, now you can sell straight to that buyer and that too seamlessly.
Sure there will be territories where DTC isn't feasible, and in those areas, you can rely on distributors, wholesalers, and agents. If your product doesn't reach a remote location in Africa, then going through an intermediary isn't all that bad. But, keep in mind, D2C is one of the best ways to diversify your manufacturing business.
The shift from B2B to DTC won't be easy, but it's worth every bit of serious consideration. There are plenty of concerns, and today we'll focus on all the aspects that help create a thriving and profitable DTC model.
What is Direct-to-customer (DTC)?
Direct to customer is when a business decides to skip the intermediary and sell directly to the customer. Manufacturers don't sell to other businesses, such as wholesalers or distributors. Instead, they go straight to the end customer.
Manufacturers can engage and interact with the customers through the following.
- The official website
- Dedicated native apps
- The store on marketplaces
- Social media platforms
Manufacturers are slowly deviating from their standard distributor networks. They aren't relying solely on the standard distribution channels. They want to expand beyond the realms of selling to other businesses. They want to improve their profit margins through higher-margin direct sales. Selling straight to the customer helps to do that.
Selling models like Buy Online, Pickup in Store (BOPUS), Customize Online, Pickup in Store (COPUS), and Manufacture online, Pickup in Store (MOPUS) are assisting brands in reaching their consumers directly. Having an omnichannel presence helps to connect with them anywhere and anytime.
Managing Direct-to-customer (DTC) and Your Relationships With Other Businesses
You can find ways to build a DTC strategy without breaking your relationship with distributors and wholesalers. You don't want to upset your business partners. Do not try to sell a product directly to customers in territories where you already have a contract with other businesses.
Trying to do so may come in violation of the terms of your contract. Also, it's unethical to break the trust of other businesses. If it was established that they would be the only ones operating in that territory, you might have to find a way to stay away from that region until the contract expires.
In some regions, manufacturers choose to sell. However, they don't slash the prices to anything less than what other businesses are displaying at that time. A product that costs $200 from one of your distributors cannot get priced at even $198 on your online store. You may have to rely on other ways to tempt customers, like extended warranty, free accessories, etc.
Top Benefits of Embracing Direct-to-customer (DTC)
1. 360 Degree Analytics
A close connection with end consumers will help the brand create better offerings. Now armed with all the behavioral, transactional, and demographic data, the brand will understand its customers better. Earlier, they did not have this valuable data since they were dealing with another business.
It was always the next business that ended up interacting with the customers. Manufacturers can now leverage pivotal, real-time data to understand buyer behavior, business performance, and product demands. The data helps to make informed decisions. Adopting DTC means manufacturers prevent overstocking and forecast better.
Advanced analytical tools, such as Customer Data Platform, help businesses compile and analyze data to succeed in their DTC venture. You get the feedback straight from the end-user. This helps scale and perfect your services and products without relying on any middleman. Better insights lead to better strategies, promotions, and communication.
2. Improve Customer Relationships
Knowing more about your customers helps to create the right discounts, promotions, messaging, and recommendations. With DTC, manufacturers aren't relying on speculation or hearsay from another business. Instead, they analyze and incorporate the rich data, collected straight from the customer in their next marketing campaign.
When brands start to show relevant ads and promotions, more customers will come onboard and complete purchases. This improves your relationships with customers, increases sales, and improves customer loyalty. Customers no longer see generic ads, instead they see personalized messages, more relevant to their unique needs.
3. Profit Margin
By eliminating the middleman, you get rid of entities that cut into your profit. When selling goods to other businesses, you set the price in such a way that they can mark it up and make some profit. In essence, you have to factor their profits as well. These businesses limit your profit margin, something you can navigate by heading straight to end-users.
A product costs you $10, you sell it to another business for $15 and they sell it to a customer for $25. You make a profit of $5, but by cutting out the intermediary, you can make a profit of $15. The DTC model also lets you offer bigger discounts, due to a higher profit margin. So, you can sell it for $20 as well. Better discounts could possibly create more conversions.
4. Faster to Market
From inception to release, it'll take much less time to launch a product in the market. No need to tie up with other businesses or convince them to buy your new product. You won't have to worry about third-party retailers not accepting your new product due to its no sales history. Conceive it and launch it yourself
Let the customer decide the fate of your new item. Manufacturers can release a new innovative product on a smaller scale. Plus, it helps you to understand what customers think about the product. Collect that feedback, make appropriate adjustments, and relaunch a perfected product.
5. Quality Control
Selling straight to the end consumer ensures the quality of your product, pricing, and packaging - in sync with your standards. You get to control the condition in which customers receive the product, something you couldn't do while going through other entities. Get more visibility into how the product gets packed, shipped, and delivered.
Sometimes third-parties damage the goods. But, they ship the product to the buyer nonetheless. The buyer receives a faulty product and blames it on the manufacturer. Thus, your reputation goes for a toss for no fault of your own. Manufacturers don't need to depend on their distributors and retail partners to ensure quality. They can take complete control over production, stocking, logistics, and sales.
6. Content and Branding
Going DTC, brands get to control and manage the messaging, experience, and reputation of their brand. Third-Party retailers and other businesses can dilute your branding. Selling through other businesses means your message will be far less impactful.
You get complete control over every touchpoint that your customers interact with. If this wasn't the case, the wholesalers and third-party retailers would control the brand perception. Plus, they may even find it hard to sell your products, due to knowing much less. Let's be honest, no one knows a product like the manufacturer.
Manufacturers can effectively communicate on the differential aspects of their inventory that can be of benefit to customers. They can present the unique value proposition of their brand and products, something that other businesses fail to identify and convey.
Your buyers can browse across any channels, purchase from any of them, and even return a product on any of the channels. Brands can access customers anywhere they want. The interconnected ecosystem lets you track and engage with customers anywhere.
Plus, the collected data from different channels gives you better insights into how buyers interact with your brand. Brands can give their buyers a seamless and consistent experience. Buyers get the convenience to buy anywhere and you get to deliver an integrated experience.
7. Increased Sales and Revenue
More insight into your customers leads to offerings that interest them and lead to more sales. Plus, you get the flexibility to cross-sell and upsell products. This allows you build a robust and deep relationship with your consumers. A better relationship leads to more loyalty, which results in more sales and revenue.
DTC marketing provides you with good insight into customer data. Use the customer data to understand customer behavior. Know their shopping habits and other browsing behavior to encourage more conversions. An increase in conversions will undoubtedly result in more revenue and profits. All as a result of understanding your buyers better via DTC.
9. More trials
Going straight to customers means you get to try products faster. You are no longer going through any intermediaries. Any inefficiency in their ecosystem or supply chain will not affect your time introducing a product or service into the market. You take charge of the product and ensure it reaches the customers.
Plus, collect feedback and revise your product. No need to rely on distributors. When customers interact with you, they leave hints and reviews that stay with you. Use this data to improve your offerings. Plus, you get to use the mailing list to retarget them at a later date. You’ll know who they are, where they live, and how to contact them.
Test new products far more quickly and often due to the direct contact with consumers. Eliminate any risk by testing the products with consumers first - before selling them to a distributor or wholesalers for other territories.
10. Customer Support
Buyers get direct access to your support team. They don't have to speak to an intermediary who coordinates with you. Customers reach out to you straight on an eCommerce site or your retail store. When selling on third-party stores, their teams try to resolve the issues, and if it doesn't help, they ultimately reach out to the manufacturer.
The loss of time and lack of immediate response leads to customer dissatisfaction. Also, these intermediaries have a team who knows very little about the products. Relaying and communicating with brand experts is more accurate and comprehensive than third-party distributors. The in-house team will give you more freedom to nurture relations, handle returns, replacements, queries, and refunds.
Your brand can be continually accessible to customers compared to other businesses that may or may not operate 24/7. You can be available for your customers to ensure any issues get sorted and resolved immediately. If the customer had to reach out to another business, the likelihood of getting a resolution is low.
Plus, they may need to get in touch with you to resolve the issue in some instances. Now, you get to take the problem head-on and be there for the end-user. No more disgruntled customers who avoid your brand due to a bad experience with another retailer. Serve them better and serve them sooner.
12. Promotions and Influencers
Manufacturers can introduce products to their global clients, and they need not reserve a high budget on ads for gaining customer attention. The promotions and deals in place suffice to generate customer interest to draw them to your site.
Plus, you have a high chance of turning your customers into brand advocates and influencers with DTC. They will spread your message and advocate your brand by word of mouth. Why? Because they had a great time interacting with you. You were able to create a top-tier user experience for your buyers. Something that other businesses fail to do.
Challenges in Attaining a Streamlined Direct-to-customer (DTC) Model
Adjust your communication, marketing campaigns, and other offers to suit the buyer persona. Send emails and newsletters personalized to a customer's demographic and behavioral data. When a customer views relevant offers, more suited to their needs, they get tempted to engage and purchase from you.
Adjust the message, tone, type of content, vouchers, and more to what the specific customer wants. Even the product recommendations must match the buyer's interests. If possible, go as far as displaying payment options and logistics providers in sync with your buyer's interests.
Informative content that tells the buyer everything they need to know about the products and more. From certifications to product specifications, cover everything to create the best clarity around your products and brand. Having a content strategy optimized for search engines to draw more organic visitors.
Spec sheets, brochures, certifications, images, videos, infographics and much more play a pivotal role in attracting and retaining visitors. Visitors evaluate every little detail before buying a product. Optimize the content on your eCommerce site. Captivating and educational content plays a key role in nurturing buyer relationships as well.
3. User Experience
A direct connection isn't enough till you provide an adequate user experience or shopping experience. This may mean more convenience, somewhere on par with Amazon to tempt them to shop more from your portal. Plus, better speed, navigation, and information accessibility. In essence, a frictionless experience.
All this helps ensure your customers get what they want faster and more easily. Help your customers locate products, contact info, and other details as soon as they land on your store. Plus, offer the best performance on your website to avoid any abandonment due to delays. Also, perform mobile optimization to help users access the site from smartphones.
Integrate high-end automation tools to speed your backend processes. This helps you move operations faster and serve customers sooner. With fewer errors, bottlenecks, and delays, you will see better efficiencies in your organizations for a D2C model. Use Accounting, order management, Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), and other software to handle your internal processes.
Rely on sophisticated systems to eliminate errors and other redundancies. Every entity, such as orders, tax, sales, logistics, etc., get processed and streamlined with absolute precision. Your workforce can focus on business management activities, marketing, customer acquisition, and customer support. They don't need to worry about handling data manually.
Improve the way you handle shipping. If you are selling straight to consumers, then any delays or damaged goods can lead to future losses, lawsuits, bad image, and much more. Manufacturers need to reduce bottlenecks and streamline processes in their supply chain. Use dropshipping to get the order out as soon as possible.
Always be in the know-how about orders. Ensure you show the correct quantity to avoid out-of-stock situations and ship out orders correctly. Don't mix up any orders and handle the labeling more precisely. Try to incorporate a robust Return management system to handle all the returns seamlessly. Keep tabs on carrier rates and their shipping policies to save on delivery charges.
Have an automated system to refund the amount for the returned orders. Consumers want the ease of handling returns online. Implement real-time tracking, so they don't need to reach out to customer support for minute-by-minute updates on their orders.
Consumers are more reliant on their phones for researching and buying products. They need to develop new-age strategies to fit their marketing and other development around smartphones. This might mean having a mobile-friendly website or a native mobile app. Sometimes even popping up for local searches can also make a difference to your business.
A mobile-first approach can enable brands to engage with buyers better. Many of your buyers are more likely to discover a social media post on their phone. Augmented Reality (AR) is another reason mobile shopping is growing so much. You can start directing ads and other communication towards consumers on mobile devices.
Customers Prefer Direct-to-customer (DTC)
In the recent past, customers too preferred to buy products directly from online brands. Many online shoppers have lost trust in other businesses due to counterfeit products. They aren't willing to commit and put their faith in another brand for discounts and vouchers, only to end up with a defective product.
Customers prefer to browse the high-quality products on the manufacturer's websites, knowing that if anything goes wrong, they'll be able to go straight to the manufacturer. There is no need to go through vendors and other businesses that may or may not relay the concerns to the manufacturer.
The peace of mind when dealing with a manufacturer trumps everything else. Sometimes, even the convenience of buying a product from another vendor on a marketplace like Amazon or Etsy doesn't seem lucrative. Manufacturers can capitalize on this trend to attract more buyers to their online stores.
Best Industries for Direct-to-customer (DTC)
Fashion and clothing, sports goods, home decor, cosmetics, and small electronic accessories, are some industries that can easily go direct to customers. These brands control the user experience, increase profit margins, and collect first-party shopper data. They get to bypass the middlemen and sell straight to consumers.
The use of Subscription models, rich content, Augmented Reality, chatbots, and Virtual Reality has made it easier for consumers to shop and get a better understanding of goods. Brands in these industries have proper tools and integrations to engage with their consumers personally.
Brands can now connect, engage, and relate to their buyers personally using all the new-age tools and technologies. Through DTC, brands get to ditch the long and winding supply chain. They can use eCommerce and other channels to communicate and sell their products to the end-users.
Brands are already on their way to building direct sales channels. The minimal customer acquisition costs, ability to build long-lasting relationships, and other benefits make them adopt D2C. Brands now have proper tools and integrations to engage with their consumers personally.