In this blog we’ll look at everything a manufacturing brand needs to know right from the basics to successfully building a D2C eCommerce store. We’ve extensively covered all of the details based on our D2C industry experience and market research.
To keep your interest alive and not to miss out on any detailing, we’ve planned this as a series blog consisting of two parts. Part 1 will address the basics of D2C, benefits and the difference between D2C and B2B.
Part 2 will detail how manufacturers and distributors can co-exist in a D2C approach, hybrid eCommerce models for D2C and the eCommerce platform of choice for successful D2C implementation.
What is D2C Commerce?
As a definition, D2C Commerce is a manufacturer’s approach to sell directly to their end consumers through their eCommerce store. Unlike the conventional method of selling in bulk to wholesalers and distributors, D2C Commerce takes the route of selling individual items to consumers.
The technology driven turnaround for manufacturers
As a manufacturer, your business model has always been straightforward: supply retailers with products who then sell them to end consumers at a markup.
The wholesale/distributor model was useful when managing individual customer relationships was a complicated business. But technology, such as Adobe Commerce, has streamlined order management workflows for eCommerce from start to finish. As a result, more and more manufacturers are following the Nike model of selling direct to consumers (DTC).
DTC is a bright spot in an otherwise challenging economy. Forrester predicts that online spending by “DTC enthusiasts” will increase by 18% year over year.
Benefits of D2C eCommerce
Should your company implement a DTC channel? Before you decide whether or not to take a DTC implementation on, consider the benefits:
Customers favor eCommerce
Ecommerce had been growing at a fast clip since its introduction 20 years ago, but COVID-19 changed the game. In July 2020, DigitalCommerce 360 reported that online sales increased by 76% due to the pandemic. Since then, consumers are actively forming new shopping habits, brand preferences and expecting new digital experiences. As a result, new winners and losers are emerging, and a robust DTC channel helps to ensure your brand is one of the winners.
Customer journey insight
Customer journey insight is a manufacturer’s treasure that’s owned by retailers. The insight you receive from controlling the customer journey will ultimately shorten your lead-to-purchase cycle.When you sell your products only via a third-party, you get no insight into the customer journey and why customers choose your products over your competitors.
Questions like what they like the most about your products, where they expect you to improve, remain unanswered. In other words, to enhance product quality or roll out new products, you depend on the distributor’s / wholesalers’ feedback gathered from customers, which is often not disclosed.
When customers directly buy from your website, you’ll gain insights on their buying patterns, preferences, seasonal spikes, and granular level data like geography and socio-economic data. The insight you receive from being in charge of the analytics will reduce customer acquisition costs and shorten the lead-to-purchase cycle.
Competitive advantage and wider product range
Retailers showcase a limited quantity of products from multiple brands in order to provide surplus brand options for consumers and compete with large retail rivals. Limited shelf space means consumers get access only to a fraction of your product portfolio.
D2C approach overcomes this shortcoming by allowing you to showcase your length and breadth of products in your exclusive eCommerce store. Brands can flaunt patterns, style, color options, multiple variants across a single product without limits. You are no longer constrained to carefully assort a limited number of products to sell on a third-party retailer website.
On the flip side, you don’t compete with other brands’ products that would be accompanying yours on a retailer’s website, narrowing down the competition to zero. In the case of a retail brick and mortar store, there’s no risk of a salesperson favoring your competitor’s brand for any reason.
Increased customer engagement and loyalty
“One-third of consumers visiting a manufacturers’ website with the intent to make a purchase prefer to buy from the manufacturer,” says Forrester. Apart from the fact that consumers love to hear directly from a manufacturing brand, a D2C store is also a place where they can find better prices than those marked-up prices provided by retailers.
This self-volunteered consumers’ attitude also means that they expect a great customer experience from the brand’s manufacturer. By leveraging the valuable data that customers provide, brands can delight customers at every interaction.
According to study, 82% of manufacturers selling directly to consumers improved their customer relationships, and 76% improved customer experience.
Providing a memorable experience could be an after-sales email thanking for purchase along with discounts for the next one or a quick response to an inquiry in customer support. Providing such experiences can build a positive personal connection, which would encourage customers to turn into your brand evangelists.
Direct customer relationships
A direct customer relationship will allow you to engage with the people who buy your product. You can solicit their feedback on products and use that input to make strategic decisions on product improvement.
GDPR and CCPA are placing limits on the kinds of data advertisers can use to engage customers and prospects. First-party data is inherently privacy-compliant because it is created via a direct relationship. A pool of first-party customer data is a valuable asset, one that can be legally leveraged to target customers when you have a new product to announce, as well as to model prospects to target.
The sinking supremacy of retail
This may be the most important reason to launch a DTC channel. To be sure, the apocalypse started long before COVID-19, but the pandemic has certainly accelerated it. Major department stores have shuttered their doors, hundreds of others are in bankruptcy, and over 100,000 small businesses have failed. At some point, every manufacturer needs to ask: who is going to sell my products?
Post the 2019 holiday season, department store retailers saw sales decline 1.8% from Nov. 1 through Dec. 24, according to data from Mastercard Spending Pulse.
CNBC reports that the decline happened even as holiday retail sales overall grew 4.1%. The COVID-19 pandemic worsened the situation. The pandemic that shows positive signs for brands to move towards D2C has comparatively had an inversely proportional effect on retail brick and mortar sales.
Major department stores that have been the go-to option for customers across the US have closed doors, and over 100,000 small businesses have failed. This leaves every manufacturer with a question: who is going to sell my products?
As consumers have become highly accustomed to digital buying, D2C adoption has become a necessity for manufacturers more than an opportunity.
How is D2C different from B2C?
Many people are understandably confused by the notion of DTC. How is it different from B2C?
The original DTC brands, such as Everlane, Allbirds, Casper, Dollar Share Club, Parker Warby, and Away, are digitally native, meaning they were launched in the digital era and operated solely in the digital sphere. Their mindset and outlook were digitally focused. From their earliest days, DTC founders have needed to sharpen their digital and social media advertising skills, and rely on clever messaging and branding to cut through the noise of these channels.
Another major distinction of DTC brands is their use of the content, which is carefully crafted to resonate with specific user personas at precise points in the customer journey. DTC brands are excellent storytellers, and those stories are what attract and retain loyal customers. Founders launch their brands because they’re unable to find a product that meets their exacting standards for quality, sustainability, or a host of other issues. For instance, the founders of the cooking brand Equal Parts say they founded the company because cooking is a way to spend more time with family and away from the screens that gobble up so much of our attention. This is a powerful message to consumers who also long to spend more time interacting with people in real life.
Mature DTC brands don’t stay purely digital, of course. The most well known DTC brands have opened retail outlets and formed wholesale relationships with major retailers. And they don’t rely solely on their owned and operated eCommerce site, as many now sell their products via the online marketplaces.
This brings us to the next question, “How can manufacturers and distributors / retailers co-exist in a Direct-to-consumer (D2C) model?”.
In ‘PART 2’, we’ll be discussing how it can be done and also elaborate on the hybrid eCommerce models for D2C and the eCommerce platform of choice for successful D2C implementation.