Welcome to ‘Part 2’ of our series blog ‘What is D2C eCommerce? Why and how should manufacturers embrace it?’ In ‘Part 1’ we discussed the basics of D2C eCommerce, benefits and the difference between D2C and B2B.
(If you’ve missed Part 1, you can check it out here).
Now, let’s start from the part that explains why the D2C approach is considered a threat for Distributors and Retailers and how manufacturers can retain them in their digital ecosystem.
How can manufacturers and distributors / retailers co-exist in a Direct-to-consumer (D2C) model?
Let’s start from the part that explains why the D2C approach is considered as a threat for Distributors and Retailers.
Cutting out the middleman is considered to be the foremost advantage of the direct-to-consumer approach among various others. Why? Manufacturers are not doing this only to establish a direct connection with customers but for better profit margins as well.
The mutually agreed upon rule is that Manufacturers make products. Distributors and retailers procure it in large quantities and sell it at a higher price to end customers. At each hand off, the price level increases but manufacturers manage to get only a fraction of it.
A D2C eCommerce approach enables manufacturers to cut through the middleman. The marked-up prices are now the sole property of manufacturers.
Though this sounds like great news, the actual fact is that manufacturers could experience some shortcomings in the longer run. Why is that? Read on.
Shortcomings of removing distributors entirely from the supply chain
There are quite a few concerns that manufacturers have to address after removing distributors out of the scene.
- Rising fulfillment challenges
- Customer acquisition cost
Rising fulfillment challenges
Owning the supply chain end to end means the tail end, order fulfillment, is your responsibility now. Building a fulfillment team is a more complex thing than building a D2C eCommerce website.
For a start, your D2C brand could opt for a borrowed supply chain, but that won’t work for long. For manufacturers, saving the marked-up prices imposed by distributors would make no sense as it would ultimately be lost to expensive leased distribution.
Also, the COVID-19 pandemic has made fulfillment one of the crucial differentiating factors for consumers. They are expecting brands to provide conveniences like curbside pickup, in-car, in-trunk, and in-garage delivery. All these pandemic-forced fulfillment demands are added challenges for D2C brands struggling to establish their own supply chain.
Customer acquisition cost
Though you own an eCommerce store where customers can directly purchase products, acquiring customers is not easy.
Right from getting the word out to engaging customers on social channels, you need well laid out marketing strategies. Remember, your retail and distribution partners have already been there. Tapping on to their well established loyal customer base and marketing expertise can help save customer acquisition cost.
The points we have discussed above seem to contradict the idea of keeping the entire profit margins in a D2C approach. But wait! There is a fix that’s often overlooked.
The fix – How D2C brands and distributors can co-exist
In a direct-to-consumer model, though you are willing to hand off a portion of sales to distributors, you are more or less their rival. But there are various ways to ensure the continued satisfaction of your distributors.
#1 New sub-brand for products sold via 3rd-party partners
Create a new sub-brand for products that can be sold by distributors. While keeping new or unique products to yourself, you can partner with distributors to sell your evergreen products. You can also create exclusive products for retailers who hold a track record of high sales.
54% of manufacturers said both they and their channel partners saw growth in sales as a result of a D2C model by funneling order fulfillment for larger orders through to distributors and retailers – Fidelitone.
#2 Make retailers your promotional partners
As we’ve discussed earlier, customer acquisition is one of the most important factors that can gobble up the profit margin. Encourage partners to take an active part in promoting your products. By doing so, you can leverage their connection with customers, tap into the brand community they have built on social channels.
#3 Distributor Fulfillment
Manufacturers can take the route of fulfilling orders through their distributors. However, for this idea to work out well, manufacturers will have to decide the payment model. It could be like either the manufacturer collects the payments and then pays the distributors or vice-versa.
Retaining distributors who provide a service to end customers not offered by a manufacturing brand would ensure that the customer is not lost.
But what if none of your distributors don’t enjoy a direct connection with a buyer? In that case, it would be difficult for a manufacturing brand to decide which distributor in your supply chain should be getting the fulfillment project. There are a few options.
- Offer every distributor a chance to fulfill and decide based on results
- Assign fulfillment based on geography
- Grade customers based on their customer service
- Assign fulfillment duties based on products in stock
How is an American audio electronics brand doing it?
Tivoli Audio is an American audio electronics brand that sells directly to consumers. It’s an appropriate example of how D2C brands can create a mutually beneficial situation keeping distribution partners intact.
The brand that sells to cross-border markets uses the traditional approach for fulfillment but with a little twist. Tivoli creates a website with a local flavor and domain (ex: tivoliauido.au) to sell products through retailers in that region. The brand takes care of the marketing initiatives while distributors take care of sales and fulfillment.
By doing so, the brand is able to enter new markets without establishing a retail store or own distribution channel in that geography. At the same time, distributors benefit from more sales due to the brand’s focused marketing efforts.
Doing D2C Right: The Manufacturers’ Playbook
#1: Plan Your Customer Journey Upfront
Selling direct to consumers is a very different model than what you are used to. To succeed, you’ll need to plan and execute an end-to-end customer journey, from awareness and consideration to purchase and post-purchase experiences.
This journey will encompass your customer and employee experiences, internal business processes, and technologies.
#2: Create Omnichannel Experiences
Your customers may first consider a need based on a video ad they saw on their connected TVs, search your brand on their mobile phones, be reminded of your product in a display ad, pick up their research on their tablets, and ultimately convert on their laptops. The successful brand knows how to recognize those customers across every touchpoint and tell a unified story across the entire journey.
Creating an omnichannel experience also requires you to connect your eCommerce platform to your ERP so that online shoppers have access to real-time product availability data. And in the age of COVID-19, many customers want to order online and pick up at a specific location.
#3: Create a Culture of Content
This is one of the most important lessons of the first generation of DTC brands: consumers are hungry for product data and brand stories and will actively seek it out. As a brand, you’ll need to create an abundance of content and map it to each stage of the customer journey. Social proofing — customer reviews, testimonials, social media posts — will all play a crucial role in your content strategy (and alleviate some of the burden of content creation for your brand).
#4: Carve Out a Niche for Your Long-Term Business Partners
Clearly, the wholesalers, distributors, and retailers that have traditionally sold your products are vital to sales strategies and revenue streams. You have numerous options for ensuring their continued satisfaction for your brand as you open a new, direct-to-consumer channel. For instance, you can create a new sub-brand for products sold exclusively through your third-party partners. You can sell your evergreen products through these distributors and reserve your online channel for new or unique inventory. And you can create exclusive products for your top-performing retailers, giving them a reason to drive customers to their stores.
#5: Use Marketplaces as a Stepping Stone
Online marketplaces, such as Amazon, eBay, Walmart, and Alibaba, can provide a stepping stone as you prepare your DTC channel. Many consumers begin the discovery phase of their purchase journey on Amazon, making it an important brand awareness channel. A marketplace strategy will teach consumers that they can buy from you directly and will steer them to your online channel.
Hybrid eCommerce Models that Support D2C
What will the next generation of the DTC business model look like? One thing is certain: there will be no one-set model that applies to all brands. We are already seeing hybrid commerce models supporting DTC channels.
This is a model in which both B2B and B2C customers shop from the same website. Products may be purchased individually for the consumer, or in bulk for the B2B customer. Discounts are applied based on the volume of items ordered.
B2B + DTC functionality on same site
In this model, a single instance of the eCommerce platform offers a complete set of B2B functionality for business customers — custom catalog, pricing, bulk ordering, flexible payment options — and a B2C site serves direct consumers.
Multiple branded sites on one eCommerce instance
As we’ll discuss below, some manufacturers opt to launch a DTC line under a new brand and want to support it with a separate consumer-facing website. That said, they don’t want to buy a separate ERP system for the new brand or integrate the brand into its backend system. In this scenario, a single eCommerce platform like Adobe Commerce can support multiple branded sites on a single instance.
How Adobe Commerce Enables D2C Selling for Manufacturers?
Personalization and creating engaging customer journeys
D2C marketers are masters at creating engaging experiences that attract loyal customers. But growth will require you to look beyond your initial customer base. In the near future, you will likely expand into adjacent product categories to reach new pools of customers who had never considered your brand before. How will you personalize the experience of these new customers and cohorts as you advance?
Adobe Commerce (formerly Magento Commerce) allows you to glean data from your website and social channels to create nuanced personas to drive the customer experience. Magento’s Product Recommendations will allow you to present customers with items of interest based on their browsing and purchase behaviors. And you can extend that personalization to your social channels, email, and SMS campaigns.
According to eMarketer, research shows that consumers who engaged with a recommended product had a 70% higher conversion rate during that session. And Magento reports that 40% of people said they spent more than they originally planned because their experience was personalized.
Moreover, with the help of Magento Business Intelligence, you can analyze customers and products deeply to optimize your customer journey. You can also strategize marketing initiatives based on targeted segments.
Omnichannel commerce enablement
Consumers will engage with your brand in numerous ways — online, in-store, from a social media ad or via their mobile devices. Let’s say a consumer discovers your eCommerce site and puts an item in your cart, but clicks away without purchasing. Is that customer lost forever? Not with an omnichannel approach to eCommerce.
All touchpoints to your business are fully unified, so you can pick up conversations where they were left off. For instance, you can remind customers of the items left in the cart on social media and even offer an incentive to convert like free or low-cost shipping purchasing now.
Adobe Commerce offers unparalleled omnichannel capabilities. And with a large community of developers, you can be assured you will have many options for expanding into new channels that capture the consumer’s imagination and eyeballs.
Magento also allows merchants to offer users conveniences like buy online and pick up instore. Support for mobile responsiveness and capabilities to build PWA (Progressive Web Applications) through Magento’s built-in SDK PWA Studio contributes to the mobile-friendliness of your eCommerce store.
Adding to this, Magento provides integration with B2B and B2C marketplaces like Amazon Business, Amazon and eBay extending your opportunities to reach out to customers on thriving multi-vendor websites.
Magento Content Management System is fully featured for developing, editing, managing and deploying digital content. Magento’s content management provisions provide workflows for creating, sharing and quick approval of content within teams like design, content and marketing.
To make your content recognized, the platform offers SEO features that includes developing SEO-friendly URLs and meta descriptions, integrating Google sitemaps and more.
Magento’s technology partnership with one of market leading PIM (Product Information Management) systems Akeneo helps in centralizing product data for multiple channels. Using a PIM system you can achieve data consistency and accuracy. Easy to use drag and drop interface means marketers and customer care personnel can create, edit and deploy content without the aid of a frontend developer.
Accommodating business buyers
Leveraging Magento’s customizability and built-in features, you can cater to your different types of audience (wholesalers, distributors, retailers, end customers). You can set different pricing structures, show different products to different audiences, or customize checkout and fulfillment options.
Loyalty programs to improve customer retention and conversion rate
Loyalty programs are a great way to keep customers buying from your brand, even if your price point is higher. There are numerous loyalty program plug-ins for Magento, enabling you to select from a wide variety of features. If your product line is a bit premium, you can launch a loyalty program that allows your customers to save up points for a big-ticket item. Or, you can offer tiered loyalty points based on average spending. The possibilities are endless.
True, there are some costs involved in maintaining a loyalty program. Still, you save in other important ways, such as reducing your customer acquisition costs (it costs five times more to acquire a new customer than it does to retain an existing one).
Spread out to B2B
The most successful D2C brands expanded beyond the initial model of selling directly to consumers and have formed relationships with wholesalers, distributors, and other retailers. Brands like Allbirds still sell directly to consumers, but they also sell via Amazon and Nordstrom’s. B2B relationships offer significant growth potential, allowing you to benefit from your partners’ sales and marketing initiatives.
If you decide to take the B2B route in the future, Magento’s B2B-specific features can make it a breeze. Also, Magento allows you to run a B2B site and your D2C site in the same instance. That will save you time, money, and administration hassles.
Room to grow
One of the most compelling reasons to choose Adobe Commerce for your D2C eCommerce venture is that it can alongside your business. Adobe Commerce can easily scale and allows you to deploy more sophisticated features — gift registries, PO support for B2B distributors, website personalization, integrated marketing campaigns — as needed.
Moreover, brands are focusing on providing additional conveniences for customers which requires a lot of changes required in the operational and technology side of your eCommerce store. The flexibility of your eCommerce platform is a major factor in determining how quickly you can pivot your business to institute the changes, technology, and processes you require to keep working.
The D2C success story of an auto parts manufacturer in the U.S.A.
Ziffity, as an Adobe Silver Solution Partner agency, has powered the D2C dreams of major manufacturing brands in the US across industries like automobile and food. Here’s a case study that can help you understand how we’ve done it successfully over the years.
Dynojet is an automobile performance components builder based out of Las Vegas that focuses on both on-road and off-road vehicles like cars, motorcycles, jet skis, snowmobiles, and ATVs.
The brand, which has almost half a decade of market presence, had its products spread across four different online stores Dynojet.com, Powercommander.com, Dynojetwb2.com, and Dynojet Automotive.
The brand wanted to unify 4 different brands under the parent brand name Dynojet and build an online store that acts as a single repository for all the products offered by the brand in the market.
Dynojet enjoys a well-established network of dealers and resellers. The brand wanted to ensure the ecosystem was undisturbed in the process of unifying its product portfolio and enhancing the digital experience.
To achieve these objectives, Dynojet turned to its technology partner Ziffity.
The eCommerce approach that enabled Dynojet to cater to both B2B buyers and end-users
Dynojet enjoys a vast user base that includes brick and mortar store owners, dealers, resellers, and individual racing enthusiasts.
Along with its efforts to unify its sub-brands, the brand wanted to revamp its website with provisions for both end consumers and wholesale buyers to make purchases.
Ziffity, as its technology partner, migrated the website from a custom-built system to Magento Commerce, providing social logins for end consumers and registered ID-based logins, which Dynojet can create for their wholesale customers.
By segmenting customers, the storefront provides different experiences. While the storefront exhibits B2C pricing for others, B2B buyers who log in with registered IDs will get separate pricing pulled from the ERP. Thus using a single website and codebase, Dynojet was able to cater to all of their customer segments and overcome their challenges.
Amassing its distributed strength into a single eCommerce store, Dynojet provided users with a one-stop option to buy all their favorite products. With improved digital experience, blistering page speeds, and well-organized product information, the store experienced a spike in traffic, organic visibility, and increased ROI.
- <2 seconds loading time
- 100% increase in traffic
- 100% increase in revenue
Dynojet has signed up Ziffity as its Magento and Cloud managed services partner. Now, Dynojet is looking forward to a new Magento Commerce Cloud implementation for Dynoline, its sister concern.
With our 8+ years of experience in Adobe Commerce and a team of 30+ certified developers Ziffity can
Build your DTC channel from scratch and have you up and running quickly.
Migrate from a third-party eCommerce infrastructure to a robust platform such as Magento Commerce.
Customize your DTC channel to your customer journey. Our experts can perform code refactoring, custom module development and customization for your existing functionalities.
Offer affordable build packages with no payments for 90 days towards your Magento Commerce implementation.
And once you go live, we offer managed services for your technology and marketing needs, thus improving your operations and sales.
Are you looking to join the D2C bandwagon? Ziffity can provide free consultation to plan your D2C eCommerce roadmap.