Brands should adopt an ecommerce model for direct-to-consumer sales
Brands should adopt an ecommerce model for direct-to-consumer sales As has been the recent trend of consumers moving online, so has been the observation about the wholesale business too making the same shift. What started earlier as just an opportunity to increase volume through online channels for B2B and earn more from each sale has now changed to D2C (Direct-to-Consumer), getting recognition from the industry to grow and competitive advantage.
Let’s discuss in detail the benefits of moving brands to D2C and find out whether they are in the right state of readiness for customer fulfillment, as there are a lot of variables involved in this process. Hence, a clear understanding of the benefits and risks involved should be there beforehand.
The first question that arises is why brands should turn to D2C.
As has been the trend in recent years, the competition for wholesale brands in the retail sector has been growing exponentially, and it’s not expected to slow down in the future either. What was supposed to be a competition for retail shelf space with just a few other brands by businesses during pre-internet days has turned to be a face-off between hundreds of competitors in the current time, including both online and offline market.
As they jostle for space has become increasingly mind-boggling and expensive, the cost of operation for smaller brands has risen too due to the availability of slots at an ever-increasing premium. As a result, brands have realized the potential a D2C model can bring and have turned to them to navigate the obstacles above.
With increasing competition, Brands have been witnessing the traditional retail sector getting more crowded day by day and themselves losing out on their share of real estate and their retailers altogether. Because of these issues, brands see D2C as a perfect opportunity to regain sales that they had lost out earlier due to this excessive overcrowding.
Not only does D2C solve this problem of losing out on competition through space constraints, but it also creates sky-high opportunities in ways that traditional retail could never do. Access to customers through this direct channel has resulted in newer ways for brands to reach out to them, creating further opportunities for increasing sales. The most significant advantage of this shift is that it has thrown the problem of geographical constraints out of the window, as now brands can reach customers irrespective of geographical boundaries.
Gain control over pricing
A significant advantage with D2C is that not only it offers immense growth potential, but it also gives control over price back to brands. Recent trends have indicated that the D2C business has been shifting towards full pricing, as the retail markup of products has now moved in control of the brands themselves. This has resulted in brands managing their promotional derivatives to drive critical incentives, customer acquisition, and brand loyalty.
The business model has changed in recent years, but the industry has witnessed buyers also changing the way they approach brands. Buyers nowadays are digging deeper to find out what the brands are offering and are always on the lookout for complete packages from the brands, not just in terms of quality but also an exceptional user experience.
D2C provides the consumers with total control over their journey with brands. Earlier, when brands were held back by inefficient business processes or poorly trained staff, now the freedom of execution through D2C has seen brands operate seamlessly by moving aside those constraints.
Development of closer relationships with Consumers
One of the most significant advantages that D2C has provided to businesses is the opportunity to develop a closer relationship with their customers. The advent of modern eCommerce technologies has allowed brands to have access to their customers’ data, which helps them offer their customers a personalized shopping experience tailored to their needs. Offering such a customized level of service and user experience helps gain customers’ trust and increases customer loyalty, thus ensuring that they visit the brand again and again.
Testing new markets and products
Compared to traditional retail, not only does a D2C involve minuscule investment, but it also allows brands to position themselves in a less-ventured market with less investment and risk.
The brand’s future growth potential in that geographic market can also be judged by its feedback from the activity mentioned above. Before venturing into a new geographical market, brands can first develop an online D2C channel and target those markets through social media adverts. After which, it can collect ample amounts of feedback which would help in data-driven decision-making about whether to expand into that new territory would be economically viable or not.
So, the next question that arises is whether the Brands are ready to go D2C or not.
The brand’s current capabilities and willingness to expand would determine its readiness to move into the D2C eCommerce model. The following facets of business need to be looked into before deciding whether the brands should move into the D2C model or not.
Retail Channel Conflict
As businesses start supplying their customers directly, this will threaten the future business of their retail supply chain partner, which would create a conflict, and they might try to restrict the brands from getting exposure from their customers. Hence, thorough restructuring of product development, merchandising, and the overall supply chain to smoothen out the new processes.
New Product Developments
The most significant advantage that brands will have once they move to the D2C model is the immense wealth of customers’ information that they would get access to. This would enable the brands to get the correct information about their customer’s needs and expectations.
Another challenge that moving to D2C brings is the adherence to a newer set of inventory merchandising. The brands would have to indulge in thorough brainstorming sessions to consider the effect of inventory planning and markdown optimization and its impact on inventory replenishing procedures, along with the other technical systems needed to be implemented.
Compared to traditional retail orders being massive and less frequent, the D2C model involves adjusting to the relatively higher frequency of business dealings, and that too at a fraction of the quantity. As a result, a system should be implemented to handle such new fulfillment procedures.
In the end, it’s fair to say that we are increasingly clear about the benefits a brand stands to achieve by transitioning from traditional to B2C eCommerce models. Also, there’s a fair bit of understanding about the challenges one might face while making this transition successfully.
Safe to say, the improvements that D2C offers to brands are plentiful if proper efforts are applied to change the business model.
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