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The global COVID-19 crisis has accelerated the shift in consumers shopping habits - from physical retail stores to online and low-touch shopping experiences. Customers are now getting "more digitally empowered" and hinging on the frictionless digital experiences. According to Forrester, "81% of enthusiast consumers plan to purchase directly from a Direct-to-Customer or D2C e-commerce in the next five years, and they are between the ages of 18 and 34." They're progressive and believe customer experience from direct to consumer brands is much more satisfying than traditional retail brands. Price, quality, free shipping, easy returns, and convenience are the key parameters that accelerate the growth of the Direct-to-Customer e-commerce model.
As society settles to the new normal, online shopping through direct digital channels is seeing a much higher adoption rate among people, even when brick-and-mortar stores reopening. This massive shift from "Bricks-versus-Clicks" to "Bricks-and-Clicks" is posing a serious challenge to business leaders across the confluence of multiple retail modes. Yes, the march of digitalization has intensified through this challenging time and became widespread practically overnight. More recently, it has extended beyond the product categories like electronics, fashion, food, grocery, health and wellness.
In response to shifting buying patterns, many consumer-packaged goods (CPG) and Retail companies have turned their attention to re-evaluate their traditional e-commerce capabilities and launched D2C e-commerce propositions during the pandemic. However, some e-commerce retailers have been among the most brutal hit, faced unprecedented struggles, wanted to modernize their existing commerce investments, but their highest-priority questions have shifted to:
- Why should they sell directly to customers online?
- How should they cope with marketplaces, distributors and retailers?
- What does D2C e-commerce strategy mean for an existing retail partner and distributor relationship?
- Will modernizing their e-commerce strategy impact the profitability of the sales and cannibalize all other channels?
- Will establishing the D2C e-commerce channel absorb a lot of resources?
D2C in retail holds immense potential. It is a low barrier-to-entry e-commerce strategy that eliminates an intermediary, distributor, wholesaler or another outlet to get products on the market. Going D2C means that e-commerce companies will build, market, sell, and ship their products directly to the end consumers at a lower cost, without intermediaries. To remain viable in an evolutionary consumer landscape, traditional retail stores and modern brick-and-mortar stores must consider a direct-to-consumer digital commerce strategy.
Nike, Levi, PepsiCo, Impossible Foods, Cort, Branch, Warby Parker, Casper, Everlane, and Inhabitr are a few traditional manufacturers that initiated direct relationships with their customers and accelerated their digital transformation journey. They leveraged the borrowed supply chains, web-only retail, direct distribution, and social media marketing to achieve early success. For them, D2C acted as a catalyst and helped them unlock various potential benefits such as new synergies, improves customer-centricity, expands direct coverage, drives business growth, better connections with consumers, and ensures a compelling customer experience.
The shift to D2C in E-Commerce: Why are retailers moving away from traditional methods of doing business?
Given how much things have changed with the rise of the internet as a medium of commerce, the Direct-to-Customer is definitely a holistic approach for businesses. It enables them to operate more flexibly, create stronger customer relationships, win new customers, and improve customer-centricity into the post-pandemic era while eliminating a significant amount of overhead. The result? Manufacturers end up gaining higher sales margins, and consumers pay less.
Here are a few more reasons why e-commerce and manufacturing brands embracing the direct-to-consumer e-commerce model as a part of their business strategy:
- Greater Brand control: In the traditional departmental store settings, manufacturers are left with no control over how their products are showcased or how their end consumers are influenced. With the D2C eCommerce strategy, companies get access to greater brand control at every step of the buying process, from initial marketing efforts to the post-buying consumer experience.
- Omnichannel Experience: It's the very core of what is making the D2C strategy a popular approach. That's because this kind of business model depends on establishing a direct connection with the end consumers. With the D2C model, brands will go the extra mile and deliver a unified shopping experience to their customers at every digital touch-point. An omnichannel experience unlocks better engagements, builds customer loyalty, influences a consumer's purchase decision, and accelerates customer leads.
- Drive Efficient Growth: Direct-to-Consumer retail strategy is a vital source of gaining competitive advantage to disrupt competitors. It allows the manufacturers to seize a favorable window of opportunity by adopting technology to enhance operational efficiency and become more agile.
- A Sense of Community: Adapting a D2C business model allows to capture valuable buyers data while having one-to-one relationships with the end consumers. It is impossible to achieve with traditional e-commerce stores. Brands can leverage the precious data to study consumers shopping behaviors, create more intimate relationships with customers, and personalize the product offerings based on data-driven insight. The result - more insightful and personalized brand experiences that will set a brand apart from its competitors.
Are you D2C-Ready? Things to keep in mind for a successful transition
A transition towards a D2C retail world isn't as simple as it sounds. Given the challenging circumstances each brand faces during the COVID-19 pandemic, many companies see the deployment of a new D2C strategy as a threat to their bottom line. However, paving its own road forward to e-commerce success, a manufacturer must chart out a plan of action that translates into higher margins, greater control, omnichannel customer experience, and a closer relationship with consumers. A poorly planned strategy can wreak a devastating effect on a brand's growth.
So what does a business requires for a successful transition into the direct-to-consumer world? Given below are some key considerations the company must keep in mind to become D2C ready:
- The Crystal Clear Role of a D2C Channel: It is a crucial first step when any e-commerce or manufacturer decides to engage directly with consumers. The reason - eliminating the middle retailer from the selling cycle can create conflicts with the retail partners. A brand cannot rely blindly on the D2C strategy to generate higher sales revenues. Therefore, defining the role of a D2C channel will undoubtedly save a lot of time, investments, and hassle. The role of D2C e-commerce strategy can be one of four options mentioned below:
- Find a Compelling Consumer Value Proposition: Time and again, a D2C strategy will fail if the business is not offering a compelling consumer value proposition. When settled on D2C's role, a manufacturer must work on a unique reason why any buyer comes back rather than purchasing from the competitor. Factors like exclusive deals, right pricing, premium quality products, sense of community, fast order delivery, easy returns, seamless customer experience, and hyper-personalization - contribute to a distinctive consumer value proposition.
- The Right Technology: In today's challenging landscape, successful D2C businesses rely more prominently on the right technology, cutting-edge digital tools, augmentation of human capabilities, robotics, cognitive process automation, big data and analytics technologies. Indeed, these are crucial enablers of any D2C business transformation effort and can result in digital-led operational excellence.
How can Kellton help you setting up a D2C Retail Strategy?
The COVID-19 pandemic has changed everything in e-commerce and has boosted the relevance of online Direct-to-customer strategies. With physical retail outlets closed and supply-chain disruptions, D2C has become a necessity for retail businesses rather than an opportunity. And it is here to stay - rapidly affecting every product category. As a leader in this space, Kellton helping businesses to achieve post-COVID-19 growth in today's competitive retail landscape by executing D2C retail strategy in an agile manner. We enable them to respond to the crisis, build relevance at scale, help them adapt to the next normal, and stay ahead of the accelerated pace of change by driving a transformation at a business’s edges.