E-commerce growth and digital channels, such as mobile and tablets, are driving change in the retail landscape. As the pressure to keep pace intensifies, a growing number of manufacturers are establishing digital direct-to-consumer (DTC) sales channels.
Today’s consumers have never had more options for researching and purchasing products. Ever-increasing online sales and the emergence of new digital channels, such as mobile and social media, drive innovation in a constantly evolving retail landscape.
Manufacturers realize that they need to offer a better experience for consumers already shopping on branded sites. At the same time, they must gain tighter control over their brand, pricing, and more.
The power of data
Product Catalogs - Rich product content is lacking for many manufacturers, despite the fact that it is essential to have your own product catalog as a brand. Content must be organized efficiently to drive the market and help retailers increase their sales. This can be done without losing what customers value most about the brands they love: true and authentic content.
Ratings and Reviews - Collecting and managing ratings and reviews is a great tool for B2C strategy; it is also useful when looking for feedback about the role the company plays. Using ratings and reviews, data manufacturers can drive product assortment, new product development, pricing and functionalities.
Consumers - A complete vision of your consumer- how they buy and their online behaviors- is a rich source of consumer data previously controlled exclusively by retailers.
Competition - Competition comes from all directions. As a result, brand manufacturers are forced to explore channels that are free from competitive distractions. Opening up direct-to-consumer online sales channels lets brand manufacturers reach and connect with the increasingly flighty customer.
Why pay more for going direct?
According to most consumer studies, shoppers typically conduct research online before making a decision to buy. A natural source of information during this discovery phase is the brand manufacturer’s website, as consumers trust the brands they know.
Customers are often willing to pay more to buy direct from a brand manufacturer because they know they will receive an authentic product that is exactly as ordered. Brands should focus on consumer experience by offering more to shoppers already on their sites and make sure that customers can purchase directly from the brand site.
Control of brand and product pricing
The pressures faced by most brands from competitors, other retailers and marketplaces can often result in a lack of brand control and product pricing. These pressures compel brands to exert a stronger influence on marketing and pricing so that brand equity remains strong.
Adding a direct-to-consumer online channel provides a new avenue for direct customer engagement and a way for brand manufacturers to control messaging and pricing strategies. These practices can be shared with retail partners, creating a win-win cycle.
Why do brands go direct?
Investing in a digital channel has many upsides. For one, sales increases can be driven by a number of factors, like new customer acquisition, improved ability to increase average order value, and better chances for repeat business from loyal customers. Digital channels are also an effective way to generate traffic in other channels like stores, mobile, events, etc. Additionally, brand manufacturers will see better brand awareness as they foster relationships with consumers through direct sales.
All business buyers are consumers. A B2B customer can be a B2C customer and even EDI users are coming to B2B sites before ordering. B2B and B2C sites are currently converging, narrowing the gap between B2B and B2C sites.
This allows the brand manufacturer to get closer to the customer, to engage with them, learn from them, and find better ways to sell to them. With the customer now engaged with the brand, brand manufacturers can use direct-to-customer marketing to establish loyalty. The overall strength of the brand will see huge improvement.
By borrowing techniques from DTC, digital commerce brands can create relevant experiences for B2B business buyers. For example, supporting a customer-first strategy accelerates growth in B2B digital commerce. Currently, many manufacturers approach B2B digital commerce initiatives seeking merely to create web-based interface of ERP and back-end processes, but there are many more options available.
Understand the customer and generate revenue
To focus on a digital commerce experience without disrupting your traditional distribution channel, don't undercut prices. This is the best way to understand your customer; it is also another valuable way to collect data and feedback for the company.
Meeting customer demands
Shoppers have high demands. They want a seamless shopping experience at all touch points. The digital commerce platform facilitates the front-end experience but it is also important to focus on the operational aspects of the business to ensure a seamless customer experience.
All departments must be aligned for flawless customer service as there is a higher risk of losing customers once you are directly engaged. As such, learning to respond to customer behavior is critical. Provide them with excellent service and unique experiences, and they will become your best advocates. Disappoint them and you risk losing them for good.
According to Gartner Research, the key challenges when developing a digital commerce strategy are:
- The lack of business alignment and neglect of customer experience that tends to occur when IT leaders are tasked with deploying the digital commerce platform.
- Being caught off guard and failing to respond to fast- changing market conditions and variable customer preferences.
Dealing with channel conflict
Historically, the biggest challenge in establishing a direct-to-consumer sales channel has been the fear of channel conflict – not wanting to harm existing retailer relationships by competing with those retailers.
While some retailers refrain from doing business with brands that sell direct-to-consumers, manufacturers are increasingly overcoming this conflict by working with retailers to devise strategies that are beneficial for all parties involved.
Selling direct does not mean abandoning existing distribution channels. A successful direct-to-customer business should be built on a strategy that supports current distribution partners and increases revenue across all channels, rather than prioritizing one over another.
From manufacturer to retailer
Running an ecommerce channel is a completely different business model than a wholesale retail business, as it requires a different set of internal skills, processes, and infrastructure. Brand manufacturers who sell online do not just need to become online merchants; they need think and act like retailers. If brand manufacturers do not plan and prepare for operational differences, the customer experience will suffer. Everything from order placement to fulfillment to shipping, returns, marketing and customer service needs to be tailored to the ecommerce channel in question to deliver a seamless customer experience.
To ensure that the customer experience is on par with the brand experience, front-end experience and backend operations must receive the same amount of care and maintenance. If the backend infrastructure and logistics are not equipped to handle the direct channel, customer experience will suffer, which will in turn have a significant impact on the brand.
Behind the scenes
While a user-friendly and effective customer-facing ecommerce site is essential, it is also critical to plan for what happens behind the scenes once an order has been placed. The processes involved in delivering a smooth and seamless experience after the point of purchase are paramount. Failure on the part of operations, backend infrastructure, and logistics to deal with the direct channel will negatively impact consumer experience.
Because these processes differ so significantly from what brand manufacturers are accustomed to, most brands struggle to overcome these challenges. Diligent planning should always include an investment in skilled ecommerce labor resources, infrastructure adjustment, new technology systems implementation, and new operational resources covering everything- from order management to warehousing, shipping to customer service- are critical to ensuring success.
To develop a successful digital commerce strategy, establish a cross-functional team with a variety of skills, set the right objectives, design a better customer experience, and find the right option to get the products direct to consumer. It is important to note that filling SKUs is not the same as working with pallets. You can adapt with what you already have or choose to outsource with the right partner.
Selecting the right e-commerce platform
After deciding to go direct, it is important to select the right digital commerce platform. From a technology perspective, brand manufacturers should look to an ecommerce platform that allows non-technical marketers, content professionals, and merchandisers to easily manage their content. The platform should include such features as Personalization and Segmentation, Publishing Tools, Guided Navigation and Search, Account Management and SEO.
Since brand manufacturers can realize significant growth due to an already established brand, they should be concerned about the ability to scale the platform to handle increased traffic and sales. International expansion and maintaining a balance with the expertise of the organization are two other major considerations.
This is why a 'Crawl, Walk, Run' strategy is always recommended. Brand manufacturers should choose a platform that allows them to scale upwards to support their growth and lets them learn about the digital channel without disrupting business. The speed of the 'Crawl, Walk, Run' strategy should be considered when evaluating digital commerce platforms in the middle market or enterprise arena.
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