Recent world events have accelerated the already accelerating change in the internet commerce sector. Passed years were genuinely important for internet sales since they kept customers at home, which resulted in a significant shift in consumer behavior.
By the next few years, customer expectations for internet enterprises have continued to rise. As a result, businesses that take advantage of the current trends’ sales potential outperform those of their rivals.
Direct-to-consumer (D2C) ecommerce is forcing B2B enterprises who were previously dependent on pure distribution networks to change their business strategies. D2C digital commerce sales in the US soared to 11.5 billion USD in 2020, and that number exploded to 129 billion USD by 2021. With 25% of customers utilizing D2C subscription services solely, millennials and Gen Z are driving a growing interest in the D2C sector.
Join us as we analyze what it means to go from distribution to direct-to-consumer (D2C), the motivations behind doing so, and the possible risks and problems associated with doing so successfully. We also look at the most recent developments and elements that play a role in expanding your D2C business.
FROM DELIVERY TO D2C
In the past, B2B businesses depended on retailers or distributors to sell their goods to final consumers. The well-functioning system was nevertheless upset by COVID when retail closures, lockdowns, and supply chain interruptions led to sharp decreases in sales. Distribution and retail partners even shut down completely in some instances.
The switch to D2C already took place before the pandemic; the lockdown just accelerated the process for businesses considering the change. As a result, many businesses that formerly sold through distribution now do direct-to-consumer business.
But would a direct-to-consumer sales channel help any eCommerce business grow?
After all, a significant change is always dangerous.
5 GOOD REASONS TO CHANGE TO D2C
Selling direct-to-consumer (D2C) enables businesses to diversify their revenue streams by generating an extra source of income that is not impacted by the cyclicality of B2B sales to retailers and distributors. This innovative sales approach has the potential to help you build stronger bonds with your clients and gain more control over your brand.
- DEPENDENCE REDUCE
You may lessen your dependency on wholesalers and retail partners by taking advantage of the D2C industry. When the lockdowns made it impossible for customers to visit physical stores, several distribution-only companies permanently shut their doors. B2B companies suffered greatly from the lack of a specific D2C digital commerce strategy. Nike started moving toward a direct-to-consumer business strategy a few years before the pandemic, and it paid off: the company’s internet sales grew by 82% at the start of 2020.
2. BE AWARE OF YOUR CLIENT DATA
You get far from your client when you distribute or work with retailers to sell your products. D2C commerce enables you to get closer to your clients and start gathering more information about their identities, interests, and buying habits.
This supports the development of a more clever long-term business plan, impacting everything from future market expansion to R&D.
3. MANAGE YOUR BRAND
You lose some control over your brand when you merely provide your product to another company for sale. When you use a digital commerce strategy to sell directly to clients, you regain control over the brand image by interacting with them directly.
Additionally, by providing superior customer service, you may affect how they engage with your business. To stay ahead of the competition in the cutthroat market, your brand must differentiate itself significantly. Your company’s performance as a whole depends critically on the quality of your direct consumer relationships.
4. EXPAND YOUR TERRITORY
Your D2C sales strategy has the potential to assist you in increasing your market share and fostering quick growth if it is backed by a solid product and marketing strategy. The reach of your brand is frequently constrained by distribution networks and retail locations.
It is possible to get beyond the limitations of conventional retail locations in the realm of internet commerce. You may connect with clients all across the country or even the world if you have the correct fulfillment and delivery plan in place.
5. LOWER COSTS
Businesses must consider methods to lower their expenses as budgets become more constrained. Digital D2C commerce has the potential to reduce expenses through more automation and self-service.
Retail establishments have always depended on in-person encounters to generate sales. Rent, labor, and other expenditures are included in this. Successful digital commerce reduces costs through self-service and direct-to-consumer shipping while maintaining the human touch. As customers perform some of the “hard lifting,” your business can concentrate on reducing the price of your products.
4 D2C TRENDS
Digital businesses confront a number of difficulties this year, including rising consumer expectations and persistent supply chain problems. D2C companies and conventional digital merchants will be prepared to face challenges and thrive in the nearest future by keeping up with current developments.
- MORE B2B BUSINESSES WILL CHANGE TO D2C
Many more significant B2B companies will create their own D2C channels in order to compete with digital D2C brands. Less people visit physical stores as a result of the pandemic’s continuing consequences, such as the continued work from home of many employees and supply chain problems. In order to build stronger ties with their consumers, traditional businesses will seek to connect with potential customers online.
2. MORE D2C BRANDS WILL INCLUDE A D2C SUBSCRIPTION MODEL
A minimum of one retail subscription is paid for by around 33% of all US customers. With around 51 million US customers adopting D2C subscriptions, D2C subscriptions are becoming more and more popular among retail subscribers.
Of course, not every direct-to-consumer firm can use a subscription model. Vendors must research the market to determine where their company gives the greatest value.
You don’t have to reinvent the wheel; perhaps it’s simply a matter of packaging and distributing the wheel in a novel manner.
3. THE CX FOR D2C CUSTOMERS WILL CONTINUE TO DEVELOP
While D2C businesses provide functionality, they have the opportunity to better cater to their customers’ needs. Brands offering direct-to-consumer subscription services may make ordering more flexible. A consumer who subscribes to prenatal vitamins, for instance, would prefer to receive orders every three weeks rather than every four because traveling might keep them away from home.
Customizing the customer experience also entails paying attention to your clients’ wants. It may take some time for a brand that has only sold to wholesalers and retail partners to understand the specifics of each of its clients.
However, you can enhance your CX and broaden your category reach by providing more items or services by getting to know your clients at several contact points and obtaining information about their requirements and wants.
4. A HEADLESS OR COMPOSABLE APPROACH WILL BE ADOPTED BY MORE D2C BRANDS
B2B companies creating a new D2C channel today have a distinct advantage over their rivals because they can create a flexible digital commerce solution that enables them to quickly adapt to the shifting demands of the customer. D2C businesses can immediately deploy new and highly flexible solutions, such a headless or composable approach, to their digital commerce platform while competitors are hampered by legacy platforms and antiquated software.
The term “headless” refers to a notion in which the frontend and backend of a website are distinct, giving you greater freedom to manage a seamless omnichannel experience.
Without being tied to the characteristics of a single platform, composable commerce enables you to select and customize best-of-breed tools and functionality to satisfy unique company needs.
These strategies enable D2C firms to swiftly and elegantly adapt to the changing demands of their new customers.
THE 2 MAIN RISKS OF D2C SHIFT
Although switching to a D2C approach has many advantages, you also need to be aware of the expenses and dangers involved. Businesses that previously depended on a distribution strategy can discover that selling directly to their customers is more difficult than they anticipated.
- LOSING PARTNERSHIPS
The truth is that not all partners are happy when a formerly dispersed company enters the direct-to-consumer market. Partners may interpret the action as a brazen attempt to siphon off revenues from prior relationships.
Your distributor and retail partners may then take retaliatory action by ceasing to distribute your items or removing them from their shelves.
Short-term retaliation may be bad for the company, especially at a time of year when sales might be sluggish. For a company employing a mixed D2C and distribution strategy, navigating these agreements becomes even more challenging.
2. DIGITAL BUSINESS COMPLEXITY
You need to invest in the necessary partners, resources, and skill sets in addition to developing an e-commerce website to accommodate this new sales channel. Your company will need to concentrate on marketing, customer experience optimization, customer support, and, frequently, even new fulfillment and shipping capabilities.
Additionally, you must use an omnichannel approach to reach your clients in a number of settings in order to suit the expectations of contemporary shoppers. Nowadays, customers don’t just want to explore an online site and make purchases. They want to do research, engage in conversation, and receive communications in a linked way across many channels.
THE 3 WAYS TO NEGOTIATE NEW TERRITORIES
Putting aside the commitment of money and resources, you could still be concerned about how your distributor or retail partners would respond to your new endeavor.
It takes a planned strategy supported by reasonable expectations to navigate uncharted seas. Making a choice on the role your D2C channel will play is the first step. What do you actually want your D2C efforts to accomplish?
The solution rests on a continuum where sales are prioritized at one end and customer insights at the other. As businesses move closer to the sales side of the spectrum, the possibility of channel conflict rises.
1.SIMPLIFY ONLINE SALES
Build relationships with customers gradually if you want to transition to selling online without alienating your current retailers. Utilizing social media is a great way to engage with customers, build loyalty, and personalize a brand that was previously only available on store shelves.
2. SELECT CHOICE PRODUCTS
Sell a lower number of your items at first. Consider launching your e-commerce with sales centered around niche or limited-edition items. Perhaps develop goods that are sold just online!
As you develop your omnichannel approach, you may continue to let your distributor and retail partners offer the more well-liked, high-volume items. Additionally, it gives you the opportunity to test the market for goods that your local traditional shops might be hesitant to carry.
3. THINK ABOUT A REVENUE SHARE PROGRAM
With your distributors, implement a revenue sharing scheme. Offer a bonus, for instance, if they send your e-commerce site’s self-service consumers who are smaller or less profitable.
Although your D2C channel may not see much revenue from these strategies in the near future, you may start developing your D2C ecommerce knowledge and capabilities. Additionally, it enables you to discover more about your clients and how they like to communicate online. As you attempt to develop a strategic strategy for switching to a D2C model, this can be quite helpful.
4. SELECT THE BEST PARTNER
The ideal relationship is essential for businesses interested in transitioning to a D2C ecommerce strategy. Mygento specializes in omnichannel strategy and has knowledge of both B2C and D2C digital commerce.
We help you collect crucial customer data sets and develop a tactical plan for switching to direct-to-consumer sales. We also investigate new approaches to accessing the D2C market to make sure you can make this change with the least amount of possible risk.
Please contact our team right away to discuss how we can assist you in creating a highly effective D2C digital commerce channel.