Success in the digital age depends on a company’s ability to evolve. That’s a lesson learned from Blockbuster.
But while most businesses have moved online to stay competitive, others are going one step further.
Looking to future-proof their B2B business, many distributors are now reaching out and selling directly to the consumer through direct to consumer (D2C) channels. Just look at Heinz and PepsiCo – two brands that have always sold through traditional channels and have now activated direct relationships with customers for the first time.
The reasons for going D2C can vary. Generally seen as a long-term strategic initiative, it’s a way to gain greater control over pricing and freedom to innovate. But for some businesses it’s more a response to market disruption.
Whatever the thinking behind transitioning from B2B to D2C, selling directly to the consumer allows brands to grow new streams, gain market insight, and enjoy greater business resilience.
Brand growth in the face of a pandemic
Until 2020, D2C strategies were seen as a nice-to-have. But faced with the disruption of a global pandemic, ecommerce as a whole has grown exponentially. So much so, it’s becoming a must-have for companies looking to interact with consumers, stakeholders and influencers.
The figures say it all. In the UK, it took a decade for ecommerce as a proportion of all retail to grow from 10% to 20%. During the coronavirus pandemic, it grew from 20% to 30% in just eight weeks.
A report published in July 2020 looking at D2C opportunities during lockdown found that if social distancing is the new norm, brands would look to cut out retailers. A drop in footfall has already led many to adapt their services beyond bricks-and-mortar shops.
That’s not to say D2C is the perfect solution for every B2B business out there. Traditional supply chains still work well for some brands. But even without the pandemic, it’s hard to see how the constraints of old-fashioned retail partnerships can take every brand towards a successful future.
What exactly is D2C?
Pre-internet, business was largely dictated by distributors. Today, business is different.
D2C means brands are able to produce, pack and distribute their own products. Bypassing the need to negotiate with retailers, D2C is all about cutting out the middleman.
Brands enter the market directly rather than going through a third party. This benefits the business by eliminating barriers, increasing profits, giving back control, and boosting engagement.
Essentially, it brings a company closer to its customers.
But making the move from B2B to D2C is not an easy one. First, you need to understand the practical implications on business operations and fulfilment processes.
7 things to consider about D2C
Fed up with handing your profits over to retailers? Before you take the plunge, take time to consider the implications and decide whether going D2C is right for your brand.
Here are seven things you need to think about before you start building new direct sales channels with consumers:
1 Partnerships are key
When making the move to D2C, it’s important that a business doesn’t alienate its retail partners. This is easily done. Even with a hybrid model (when a business still sells wholesale to retailers as well as directly to customers), a business makes itself a competitor to its retail partners.
With a reduced reliance on partners, brands could find themselves in a stronger negotiating position with retailers. But if retailers see D2C as a threat, that bargaining power will be lost.
Rather than cutting all ties, brands need to work harder to find a way to remain close to their partners and not lose money.
Retailers might even encourage brands to move to D2C. If a business can build brand reputation through D2C, it will help sell more products through all channels. Viewed as an opportunity, businesses could reduce channel conflictions by launching new brands and products.
A study by Forrester Research found that nearly half of manufacturers said that D2C helped boost brand awareness and increase sales for their channel partners.
The trick is finding a balance that lets both the brand and partner companies boost profits.
2 Taking control of the brand (means getting personal)
Arguably the biggest benefit of D2C ecommerce is the control a business gets over its brand. Transitioning from a traditional supply chain to a D2C model means that a brand’s marketing efforts become fully focused on its customers, rather than its wholesalers.
Brands know that consumers’ expectations of them are high – and they expect personalisation.
According to data from Retail Week, 68% of consumers said they’re happy to provide personal information if they get a more tailored shopping experience.
But these expectations go beyond personalised offers. Today’s consumers want the reassurance that a brand knows who they are and understands what they want.
By giving more control to brands, not only do customers get a more personalised digital experience, it also helps strengthen the financial health of the business.
3 Consider a subscription-based model
Operating a brand on a subscription-based model could prove to be a real success. Companies that have already gone down this route are killing it! That’s because they’re making it super simple for consumers to buy something they already use on a regular basis.
As any business knows, anything that helps save customers’ time, effort and money is generally going to do well.
Findings from a report by the Royal Mail Group revealed that in 2019, 27% of UK consumers were signed up to a subscription service.
At the time, it was predicted that the subscription box market would reach £1 billion by 2022. But that was before coronavirus turned everything on its head and created an even more lucrative market for D2C subscription-based models.
Offering a cancel-any-time subscription encourages more people to sign up – as does an easy, no-fee returns policy. And as for retention rates – they depend on the company’s ability to adapt, recommend, make the most of technology, and personalise the product or service to the individual user.
4 Website optimisation for success
If a business is going to succeed in D2C, it needs to increase its online presence and attract new D2C customers. For that it needs to be on top of SEO.
According to a report by Search Engine Journal, 51% of D2C brands say SEO is a top acquisition channel.
There’s a lot involved in optimising a website. It means focusing on the design (it needs to be mobile-friendly); adding user-friendly features (quizzes and free trials are always popular); building up reviews (responding properly to both good and bad reviews), and more.
But it’s worth it, because the higher a website ranks in search results, the more traffic will come to the site. And D2C relies on attracting the right audience.
5 A/B testing: increasing conversion and retention rates
There’s one question many businesses forget to ask themselves: how much of a marketing strategy is based on what we know instead of what we think we know?
Customer data is out there and available. The problem is knowing how to leverage and analyse it. A/B testing allows brands to base decisions on real behavioural data rather than assumptions.
In short, A/B testing means happy customers. And that translates into better click-through rates, higher conversions, more revenue, greater loyalty, and fewer complaints.
6 Getting products faster to market
Many legacy brands tend to shy away from innovation because it can be risky. When the average new product launch takes between 18 and 36 months, it’s easy to see why.
With D2C, businesses can reduce these risks by launching a new innovative product on a smaller scale. By testing products with a focused demographic and making adjustments where required, companies are able to better understand what customers love or hate about a new idea.
7 Taking order management to the next level
In a B2B company, systems and operations are already focused on order management. But with D2C, there are additional requirements: for example, payment options, payment gateways, single item dispatch and returns.
Using a single piece of software to manage orders helps to streamline the fulfilment process and avoid unnecessary work. There are always going to be sales peaks and troughs to deal with, but by having one central hub, businesses can avoid overselling and simplify the process of selling through multiple websites, marketplaces and physical stores.
By supporting growth across multiple channels and touchpoints and improving conversion rates, it also helps a business know when it’s time to scale up operations.
Grow your brand, gain control
The biggest challenge for any business moving into D2C is the shift in responsibility for fulfilment, packaging, returns and warehousing (in addition to building your online presence).
At Linney, we help brands grow online and beyond. Our end-to-end marketing service covers all your ecommerce needs from website optimisation and brand activation to warehouse management and speedy, secure distribution.
Our ecommerce fulfilment experience has helped clients branch out into new channels and markets. To find out how Linney can help streamline your ecommerce journey and grow your brand, speak with the team today.