Written by Sven Van Hoorebeeck
Ultimate convenience is a future commodity. A growing consumer trend, enhanced by technology, is the zero-effort purchase[1]. Consumer purchasing behavior goes towards solutions that require the minimal effort possible to receive value.
Online purchases and direct-to-consumer (D2C) channels answer the zero-effort purchase trend with convenience: Consumers buy from remote digital touchpoints, get deliveries at home, and communicate directly with the seller. Consumers love it, resulting in D2C sales tripled between 2017 and 2020[2].
Consumers are not the only ones benefiting from a D2C channel; manufacturers can also reap value from D2C. There are four key opportunities for manufacturers to capitalize on D2C activities:
1) Unlocking higher margins and a higher volume of sales
For manufacturers, the direct-to-consumer channel represents a higher margin of 5% to 15% [3] compared to other B2B/ B2C distribution channels.
In a direct-to-consumer channel, companies reduce the number of intermediaries between production and customers, internalizing the margins that went to intermediaries in the past.
Illustration from BrightWolves: Direct-to-consumer channel reduces the number of intermediaries to reach the consumer
An increase in margins is also coupled with an increase in sales volumes.
The direct-to-consumer channel taps into new segments of consumers who have different purchasing habits. For example, 80% of 16-24 years old frequently bought goods online in 2020[4].
2) Controlling brand image and product communication
Traditional B2B distribution channels prevent manufacturers from directly representing their brand to the end customer. On the contrary, a direct-to-consumer channel gives manufacturers total control over how the customer experiences their brand, from promotion to purchase and usage.
Furthermore, all the touchpoints with the customer are centralized on one internet platform and do not rely on distributors’ communication. Centralizing the communication and uniformizing the ‘feel’ of the brand positively impacts customer satisfaction and brand loyalty.
3) Directly accessing consumer data
Accessing customer data in B2B/ B2C channels is challenging since there is no control over the entire sales funnel, and information sharing through the funnel is relatively uncommon.
Companies engaged in direct-to-consumer exploit the data along the whole sales funnel to know their customers completely. They also leverage D2C touchpoints, such as websites, chat, emails, and surveys, to gather extensive data on them, allowing them to understand their consumers better, both in needs and pains, and consequently finetuning the product.
Direct-to-consumer is an opportunity for manufacturers to apply a customer-centric approach to product/ service offerings and innovation.
4) Low barriers to enter new markets
A direct-to-consumer channel requires only a few focused resources to implement and operate.
Manufacturers can use the expertise of external partners, such as BrightWolves and Upthrust [5], to implement a direct-to-consumer channel foundation. Other external partners exist to carry the tasks of logistics fulfillment: storing, packaging, and delivering goods.
Then, companies can leverage digital tools to operate the direct-to-consumer activities internally with very few resources. Digital tools, such as Order desk[6], automate the back-end processes of the direct-to-consumer activities.
Conclusion
A Direct-to-Consumer channel is attractive to any manufacturer who can capitalize on one or more of these opportunities. It is truly worth considering the possibility of establishing a direct-to-consumer channel. If you are interested in exploring the D2C opportunities, don’t forget to look at the associated challenges and make sure you have a solid foundation for running your D2C channel.
[1] The offer you can’t refuse, Steven Van Belleghem 2020 [2] eMarketer, March 2020 [3] Observations from BrightWolves projects [4] https://ec.europa.eu/eurostat/statistics-explained/index.php/E-commerce_statistics_for_individuals#:~:text=The%20largest%20proportion%20of%20people,two%20times%20(38%20%25). [5] https://upthrust.eu/service/digital-product-studio/build-digital-products/ [6] https://www.orderdesk.com/integrations/