Direct-to-Consumer (“D2C”): the practice of brands selling their products directly to their end customers, without distributors or retailers.
It’s not a new model.
As a child of the 90’s I remember the ‘Avon Lady’ knocking at our door regularly to consult and sell my Mum on all things cosmetics. Travel back further and door-to-door is how Vax launched the original multi-functional floorcare machine in the 1970’s.
This traditional doorstep service is, by definition, D2C.
Fast forward to today and we can see that it is the internet that has been the driving force of modern day D2C. Across nearly all demographics consumers have become far more comfortable with shopping and paying online, whilst digital marketing provides a cost-effective way to target consumer segments.
Then there is the massive pink elephant in the room, Covid-19 (not to mention Brexit . . .). These global events have sent shockwaves through the Retail sector, irrevocably damaging some businesses, and significantly impacting other’s abilities to reach their end consumer. If the past year has taught us anything, it is that brands can no longer rely solely on Retail to drive the top line.
‘Traditional’ powerhouse brands, Apple and Dyson to name but a few, have been aggressively shifting away from retail in pursuit of D2C for well over a decade and have utilised almost every marketing channel available to drive direct sales.
However, many brands are yet to commit. The ecommerce trend is there for all to see, and the commercial benefits are unquestionable, but business risk and lack of expertise have prevented many from launching a D2C channel.
I believe now is the time that must change.
So here are the 5 fundamental questions you MUST answer to ready the ship for the D2C voyage:
1. Why are you doing it?
There are many benefits to D2C BUT there will also, inevitably, be many challenges. These could include (but certainly will not be limited to!):
|Increase gross margin||Retailer backlash|
|Reduce reliance of retailers||Skills and resource (see Q3)|
|Control end-end CX||Changes to operations (see Q4)|
|Data Capture||Internal culture etc.|
Your ‘Why’ can be any or a combination of these benefits, and it is critical you keep it front and centre. The challenges are unavoidable and in the heat of battle, it will be easy to forget your ‘Why’. This could result in conceding to short term pressures, undoing any progress that has been made.
JDS Recommendation: decide on your primary ‘Why’ then consistently and constantly communicate it across the business.
2. Who will be commercially accountable?
This will potentially (actually, inevitably!) invoke the age-old sales vs marketing debate. It is unlikely when you first get started that you will be able to invest in a full time ‘Head of D2C’ position, but this should be the ultimate goal.
Instinctually you may be distracted by titles and department headings. However, D2C must form part of a broad business strategy. It is personnel skills and competencies across your senior Sales and Marketing teams that must take precedent (and they must be actively supported by leadership).
JDS Recommendation: ONE person must have accountability for the delivery of a D2C project and relevant experience of Ecommerce and project management should form the decision process, not job titles.
3. Where will the required expertise and resource come from?
Assuming you are starting from zero, specialist marketing and ecommerce expertise will be required to maximise success and alleviate challenges. You have 2 primary options:
- Outsourcing: Specialist agency / consultant
- In-house upskilling: External training courses / ‘on the job’ training / recruitment
JDS Recommendation: Outsource initially to help build out the plan, processes and lead internal project team, overtime upskilling and resourcing up to manage internally.
4. How will you adapt operations?
You are in essence becoming the Retailer when you open up D2C, so Retail-CX fundamentals must be considered: convenience, speed, and quality.
- Web & Ecomm: website should be live and ready to sell.
- Delivery: single pick/pack/ship capabilities, delivery within 1-3 days max, and good communication throughout.
- Returns: ‘Consumer Contract Regulations’ apply, and customers will expect a seamless returns process on warranty repairs or guarantees (free of charge).
- Customer Service: web/phone/email. Day-to-day queries will increase in line with D2C sales growth. Offering pre-sale support could also serve as a USP.
Versus traditional operations, assume a minimum 200% increase in operational costs.
JDS Recommendation: Involve ALL departments from day 1 to ensure smooth transition.
5. What will your value proposition be?
In other words, why should a customer buy direct from you? (vs. traditional retail)
Reasons to buy ultimately come down to Product, Price and Promotion (Added Value). Never underestimate the attraction to consumers of being able to buy direct. There is automatic trust (assuming your brand is robust) so this is a USP that no retailer can compete with.
Assuming therefore that your ducks are in a row with your three P’s, you need to then consider what could stop a consumer buying direct from you.
Ability – Is your website transactional?
Awareness – Is it obvious that you can buy?
Approach – Is it a smooth, easy (and enjoyable!) experience?
JDS Recommendation: Remove barriers to early growth and consider how quickly you want to grow the channel. More aggressive USP’s will deliver faster growth but increase risk, and vice versa.
So . . .
The challenges? Considerable. The required effort to establish and manage? Substantial.
The long-term benefits? Cannot be ignored.
Executed well, D2C will drive your bottom line. And with the retail sector as it is right now, can you really afford not to?