Since the start of the pandemic, consumers have switched to doing more of their shopping online — and increasingly, that’s leading manufacturers to consider selling their wares directly to consumers, rather than via middle-men and retail distributors, says Yoav Kutner, CEO of IT service Oro.
Even before the pandemic, of course, there were plenty of D2C success stories. In 2011, for instance, Dollar Shave Club disrupted the men’s cartridge-razor market — then dominated by Gillette — with its more affordable subscription-based D2C business model. Consumers were drawn in by the promise of a cheap shave, and many realised the company’s blades were just as sharp as the in-store brands. In fact, Dollar Shave Club kept about half of its customers through a full year of subscriptions, driving remarkably high recurring revenues.
Another success story: mattress maker Casper, which since 2014 has sold its products D2C. Casper’s key insight was that mattress buying can be confusing and overly complex. By shipping products straight to the buyer, and offering a generous 100-day no-hassle return period, Casper was able to net US$100mn in revenues within two years, making it a role-model for any manufacturer.
Looking at the success of brands like Dollar Shave Club and Casper, it's tempting to ask why all manufacturers aren’t at least experimenting with D2C sales. Still, if you’re thinking of taking the plunge into D2C, it’s important to understand what you’re getting yourself into. The reality is that selling direct brings both risks and opportunities. Here are some things to consider as you start thinking about the future of your business.
The case for D2C in manufacturing
For manufacturers, the benefits of direct-to-consumer sales are real and significant.
When you sell D2C, you control your relationship with your customer from start to finish, including marketing and customer service. Nobody is going to hijack or distort your brand, and nobody is going to slash prices or dilute the value of your products. When you sell D2C, the manufacturer’s suggested retail price isn’t just a suggestion — it’s the only price that customers will pay for your product.
Going D2C also enables you to forge a more direct relationship with customers, without having to lean on retailers or deal with a network of distributors. That makes it possible to bring products to market faster, and to prototype and test products more responsively as customers communicate their preferences. For many manufacturers, this agility becomes a key differentiator in today’s increasingly competitive world.
Selling directly can also be a goldmine of customer data, helping you better understand your client base. Over time, you’ll be able to use this richer understanding to tailor your products, promotions, and marketing campaigns to the needs of different customer segments.
Perhaps the biggest benefit of all, though, is that you get direct access to a large pool of customers. In today’s click-to-buy world, it’s never been easier to scale a D2C brand, and with the right digital marketing even relatively unknown manufacturers can quickly capture a large and loyal customer base.
Considering the risks of D2C
Still, going D2C isn’t a panacea or a path to guaranteed growth. If you plunge into direct sales without considering the potential downsides, you could be heading for a fall.
One key risk factor is simply that when you start selling D2C, you’ll impact the way that both consumers and retailers relate to your brand. That can easily disrupt existing distribution and retail channels, or cannibalise the in-store sales that currently support your business.
To mitigate such risks, manufacturers need to commit to managing customer relationships in a whole new way. That often requires hiring new staff with expertise in marketing, logistics, online sales, customer support, product returns, and more — a potentially significant expense for a new D2C brand.
You’ll also need to keep lines of communication open with your current distributors and retailers, who may perceive your switch to D2C as an aggressive move. Discuss your plans early and often with your downstream partners, and consider creating exclusive product lines to preserve your wholesale and retail partnerships.
Making D2C work for you and your customers
So how can you manage the risks and make D2C work for you? It starts with ensuring you’ve picked the right channel: some brands find that a single D2C website meets their needs, while others manage multiple storefronts for different consumer segments, or reach consumers through online marketplaces.
Branded websites offer maximum control over your consumers’ shopping experience, and also over revenue streams, customer data, and other back-end aspects of your ecommerce operations. That brings with it some complications, too, of course: you’ll need to figure out ways to manage issues such as credit card fraud, and your ability to keep driving sales will depend on staying on top of trends in search and social-media marketing.
Online marketplaces can be a great way to reach a broader audience with somewhat reduced risk, although of course you’ll have to pay for the privilege of selling your products through established marketplaces. Amazon, especially, warrants separate consideration: it offers unrivalled scale for D2C brands, with access to millions of shoppers. But make no mistake: the customer is ultimately Amazon’s, not yours. You’ll have limited access to customer data, and Amazon can sometimes promote competing products in ways that hurt your business.
Whatever channels you choose to target, you’ll also need an ecommerce platform capable of delivering results as you transition to D2C. Ideally, seek out a platform that can support multiple channels, and both D2C and B2B sales, so that you can adjust your sales strategy flexibly without having to overhaul your back-end infrastructure.
Above all, make sure you find a platform that’s powerful enough to meet your needs out-of-the-box, and customizable enough to meet your needs not just in sales, but also in areas such as fulfilment, customer service, and marketing.
The bottom line: while selling directly isn’t risk-free, the benefits for forward-thinking manufacturers are potentially significant. So don’t underestimate D2C. With a clear-eyed business strategy and the right tools, it’s possible to bring your brand to a far larger audience — and net plus-sized profits along the way.