If you’re a manufacturer, these past 12 months have been quite unnerving. Some 25,000 retail outlets closed in the US in 2020 due to COVID, and many other iconic brands are predicted to shutter in the coming months as the challenges of the pandemic and faltering economy linger on. If you relied on these retailers to get your products into the hands of your customers you’re likely thinking: what are my options?
It might be time to consider launching a channel in which you sell your products directly to your customers, better known as a DTC channel. In fact, it’s a strategy that many manufacturers, CPG brands and food companies now consider business imperatives.
These companies aren’t simply jumping on the latest fad; they’re meeting customers where they are. Seeking safe, contactless shopping, consumers have flocked to ecommerce, so much so demand for grocery delivery enabled Instacart to turn a profit for the first time ever. According to a McKinsey Report, COVID-19 has condensed ten years worth of anticipated growth in ecommerce into just 90 days.
There are plenty of opportunities and challenges to launching a DTC channel. Let’s start with the opportunities:
- Customers favor eCommerce. Last July Digital Commerce 360 reported that online sales leapt by an impressive 76%. If you want to continue selling to consumers, you’ll need to offer your products in their preferred shopping channels, and increasingly that’s digital. More importantly, consumers have spent the pandemic forming new shopping habits out of necessity. But necessity almost always gives way to habit. If your brand isn’t on the consumer’s radar, getting their attention sometime in the future could be difficult, if not impossible.
- Direct customer relationships. When you sell directly to customers you have the opportunity to develop one-to-one relationships with them, and to avail yourself of the many benefits such relationships offer: product feedback, surveys, loyalty and referral programs, to name a few. You’ll also begin to build a pool of first-party data that will no doubt morph into one of your most important strategic assets.
- First-party data. Picking up on the previous bullet, GDPR and CCPA have left marketers scrambling for cookie-free ways to target new audiences and build their upper funnel. First-party data offers a bright spot for privacy-compliant marketing. You can use your customer data to send out product announcements, personalize your web experiences to the shopper, request permission to engage in marketing initiatives with your partners, and even model new prospects to target.
- Customer journey insight. When you sell your products via third-party retailers, they — not you — own the customer relationship. They’re also the ones who get insight into customer journeys, and can understand how and why consumers favor one brand over another. A direct-to-consumer channel will allow you to capture that insight, use it to engage better with prospects, and be more responsive to their needs. It will also provide a roadmap for building your upper funnel by knowing where and how to apply marketing resources.
- Better margins. Third-party retailers and wholesalers may have provided you with a lot of benefits, but they came at a price. When you sell directly to consumers, the 40% markup stays on your balance sheet.
- Less noise. Marketplaces like Amazon and Walmart are excellent vehicles for getting your products in front of huge audiences, but it also means competition is stiff. These marketplaces are optimized to close sales, and so they present the consumer with multiple choices, even when the consumer arrives on your product page via a costly paid search campaign. A DTC channel lets you eliminate that competition.
There are many compelling reasons to launch a DTC channel, but it is, by no means, an uncomplicated endeavor.
Challenges to launching DTC channel
If your company has typically sold to retailers and wholesalers in bulk, you’ll probably need to restructure quite a bit of your internal operations in order to service end customers. You’ll also need new pricing, pick, pack-and-ship models to get your products out the door.
And there’s a pretty good chance that you’ll need to do substantial work to your website to support one-to-one sales. Unlike B2B sites which are meant to make placing bulk orders a quick and easy task for established business customers, a consumer-facing site will need to promote product discovery, provide an abundance of fresh content, and be optimized towards a new set of metrics such time on site, page views and repeat visits.
Creating a consumer website will require you to identify the customer journey and optimize towards it — a task that may have been left to your wholesalers and retail partners. If you’re like many manufacturers, you may have a fragmented view of the customer journey, and will need to engage some analysis to help you understand how consumers engage with your brand.
Finally, you’ll need to build new integrations from your DTC ecommerce site to your order management, Enterprise Resource Planning and other backend systems so that you can provide site visitors with updated and accurate inventory availability, shipping information, process orders, and ensure that key account data, such as their shipping address, payment information and other preferences, inform their shopping experience.
How Paragon can help
If a DTC channel makes good business sense to your brands/products but the prospect of building and maintaining an entire ad operations team from the ground up feels daunting, don’t fret. Paragon Services has a history of delivering world class omnichannel digital campaigns, audience management, reporting and analytics all designed to maximize DTC channel ROI.
We’ll guide you through all aspects you need to develop DTC campaigns, audience management, reporting and analytics.
We’ll help you move into the future, get in touch.