The direct-to-consumer (DTC) market has been showing rapid growth since 2020. Many brands have launched a D2C strategy especially after COVID to increase sales and profitability by adopting the digital business model.
Many brands that were impacted by the lockdowns and experienced serious losses adopted the D2C model to increase their turnover. Established brands like Pepsico and Heinz are now jumping on the D2C bandwagon to activate direct relationships with their customers. Nike generated 36.8% of their revenues from D2C sales worldwide.
The D2C model removes the intermediaries or traditional stores and allows brands to connect directly with their consumers.
D2C models deliver many benefits. The key ones are:
- Better access to consumer data to improve sales and enhance cross-selling, upselling, and marketing activities.
- Greater influence on the overall sales strategy, brand image, and customer experience.
- Improve margins by bypassing traditional distribution partners.
The rise of D2C can also be attributed to the fact that consumer expectations from brands have evolved significantly and that shopping decisions now increasingly depend on shipping times.
Challenges of a brand in the D2C journey
While D2C presents unique and clear opportunities for brands to improve customer experience, there are certain challenges to navigate for those operating in this sector.
Building customer trust, retention, and advocacy
One of the greatest challenges of D2C is navigating the times of uncertainty and building customer trust. Today’s well-informed customers demand authenticity and transparency and will trust and reward brands with their advocacy.
Research shows that people today look for product authenticity and website security when they make online purchases. As such, it becomes essential to deliver positive, engaging, intuitive, highly personalized, and extremely secure online experiences to customers.
End-to-end management of customer data and user experience
The success of D2C also depends on the brands’ capability to manage the customer data and user experience. One Plus, for example, has gone the D2C way to reduce dependency on marketplaces and boost sales. They partnered with Google to maximize their profitability.
However, D2C brands have to make sure that they can make good use of the vast volumes of customer data to design effective marketing strategies. End-to-end management of customer data and user experience is also essential to drive product improvements based on real feedback and influence profitability.
As such, developing powerful data connections to access data-driven insights plays a pivotal role in boosting D2C success by enabling personalization and faster product releases.
Finding and managing vendors
The right partnerships are crucial for D2C success. Developing a reliable network of partners and vendors is essential to overcome the vendor management challenge and bring the products into the market faster.
D2C brands also need to navigate the challenge that comes from the higher prices associated with smaller order quantities. Negotiating better prices with suppliers, developing the most efficient supplier network, and improving supply chain logistics become important contenders to offer products at competitive prices without compromising on quality or profitability.
Efficient inventory management
Inventory management is one of the most significant challenges faced by D2C brands. These companies need to optimize inventory management and gain clear insights into inventory levels across the whole supply chain and vendor network to reduce wastage and drive production agility.
This also becomes an important point of consideration since customers now demand omnichannel experiences and expect seamless connections between their in-store and online experiences.
Inventory management also feeds into fulfillment management and collectively influences the customer experience. Deep insights into the supply chain and logistics ecosystem are also critical for improving and streamlining inventory management.
Lightning-fast order fulfillment
It is imperative for D2C brands to accelerate order fulfillment and gain control over their supply chain to drive seamless customer experiences. As customer expectations move from 3-4 day deliveries to same-day/next-day deliveries, D2C brands must identify ways to track accelerating buying patterns. Along with that, they need to consolidate their storage, sorting, packing, and delivery operations and ensure that these move from siloed operations to a single, agile, fluid movement.
This demand has led to the rise of dark stores and MFCs (Micro-Fulfillment Centers) and these stores have to now reduce the time cycles between order placement and order fulfillment.
Automating store-backs, stores, and MFCs to enable next-day / same-day /on-demand deliveries are imminent for D2C success and meet the last-mile turnaround expectation. It is important to note that robotics built for warehouses does not work for fulfillment centers, and robotics built for fulfillment centers cannot work for MFCs.
Deep tech-enabled robotic fulfillment stacks developed exclusively for stores and MFCs as such are now crucial for D2C success. Mckinsey surveys show that 46% of respondents abandoned shopping carts owing to long shipping times, and 34% consider long delivery times as a key reason to shop in-store and not online.
The survey also reveals that the “young, urban, and time-constrained consumers—the most attractive segment—expect same-day deliveries”.
For D2C success, brands must support on-demand consumer behavior, leverage deep tech-enabled smart storage and sorting, and shrink the last mile to the last minute for instant fulfillment.
Connect with us at Cartesian Kinetics for decentralized fulfillment and keep up with growing customer expectations.