Direct to consumer – the challenges

Manufacturers who wish to adopt a direct sales model enjoy numerous opportunities. These are nevertheless accompanied by certain challenges. After all, the companies are in uncharted territory, and this never comes without risks. Furthermore, it is important not to annoy existing business partners.

Competition with existing sales partners

Manufacturers generally have a broad network of sales partners with whom they have cooperated intensively over a long period of time. The success of products depends not least on business partners, who serve as an interface with end customers. A company wishing to adopt a direct sales model (direct to consumer – D2C) will not be able to implement this to the full immediately. In light of the key role they play, it is important not to annoy business partners too much.

The looming conflict can be defused by adopting a moderate pricing schedule or by compiling a product portfolio that barely overlaps the traditional business. Developing a product range is something of a balancing act. On the one hand, manufacturers want to achieve rapid growth via the D2C model, without infuriating dealers. How aggressive a manufacture can be largely depends on its market position.

Creating exciting offers

In the case of everyday products, guiding customers towards a manufacturer’s own sales channels is no simple matter. Customers rarely want to buy consumer goods, such as pasta or deodorants, from the manufacturer directly. A clear added value is necessary to attract customers to the manufacturer’s own sales channel. This can be found, for example, in exclusive products, personalization or an outstanding customer experience. Brands with which customers display strong emotional ties have a clear advantage.

Profitability and shopping basket size

With inexpensive products, it is difficult to generate the required profitability through sales in an online shop. If the shopping basket is too small, shipping costs are disproportionately high. It is therefore essential to attempt to increase the size of the shopping basket. This can be achieved, for example, by clever product bundles or free shipping from a certain basket size.

New knowledge is required

Often, moving into direct sales, and more particularly digital sales, requires entirely new know-how that many manufacturers simply do not have. These knowledge gaps must be closed as quickly as possible, otherwise getting started in the field of e-commerce will prove to be a lengthy and expensive process. The necessary knowledge and experience must be developed. If it is foreseeable that this will not happen quickly enough in-house – a partner is required with whom the company can develop cooperation based on trust.

Internal obstacles

For most companies, becoming involved in direct sales goes hand in hand with internal change. New mindsets are required and deeply ingrained methods must quickly be adapted. As with other change processes, this can only be achieved if the teams affected are incorporated into the process at an early stage. They must understand which goals are to be reached through this process.

Yet it is not only people that are concerned. The changes also affect IT systems, in particular in the field of inventory control. Deciding to move into e-commerce can trigger a whole series of additional investments, while aspects of the existing processes may also come under pressure. This is because new areas of responsibility arise that have to be efficiently incorporated into structures that are already in place.