D2C commerce

Manufacturers are increasingly looking for direct contact with customers. Using direct distribution channels, they can strengthen their own brand and in doing so bypass intermediary retail. The possibilities of digital retail are accelerating this trend further. But at the same time, there are many new challenges facing manufacturers.

Digitization has been churning up the retail landscape for a couple of years. Large online retailers are increasingly achieving market dominance, but are also pushing into high street retail. New retailers are also switching to the plan and opting for direct distribution. This often forms the business model of start-ups and entrepreneurs, while established companies can also initiate a strategic reorientation to start dealing with consumers directly.

Manufacturers in flux

The sports manufacturer Nike has been implementing a clear D2C strategy (direct to consumer) since 2015 and to great success. This is now where the company’s strongest growth comes from. In 2015, Nike generated direct sales of USD 6.6 billion; in 2020, they are expecting the figure to be USD 20 billion.

Other companies make use of these distribution channels right from their inception. The mattress manufacturer Casper has been exclusively selling its products via its own distribution channels since its founding in 2014, and has seen considerable growth. The company generated USD 100 million in revenue by as early as 2016. And all of this despite a product that seemed unsuitable for sale via e-commerce.

Many Swiss manufacturers are also on the scene with direct distribution channels. Thanks to the Swissness bonus, there is already a market abroad for high-quality products which can be tapped into with e-commerce. And this is easier and quicker than first having to establish distribution partnerships in the destination countries.

Cannibalization and lack of know-how

The path towards direct distribution is often not easy for (brand) manufacturers. Existing distribution partners should not be cast aside, as they are the initial source of all revenue.

It is equally difficult to achieve sufficient relevance for one’s own distribution channels. Customers need to identify clear added value compared to existing distribution channels. It is also challenging to make digital business profitable quickly enough. It often takes time for financial successes to materialize because initial investments in infrastructure are needed, know-how has to be expanded, and the market needs to be worked on first. Those starting out in digital commerce should expect setbacks and mistakes.

Many advantages

A D2C strategy offers clear advantages despite these challenges. It establishes a direct relationship with end customers. The manufacturer retains full control of its brand and how customers experience it. And last but not least, no margin is lost to retailers.

The right strategy is decisive

An effective strategy is decisive for the success of a D2C service. It requires a clear concept to ensure the direct distribution channel is seen as more appealing than intermediary retail. Simply implementing a proprietary e-commerce solution and hoping that customers will find their way to it is not enough.