D2C commerce Direct-to-consumer – opportunities and benefits
Many manufacturers are discovering exciting opportunities and potential in direct sales. It is not just margins that count but also strengthening the brand and direct customer contact.
Direct retail from manufacturer to end consumer is becoming more important to many brands. We have put together our first post on this topic. The primary intention of this article is to look at the benefits of direct sales. What are the arguments used by (brand) manufacturers in their search for a direct route to consumers?
The consumer’s attachment to a sales channel (such as Migros or Coop) or retailer is often greater than to the product itself when it comes to consumer goods and everyday products. Here is where retailers who can afford to boycott individual brands over and over again can exert their strength (as happened in recent years with Nivea or Mars) if, for example, no agreement could be reached on purchase prices. Customers continue to visit the same businesses and simply switch to different items.
By using a direct sales channel, the manufacturer controls the entire brand experience and customer journey. If they manage to offer an above-average customer experience at purchase, the customers will more closely identify with the brand since the purchasing experience is a part of it. This can be achieved if a company designs its own sales channels to be more interesting and fully aligned with the brand.
New products and brands
Proprietary sales channels offer more flexibility in product design. Companies can develop their own product lines or even brands which are not offered on the market, such as in premium or budget segments. Direct insights can be gained from experience with these product lines. It is also possible to reduce the time to market for new products.
(Customer) data and interaction
It is worthwhile for each manufacturer to get to know its customers and enter into dialogue with them. Without proprietary channels it can be difficult to get in contact with consumers, but it becomes much simpler by having one’s own sales channels (particularly digital).
A direct channel not only helps acquire contact details; it also provides insights into customer habits and needs. Moreover, the purchase can be seamlessly linked to other interactions, such as on social media, meaning that products can not only be advertised, but also sold directly.
The personalization of products offers added value in various segments which would be difficult to achieve using just traditional sales channels. Individually configured or designed products provide a decisive differentiating factor. This option is ideal in segments where customers strongly identify with a product and brand, as is the case with fashion and sports. But product personalization does more than differentiate the offering from other providers; customers are also willing to pay a higher price.
If a product is sold via a third-party sales channel, a significant portion of the margin goes to the retailer. Whereas with D2C, the margin stays entirely with the manufacturer. Of course, establishing, operating and marketing a proprietary sales channel is neither simple nor cheap. However, the resources used will not only help with actually selling the product, but also support brand recognition and the establishment of a consistent customer experience. These can then simultaneously finance value-added services such as same day delivery or free returns.
- (( comment.published ))