Developing D2C retailer maturity

What are the success factors in D2C retail? To find out, we have conducted analyses of companies and countless interviews. This resulted in an interesting maturity model.

Many companies carry out direct to consumer retail (D2C) across sectoral boundaries. We’ve reported on this strategy on this blog many times already. But what is the significance of D2C in real terms? And what experiences are companies gaining through it? We joined forces with the University of St. Gallen and Spryker Systems GmbH to look into these questions.

We analysed major companies from Germany, Austria and Switzerland and held around 15 interviews with businesses from various sectors. Our focus was on digital retail.

D2C maturity level

Our investigation demonstrated that maturity levels within D2C retail vary greatly. The significance of online shops differs considerably as can be seen in their share of revenue and the energy companies invest in them.

Followers, strategists and pure players

We were able to identify three groups within the companies on the basis of the data we gathered.

Followers: The largest group operates its own shops but with low intensity. There’s often a lack of ambitious KPIs or clear strategies for ongoing development. In these companies, the shops usually follow on the heels of the business. They often produce less than 5% of total revenue, which is sometimes negligible in and of itself.

Being a follower does not necessarily mean that you have only just entered the realm of digital retail or that you operate a shop in an unprofessional manner. Followers include companies which have been active for many years or which see no added value in continuing to expand the D2C share achieved online. Reasons for this are serving a clear niche or the desire to not cannibalize other distribution channels.

Strategists: This second group of companies views the D2C segment as a strategic focal point. They generate up to 25% of revenue through their own shop. Moreover, they frequently have considerably more ambitious targets for their D2C channel. Strengthening their own brand is often at the forefront as this enables the customer experience to be managed deftly. Their online shops are also a central tool in opening up new markets.

Pure players: The last group almost exclusively launched their business based on a purely digital distribution model. There’s now a host of such companies which have found their way into high street retail. The brand and brand experience are usually more central than the products. The brands are typically only offered on the D2C market. 

Company development

The question of which characteristics can be seen in the development of the D2C sector interested us. The outcome was that most companies professionalize their operations through various technical, organizational and strategic developments. The specific steps and sequence in which these are taken depends on various factors and differs between companies. We were able to identify these elements and map the development they produce.

This map can be used as an aid in determining your own position and defining which areas should be worked upon next.

We will publish the overall results of the study in September 2020.