How to build a multi-million pound kick-ass DTC eCommerce brand: Part 4
Part 4: Key considerations you’ll need to make when implementing a DTC model
In this penultimate instalment of the series, we’ll be exploring some of the key considerations you’ll need to make when implementing a kick-ass DTC model.
If you didn’t catch our last instalment, which explored how to WIN at executing a Direct-To-Consumer model, you can find it here.
Are you ready?
As a business leader looking to establish a robust DTC eCommerce model, there are some key questions you’ll need to answer to ensure you’re as ready and prepared as can be. Before adopting a DTC strategy, brands need to examine their methods and understand their offering to consumers.
Whilst the benefits of establishing a DTC channel are undeniable and there are clear strategies and initiatives you can put in place when executing a DTC model, it’s important to make some key considerations to ensure the journey is a prosperous one. It will require an under the bonnet inspection into your whole business and its operations.
A long, hard look in the mirror if you like.
Failing to address key factors ahead of time can lead to a whole host of issues relating to logistics, supply chain, B2B integration issues, and revenue leakage. Not to mention damaging the customer experience (CX).
A staggering 88% of businesses that sell online admit they lost orders in 2020, and more than half said they misplaced more orders in 2020 than in the previous year. Perhaps more worryingly, over 25% admitted they don’t even know how many orders they are losing due to the weak hold they have over their operations.
Below, you’ll find three key considerations brand owners should make before taking the decision to establish a fully fledged DTC model.
1. Having robust logistics and technology infrastructure in place
When making the shift to selling direct, you’re in control of the full, end-to-end eCommerce lifecycle. Not only are you responsible for marketing and selling your products, you’re also responsible for the fulfilment and shipping the product directly to your customer. You’ll also need to manage the returns process, as well as the aftercare and support for customers. This can be unchartered territory for smaller brands yet to scale, or those comfortable and familiar with selling through retailers.
From a logistics perspective, if you shift to selling direct, the chances are that you’ll need to store products in a warehouse location, until it gets selected, packaged for shipping, and labelled. As your DTC eCommerce business scales, you’ll soon discover that, unless you are prepared, this process requires meticulous planning and can become onerous (and expensive!). For the ever-growing DTC space, logistics and fulfilment continues to be a killer headache. Bruce Welty, CEO of Quiet, a third-party logistics company confirms as much stating “the most expensive part of the supply chain is packing and shipping”.
When making the shift, you will need to assess your capabilities and start smaller until you establish lean processes, or you may need to consider whether hiring a 3PL partner is cost-effective and a strategic move for you.
Establishing a DTC model typically requires an internal team, to handle all sales and shipping, as well as manufacturing, which is no mean feat for a small workforce without established logistics infrastructure and processes. Therefore, it’s crucial that there are sufficient resources in place to handle to amount of time and labour required to effectively execute a DTC model. A complete shake up in operations will be required to implement a DTC approach at scale.
Technology plays a crucial role in building robust infrastructure when shifting to DTC.
Poor technology integration between any modern apps and disparate legacy technologies can cause a whole host of issues for merchants, including lost orders. Not only does this impact revenue, but a lost order also means product inventory is sitting on the shelf at a warehouse and if goods are perishable, a lost order can lead to expired products, which directly impacts your margins as a merchant. These lost orders can also cause much wider issues with ecosystem entities, such as your customer and trading partners. And once these relationships are impacted, they can be difficult to repair.
Modern integration software helps eliminate issues such as lost orders by providing the necessary visibility to track products, resolve errors and give real-time status updates. In turn, this empowers your customer-facing teams, by giving access to reliable data, to quickly communicate with customers and partners.
Technology can be used to automate repetitive, error-prone tasks so that employees can focus more of their energies on more complex projects. A workforce that is equipped with the right tools for the job makes any task easier. Similarly, having robust integration technology in place enables the ecosystem in the most powerful way possible, both now and in the long term.
With eCommerce integration technology, the accuracy of data is not left to chance. Whereas with manual data entry, you’re always going to be prone to human error. There are some really innovative technology solutions that can support pre-sales and post-sales operations. Take Stateset for example, a state-of-the-art solution that aggregates all post-sales operations into one intuitive platform. Stateset’s pioneering technology platform, powered by AI/machine learning, blockchain computing, cloud technology and real-time data & analytics, seamlessly brings together the existing apps that eCommerce merchants use to manage inventory, orders, returns, reimbursements, and customer service.
Aside from claiming to save roughly thirty hours a week to an operations team of three, Stateset’s solution also creates a Single Source of Truth, where data is updated and aligned in real time. This allows merchants to download Excel reports and reconcile data in one speedy click. The powerful Stateset solution, which centralises all post-sales applications, helps drastically improve the employee experience by putting everyone onto a real-time platform, with zero misunderstandings.
By implementing innovative technology infrastructure, inventory synchronisation, real-time track updates and pricing, all speed up data exchange and can make logistics and operations more seamless and efficient.
Before making the decision to go DTC, it’s important to think about all the changes you’ll need to implement across the business model to meet the demands of your customers and prevent employees from being overwhelmed and demotivated with a new, larger workload. A combination of well thought out processes, utilising the right partners and selecting powerful technology can all make this process more seamless. It’s crucial to have full visibility and control over business processes to drive better results and generate revenue. Selling direct through eCommerce isn’t just a front-end process, it must be a thorough and well-planned strategy that takes into consideration all the affected backend processes within the business, as well as the extended ecosystem.
2. Ensuring the customer experience (CX) isn’t negatively impacted
Shifting to a DTC model, requires much more attention to the customer experience. Selling direct, rather than through intermediaries such as retailers will mean you’re having far greater interaction with customers, and this will need careful consideration when devising any DTC strategy.
For brands to keep up with today’s digital market, you’ll need to deploy a strategic, ecosystem-driven integration approach that expands market opportunity, giving your distribution model a competitive edge, while also enhancing the consumer’s experience. Modern hybrid cloud and on-premise integration can increase business agility and allow merchants moving towards a DTC model to minimise any complexity, without losing any control. This should enable merchants to expand market reach and enable more efficient, cohesive eCommerce and digital marketplace channels. Through technology and a closer connection with consumers (by selling direct), DTC brands can provide a personalised and flexible CX online, without the need to rely on a wholesale distributor. This way, the brand has greater control over the shopping experience and its level of customer service.
Having more data on your customers, through selling direct, will allow you to tailor the experience being received. But only if you use it effectively. Take advantage of this increased control by devising a strategy that delivers on what your customers want, demand, and expect when it comes to service. Success, in relation to CX, could very easily come down to how well the business manages the customer experience and delivers on customer expectations.
3. Avoiding channel conflict when implementing a DTC model
An important consideration to make when establishing a DTC model is assessing how it could impact current retail channels. It’s crucial any strategy conceived is carefully considered. Selling direct, should be viewed as a growth opportunity, to create a new channel that will coincide and work in tandem with any current revenue streams. Rather than a replacement, the two together, if executed well, can act as a way to improve your offering and diversify channels for revenue.
There are steps you can take to ensure the existing channels and new DTC channel can prosper, together. Extending a popular brand online and selling direct, often means adding to the value proposition already offered in retail locations.
A way to add value to the current channel, through selling direct, is to offer a premium DTC product. Premium products offer a distinctive consumer value proposition. Offering a premium product or unique range can distinguish your DTC offering from that of your retail partners. Carhartt WIP is a shining example of this. It’s a premium DTC line that builds off the parent company’s excellent reputation for high quality workwear and extends the brand to a younger, eco-conscious audience that’s more interested in how the product is sourced and its sustainability. The brand has developed a code of conduct outlining its values, commitment to human rights within the supply chain, and improved social and environmental practices.
Initially setup as a premium workwear brand, Carhartt WIP, has evolved to become a fashionable and stylish offering, catering to an urban audience that appreciates creativity and collaboration. For example, Carhartt WIP and Nike recently teamed up to launch an unique urban sneaker (trainer) collection. Selling direct, alongside existing channels, affords brands new opportunities to offer premium products and partnerships.
Another strategy that brands can deploy to avoid channel conflict is to carefully optimise inventory. This is where, through data, you identify the products that are performing well with your retail partners, and which ones aren’t. Since intermediaries such as retailers are a significant source of revenue for most brands, you don’t want to draw sales and traffic away from those products that are performing well. This would be counterproductive. Instead, with careful inventory planning, you can focus your strategy on those products that don’t perform well at your retail partners. Some brands have found that by limiting the products they offer on their DTC eCommerce site, this ensures their retail partners avoid missing out on sales. This way, both channels can work in tandem, to ultimately drive sales.
Offering personalisation through your direct channels, can also act as an effective strategy in differentiating the product offering of that of through retail or reseller channels. Research indicates that 40% of shoppers spend more on brands that personalise the shopping experience. It’s a very worthwhile move to offer personalisation through your DTC channel as the more you engage with your customers directly, the more first-party data you’ll obtain, to understand your customers better. This can help with data-driven decision making and fuel your product recommendations, preferences, and loyalty/ambassador programs.
Have your say
Please feel free to share your thoughts in the comments section below on part 4 of this 5-part series on building a multi-million pound kick-ass DTC eCommerce brand. The final edition will be released next week and will look at DTC goal setting and how to clearly define your DTC strategy, be sure to look out for it.
Hope y’all enjoyed this penultimate instalment and hope to see you on the final one.