Across the United States, enterprise-level manufacturers that have historically focused on traditional retail sales channels are now exploring how they can add a direct-to-customer (DTC) channel to their sales operations.
Why? A massive transformation is underway in the selling landscape, as brands look for opportunities to take control of selling directly in the marketplace.
One source of this change is the ascendance of millennials as a dominant customer category. Millennials now comprise half of the working population in the US today, and will be up to 75% by 2025. As these customers move deeper into management and assume more control of corporate spending, they are likely to bring their personal spending habits with them.
What's Driving the Push to DTC?
Notably, millennials don’t shop the way their parents do. According to a study by Coupon Group, millennials do 60% of their shopping online and are quite accustomed to buying directly from brands.
Another reason behind the DTC trend has been the headline-grabbing upheavals in retail over the past decade. Consider the 2008 closure of the retail chain Linens ‘n Things, which sent shockwaves through its extensive supply chain. This story has repeated itself again and again in recent years, with more than 9,300 retail stores shutting their doors for good in 2019 alone.
Undoubtedly, these incidents have led manufacturers to reconsider the wisdom of depending entirely on retail as a middleman. It’s also heightened the appeal of disintermediation: the practice of sidestepping distributors and retailers to sell directly to customers.
That’s not to say manufacturers want to cut out retailers altogether, but increasingly they’re seeing the need to diversify their revenue streams by adding a direct sales channel into the mix. This ensures brands can still maintain their share of the traditional retail market, while adding an extra layer of protection by diversifying their revenue streams. Moreover, brands are learning that their digital-native customers actually prefer having direct access to their goods.
Should you consider adding a DTC channel for your business? Perhaps. But there are serious operational considerations to think through.
Here’s a look at three of the main considerations.
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1. Know Your Customers
For years, manufacturers sold products strictly via distributors and dealers without having to concern themselves with how consumers like to shop. But selling directly to customers is new territory. Understanding your online customers, including how they buy, what they buy, and how they differ from your distribution and retail customers, should be the cornerstone of this strategic shift.
Your market research and customer development operations will need to map out potential online customer journeys from start to finish. Big questions you’ll want to answer include:
- What are these shoppers’ online buying habits?
- Where are there gaps between your understanding of your personas and their buying journeys?
- Do you have a content management system to manage and support data?
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2. Adapt Your Infrastructure and Logistics
This new channel venture is not a short-term project: it’s an entirely new line of business operations. As such, you are building an entirely new customer experience, one that is hopefully engaging and fruitful. This may require rebuilding your website or adding a new component to your site to enable your customers to easily browse and buy.
However, your client-facing website is only the beginning. Your back-end infrastructure also must ensure you can deliver on the promises you’re making.
Think through the systems that will be involved in your DTC sales from beginning to end. You’ll likely need to dedicate resources for sales intake, customer service, product packaging and fulfillment.
In addition to infrastructure, you must also consider processes. Establishing a DTC sales channel will impact multiple processes and departments within your organization. Bring in other teams early and often during strategy and development, so you can manage this change in a collaborative and clear fashion. By doing so, when launch day finally arrives, every team member will be completely on board and will know exactly what they’re supposed to do.
Related Article: What DTC Companies Know About Delivering Great Customer Experiences
3. Build Your Marketing Machine
If you build it, will they come? Not if they don’t know about it. Your marketing efforts will need to expand, and in multiple directions.
To do this, you’ll need to plan and execute a marketing strategy that informs customers they can buy direct through your effective, easy-to-use customer portal or new website. Content marketing, targeted email and social media campaigns, and special offers in promotional and advertising materials all play a role in getting the word out and encouraging your target audience to become visitors, and then customers.
Meanwhile, it may be wise to maintain your promotional support of your distributors and retailers (and possibly even increase your spend, to smooth any ruffled feathers that may arise.)
More Eggs, More Baskets
The goal of adding a DTC channel is not to cut out retail sales or disrupt relationships with distributors.
Rather, the goal is to meet customers where they are. By providing multiple ways to find and purchase your products and services, you are simply delivering what customers today have come to expect from virtually every other shopping experience in their lives.
In short, DTC channels give your customers the opportunity to buy from you where, when and how they want, making it that much more likely that they’ll keep buying from you in the long term.
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