Navigating the Logistical Maze of D-to-C Business Models
From makeup and toothbrushes to mattresses and luggage, the direct-to-consumer (D-to-C) market has grown exponentially in recent years and the shopper experience today is unlike anything we’ve seen before — with virtually no signs of slowing. In fact, according to a 2019 report from eMarketer, there are well over 400 D-to-C companies today, and while that number doesn’t come close to traditional brands, the web traffic to D-to-C sites has already doubled in the last two years alone.
Additionally, 55 percent of consumers say they actually prefer to buy directly from brands. A main reason for this is the inherent convenience of having desired products shipped directly from the manufacturer straight to customers' doorsteps with the ease of one simple click. While companies like Nespresso capitalized on this trend years ago, cutting out the middleman and selling its coffee pods directly to shoppers, this growing model has resulted in an abundance of new entrants. These players are not only disrupting their singular product categories, they’re changing entire industries — just look at Casper, Warby Parker, or Quip. Even suppliers such as Heineken and Verstegen have embarked on the D-to-C journey.
As these types of e-commerce opportunities grow, more and more companies of all sizes and stages are looking to capitalize on the trend and introduce their own D-to-C models. Those that have gotten it right have successfully eliminated the need for external selling parties, and have cut costs, increased product margins, made their supply chain more transparent, and built stronger relationships with their customers.
The problem, however, is that not all companies that introduce a highly focused e-commerce approach are prepared to keep up with the new set of supply chain and logistics challenges that come with it, such as increased consumer demands, peak season spikes in order volumes, the logistics of selling individual packages to each consumer, the greater expectations around convenience, and seamless shipping and delivery processes.
To better support the D-to-C model, companies must consider the technologies to put in place to drive efficient, effective and consumer-centric logistics and supply chain practices.
These include the following:
Not Relying on Legacy Systems
For instance, the systems suppliers work with often don’t support connections to multiple sales channels or to online front ends, such as the Shopify, Amazon.com or eBay platforms. As a result, legacy systems must be transformed or replaced to fit the D-to-C model.
Prior to e-commerce, suppliers and manufacturers also mainly relied on fixed deliveries in large quantities to support sales. Since not all deliveries are fixed in D-to-C, income is far less predictable today and companies need to introduce the right platforms to efficiently and cost effectively sell individual packages and small batch deliveries.
From warehousing to fulfillment to delivery, organizations must evaluate current systems and determine the right technology solutions that help them prosper under new e-commerce considerations.
Ensuring Consistency and Accuracy
Consumers expect accuracy, and any mistakes or issues with their orders can result in negative brand experiences and, ultimately, soured relationships. It’s therefore important that a merchant's technology environment supports its new D-to-C approach.
For example, the stock shown on a website should match the actual stock in a warehouse. By using capabilities like real-time inventory management; automated pick, pack and ship processes; and omnichannel order fulfillment, suppliers can deliver on the promise of no order mishaps for customers.
Creating New Delivery Options and Remaining Transparent
Beyond free or fast delivery, consumers today desire numerous options when it comes to their delivery choices: 24-hour, two-day, same day, or even during specific time frames. This requires that e-commerce companies be as flexible and nimble as possible to meet these demands and fulfill each order on time — a factor that has significantly increased the need for technologies that streamline picking, packing and shipping processes.
Transparency is also critical today. While transparency has come to mean many things, including topics like sourcing and corporate social responsibility, both of which are increasingly important to consumers today, it also refers to where packages physically are at all times. Companies must be prepared to give customers the ability to track the status of their items in real time and implement the proper communication channels needed to provide regular updates on the status of deliveries. Since customers expect to be informed of and be able to proactively track where their package is located during the delivery journey, companies that can’t fulfill this need are more likely to experience sales challenges or negative impacts to bottom-line results.
Above all, companies embarking on D-to-C journeys must understand that change management, iterative adaption, and ongoing improvements are huge factors in driving success. No supplier simply jumps into the e-commerce world. A well-thought-out logistics strategy will help companies execute effectively and remain competitive.
Johannes Panzer is head of industry solutions, e-commerce at Descartes, the global leader in providing on-demand, software-as-a-service solutions focused on improving the productivity, performance and security of logistics-intensive businesses.
Related story: Top 5 Trends Influencing E-Commerce Fulfillment in 2020