The Key to Success for Direct-to-Consumer Businesses is Preparation

Direct-to-consumer (DTC) businesses have been put through the ringer in recent years with unpredictability abound. Between supply chain disruptions, the rising costs of goods and services, and shipping delays due to global events like the COVID-19 pandemic and the Russia-Ukraine War, many businesses have been struggling to survive. To further complicate business operations, consumer spending has changed. Thankfully, these shifts in buyer behavior can be tracked and used to inform business operations — especially around peak holiday sales periods.

Analyzing holiday sales data from the past two years shows that consumers are willing to buy nonessential goods, but they're highly motivated by sales and discounts. According to a recent report stemming from our survey of small to midsized businesses (SMBs), there was an increase of 44 percent in daily sales orders volume during the Black Friday and Cyber Monday period compared to regular Q4 activity in 2022. And this past July, the consumer confidence index rose to its highest level in two years, indicating that this spending trend is likely to continue. This highlights an urgent need for businesses to prioritize efficiency control, streamline inventory management, and evaluate financial data to combat competitive discounts on top of the steep costs of raw materials to prepare for the upcoming holiday season.

The Costs SMBs Can’t Control

The skyrocketing costs of raw materials is a macro-level burden SMBs can’t avoid. Between 2021 and 2022, many popular raw materials saw a more than 50 percent increase — with some price jumps of more than 100 percent. Supply chain disruptions have impacted the labor market, too, and packaging materials and shipping costs have increased in parallel further impacting businesses’ bottom lines. While there are many factors at play in the modern DTC market — most of them unpredictable — there are also solutions available that can help SMBs navigate the economic uncertainty and accurately factor in the rising costs of goods and services.

Modern Technologies Can Save Time and Money

Integrated technologies that offer real-time insights and management over inventory, sales and financial data can make overall operations much more efficient. When demand is surging during a chaotic peak holiday sales season, business managers won’t have time to update their software or cross-check inventory. Therefore, a system needs to be tested in advance to ensure a smooth process from order processing to fulfilment to avoid unnecessary stress.

Forecasting demand and taking stock of materials and products early helps to reduce the risk of delays, and there are programs that can help track and analyze data year-over-year. Connecting your accounting software can also assist in forecasting, as well as help sidestep financial roadblocks like rectifying balance sheets that don’t add up. It’s also important to test online sales workflows to make sure that orders are populating correctly and being received by the appropriate teams or people through set channels in a timely manner.

As the seasons start to change and peak holiday sales season grows near, businesses should begin to prepare now to maximize success and lessen the mounting external stressors that are impacting SMBs, retailers and DTC manufacturers today.

Kristjan Vilosius is the CEO and founder of Katana, a company that specializes in providing innovative inventory management software to small and midsized direct-to-consumer businesses.