direct to consumer ecommerce · 2020. 6. 24. · from a brand manufacturer’s website last year....

Direct to Consumer EcommerceProtect Your Business with D2C Ecommerce

The Enterprise Ecommerce Experts


The Enterprise Ecommerce Expert

This is a time of uncertainty. As retail stores temporarily shut down, Amazon suspends shipments to its warehouses and consumers stay

home, we’re seeing a drastic shift in the retail landscape which is affecting businesses of all shapes and sizes.

According to the Centre for Retail Research, which has been forecasting retail trends over the past two decades, predict that by the end of the year, a total of 20,620 retail stores will have

pulled down their shutters for the final time. This is why a Direct-to-Consumer channel should be considered as an insurance

policy against an uncertain future for manufacturers, brands and distributors.

The evolution of the digital age has paved the way for manufacturers to adapt their retail channels by selling directly to

consumers. But beyond the desire to drive more direct sales, what’s in it for manufacturers and B2B businesses?

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Magento: Commerce vs. Open Source Direct to Consumer Ecommerce

DIRECT TO CONSUMER ECOMMERCE PROTECT YOUR BUSINESS AND SERVE YOUR CUSTOMERS



In addition to selling through traditional channels – retail partners and resellers – manufacturers and B2B businesses are taking matters into their own hands by building their own Ecommerce stores and in some cases their own retail shops.

This gives them:

• The ability to build a better understanding of their end user through direct customer relationships

• Control over the end-to-end experience from product design, data gathering, brand marketing and the post-purchase service

• Potential to reach larger audiences and expand their market share

• Advantage of not having their products on sale alongside their competitors'

• A platform to provide up-to-date and accurate information to consumers

• An opportunity to offer customers an option to buy authentic products direct from the brand.

As a minimum, opening a DTC channel will increase your brand presence and pay for itself in the process.

Taking Back Control

Direct to Consumer Ecommerce

In a recent 2019 eCommerce survey, we saw a rising trend for consumers spending directly with manufacturers, “59% of respondents prefer to do research directly on brand sites" and "55% want to buy from brands directly.” It’s clear that as brands and manufacturers become more comfortable with selling direct, this trend will only grow.

Likewise, more and more consumers appreciate that buying direct means a better brand experience.

According to a CEI survey, 86% of buyers will pay more for a better customer service experience. They also have the perception that buying from a brand directly will mean returns or faults will be dealt with more efficiently. This underlines the importance of creating an open, direct and transparent line of communication with your customer.

In fact, according to Forbes, over a third of consumers report that they bought directly from a brand manufacturer’s website last year. And the number of manufacturers selling direct to consumer is expected to grow by 71% this year to more than 40% of all manufacturers.1

THE BENEFITSTHE BENEFITS OF DTC ECOMMERCE

Authentic Brand experiences

1. Forbes - Why DTC brands should think twice before outsourcing.

https://www.forbes.com/sites/steveolenski/2016/10/10/why-direct-to-consumer-brands-should-think-twice-before-outsourcing/#28f0391e750d

Direct to Consumer Ecommerce The Enterprise Ecommerce Experts

If a consumer chooses your product over a competitor on a retail site, you might have won a sale - but you’ve missed an opportunity to build a relationship. By orchestrating the entire journey from discovery to purchase, not only do you have invaluable data at your fingertips, you have the option to own and nurture these relationships. This data is a goldmine of information that can help you build confidence in your product and marketing strategy.

Brands can leverage data from their digital tools and platforms to better understand customers’ product preferences, demographics, lifestyles and path to purchase. High value segments can be identified and targeted, the customer journey can be personalised. In the same vein, you can identify friction in the customer journey and rectify issues. Small improvements that should make a difference to your bottom line.

It’s fair to say that nobody knows your customers like you do. By going direct, you’re able to tailor the sales journey to what your target audience wants. You’ll have the opportunity to build more meaningful relationships - giving customers direct insight into the brand, products and gain valuable feedback to improve your customer service.

Design, Data and Delivery

In today’s digital age, brands are no longer restricted to their local region or a reseller’s geography. Online brands or manufacturers can expand their market reach and sell products globally pretty much overnight.

While brands that have firm roots in a traditional, non-digital world can be weighed down with legacy systems and processes, digitally-native start-up brands have the edge. But joining the digital brands in their own space is the perfect way to compete. If you don’t, then you’re not in the game.

Expand Market Share


Direct to Consumer Ecommerce promises the potential for increased direct sales at a lower cost, improved access to customer data, and the opportunity to gain more control over the entire customer experience. However, gaining dominance online doesn’t come without its challenges.

One of the biggest barriers we find when working with manufacturers / B2B brands is the fear that this DTC transition will jeopardise their partner relationships.

Will their partners see this shift as a threat and consider them new competition - dropping them from the shelves altogether?

We appreciate this is a difficult balance to strike. As an established brand you already have the edge over the competition.

Potential Conflict with Partners

Keeping your resale partners on side at the same time as carrying out a huge business-change project can be daunting. Not to mention the transition to a new selling model, recruiting a new team of Ecommerce and online marketing experts, the list goes on…

We’ve found that offering an exclusive range or bundles to your retail partners, whilst selling the ‘basic’ product on your own DTC channel may be the best way to achieve the best of both worlds.

It’s also important to remember that, even with the most fundamental of concerns and potential risks, your competitors will be looking to sell direct to their consumers even if you don’t. It is actually a case of “when” and “how”, not “if” for most manufacturers.


THE CHALLENGESTHE CHALLENGES OF DTC ECOMMERCE

The Enterprise Ecommerce ExpertsDirect to Consumer Ecommerce

Technology is the single biggest difference in retail, B2B and wholesale businesses today compared with 30 years ago. The relatively low-cost of digital technology has made DTC a viable option for many consumer goods manufacturers. However, this is the reason so many start-up businesses can succeed and grow where monolithic “traditional” businesses struggle. Even companies who embraced technology over the last three decades have found themselves falling behind the curve as the rate of tech change has accelerated and the cost to keep up has become prohibitive.

Operational Baggage

Setting up an Ecommerce platform becomes more complicated the broader your product range is. Not only do you need to consider a new business model but the logistics to fulfil these orders. If you’re a manufacturer that has historically sold thousands of t-shirts in bulk to retailers, selling thousands of t-shirts to individuals will need a completely different set of systems and processes to cope with the complexity of B2B, B2B2C and B2C. Afterall, consumers whose orders aren’t delivered on time, will blame the manufacturer / brand, not the delivery courier.

One of the major issues is that many pure-play start-ups have the benefit of agility on their side. Not shackled by the baggage of legacy systems, processes and operations, or by leadership teams who insist on tradition or “our way of doing things”, these newer businesses can change strategic direction on a whim, and capitalise on new opportunities well before the competition.

The DTC concept is nothing new, and is an area most consumer goods manufacturers, B2B businesses and wholesalers have been experimenting with for some time, but many are recognising the need to step up, or fall behind. The truth is, your future survival may well depend on it.

We’re already seeing established manufacturers being challenged and usurped by DTC start-ups able to offer a more engaging customer experience – but some are fighting back.

For many businesses unprepared for the demands of Direct to Consumer selling online, but keen to exploit this new channel as soon as possible, the use of a third-party marketplace is often seen as a solution.

Marketplaces such as Amazon, eBay and Rakuten are really the modern equivalent of the traditional department store. Whilst you may feel you are selling more directly to your end consumer by using the platform, the reality is that you are just replacing one retail brand with another, and one with far more control over your product than most retailers enjoy. Further to this, you won’t get much in the way of customer or marketing insight from marketplace partners – most are highly protective of their data and limit contact with the buyer to order updates and simple post-purchase aftercare.

That said, if the alternative is losing business to competitors, or your product not being available online at all, then marketplaces may be a viable short-term alternative, or better still a supporting channel to your own direct to consumer presence.

Marketplaces


Distributors and wholesalers may worry somewhat about this strategic shift by manufacturers – after all, cutting out the middle-man directly affects their sales activity and threatens their very existence. However, there is still plenty of opportunity to capitalise on the changing retail landscape and to forge your own niche as one of the middlemen.

We are seeing many B2B businesses, distributors and wholesalers safeguarding their traditional proposition by innovating in a number of ways. Some are creating a range of “own brand” products, either through partnerships with existing suppliers or by sourcing products directly. By becoming a manufacturer as well as a wholesaler of other manufacturers’ products, they have more control and reduce the risk of falling behind the online curve.

Distributors creating their own brands to overcome channel conflict


Others are forging partnerships, either with retail customers or manufacturing suppliers, to offer co-branded sites to sell to end consumers. This maintains existing supply chain relationships whilst cementing the working relationship between the two businesses.

Finally, white labelling is coming back into fashion. Some distributors are adding to their client toolkit by offering websites for customers to sell through as part of their agreements. By offering a simplified route to market, these are often too good to turn down for smaller retailers who may not be in a position to create their own independent online sales channel.

Co-Branded & White label Sites

These approaches (and you may choose to use one or many of them) offer similar benefits to distributors and wholesalers as going direct to consumer offers manufacturers – opening up new channels and allowing a business to create a greenfield setup to grow within. By creating this style of start-up style incubator, you can be far more agile – with its own technology roadmap, processes, separate online presence. Ideas can be allowed to grow or fail on their own merits outside of the parent business. Additionally, successful initiatives can be brought back in to help grow the business over time, all without stepping on your retail partners’ toes.

Grainger, ERA, Nisbets all have their own-brand product ranges and use Amazon Business as an extra sales channel. In some cases, larger businesses have found value in going direct with their own-brand online channels to cater to customers with less complex operations and needs.

For more insight on this topic, download “Wholesale in an Online World”.

Creating own-brand products

https://www.maginus.com/imagine/reports/wholesale-digital-transformation/


In 2017, Nike announced their “Triple Double Strategy (2X)”. A strategic decision to double their focus on direct to consumer connections and speed to market. As a brand that traditionally relied on retail partners to sell their products, they are now focusing on their own Ecommerce website and distribution from their own stores – with an emphasis on 12 key cities, across 10 countries.

At a time, when most big companies would be doubling efforts on what has made them successful to date. Instead, Nike have proactively decided to disrupt themselves before the competition.

As the #1 leading footwear and apparel brand in the market, Nike recognised the need to “edit to amplify”. In practice, this means they will be streamlining the number of distribution partners from a whopping 30,000 retailers and 110,000 distribution points, down to 40 key retail partners.

Nike Double-Down on Direct to Consumer

According to Nike, these chosen partners are “the best of the best” and focus on offering superior customer service and storytelling that differentiates their brand. In addition, they will be focusing effort (and investment) into their own Nike Direct retail stores and Ecommerce platforms. Their simplification strategy doesn’t end there. They will also be editing down the number of styles on offer by 25% - the logic being that simplification will improve the buying process (and help drive growth).

The Direct to Consumer approach is expected to represent an 80% growth through 2020.

According to Forbes, the results are already starting to show with 9% growth in 2018, and 10% in Q1 2019.

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Clearly such dramatic strategies are not for the faint hearted, one thing’s for sure, Nike have firmly taken back control and deciding to “just do it” rather than wait for their retail partners to catch up with market changes.

If your customers won’t wait, then why should you?


Majestic Wines is another example of a brand making the headlines for their bold business decisions. Despite their ongoing success the fear is that, for the wine industry, traditional retail will soon be dead.

Rowan Gormley (founder of Naked Wines in 2008), joined Majestic Group as Chief Executive back in 2015. Since then Majestic have announced plans to blend the two brands as “Naked” – putting pure-play front and centre of their business model.

Since Majestic acquired Naked Wines in 2015, they have more than doubled in size, with sales expecting to pass the £175m mark this year. Majestic has seen growth online, with over 45% of sales online, more than 20% internationally.

Majestic & Naked Wines

Understandably then, the new direction of the business will focus on their online presence and international growth, blending the best of both brands with a single unified proposition: Wine direct, in-store shopping experiences, advice / wine tasting and online subscriptions. This change in business model will mean the closure of stores, selling assets – all of which will fund the investment and rebranding of some 200+ stores.

Hot off the press is the news that Majestic Wines are in discussions to sell their multichannel business to focus purely on their online potential. If the sale goes ahead, subject to shareholder approval, the name of the quoted company will be changed to Naked Wines plc, and the proceeds of the sale will be used to pay off debt while investing in Naked Wines' growth.


“Whilst in theory it seems that Majestic and Naked could work as two distinctive and complementary brands, we have to balance this against the harsh business reality of what the company can afford. […]

We believe that a transformed Majestic business does have the potential to be a long-term winner, but that we risk not maximising the potential of Naked if we try to do both.”

Rowan Gormley, CEO, Naked


Most of the examples that we outline below are a new generation of direct to consumer brands that have designed,

manufactured, marketed, sold and shipped products themselves. Without middle-men.

WHAT CAN WE LEARN FROM DTC ECOMMERCE START-UPS?

SIMPLIFICATION, BLUE OCEAN THINKING

& DESIGN THAT DELIGHTS

Most of them focus on only selling a handful of products, and many started with just one. Take Casper for example, Casper started out by selling one mattress that they positioned as the ‘perfect’ bed. Dollar Shave Club with the best affordable razor. By simplifying the product down to one, they can focus on getting people’s attention - rather than spreading effort (and marketing spend) trying to a sell a wide range of different products, to lots of different people.

What do all these brands have in common?

Casper was founded on the basis that the traditional retail experience (when buying a mattress) was terrible. Full of aggressive sales people, too much choice and high prices. Casper saw a gap in the market, and instead of being all things to all men – they’ve focused on one product that will suit ‘most’ people. Casper did lots of market research to decide which firmness would be more comfortable for the largest possible market. Throughout their sleep research they also debunked the myth that everyone is either a side sleeper, back sleeper or “on your stomach” kind of sleeper. Despite popular belief, their research shows that most people shift position throughout the night. This insight justified their message that one mattress will suit most people. What’s more, this simplified strategy helped to position their product as the best, inferring that “no alternative will do”.

The beauty of being a start up with one product line is that they can experiment and fail fast. Changing product iterations and the entire organisation if necessary.

Casper: The Best Bed for Better Sleep


“Some larger, unwieldy businesses have found value in creating start-up style incubators within their organisation to trigger business change. By federating the new business from the shackles of bureaucracy and allowing it to define its own technology roadmap, processes and limitations, concepts and ideas can be allowed to grow and fail on their own merits.

Successful technology and systems can then be taken back into the parent business, or, if there is a particularly significant success, the parent business could move more of its business over to the new entity and grow through that avenue instead.”

Gavin Masters, Ecommerce Industry Principal at Maginus

Key Takeaway:

Direct to Consumer EcommerceThe Enterprise Ecommerce Experts

Gillette is a long-standing household name with a 115-year history – known for launching numerous new products with more complexity, more blades, at ever-increasing prices. This strategy has helped them gain a dominant position in the market over the years. So much so that MBA students now refer to this strategy as the “razor and blades” business model.

This proven approach didn’t deter a few young start-ups from challenging the status quo.

Jeff Raider and Andy Katz-Mayfield, founders of Harry’s, were tired of overpaying for overdesigned razors, fed up of standing around waiting for the sales people to unlock cases so they could actually buy them. When they discovered that many of their friends felt the same, they decided to do something about it and from there – Harry’s was born.

Harry’s embraced a simpler approach – just one type of blade, with cheap refill cartridges and two types of handle. You’ll never run out as the blades are sent straight to your door on a subscription basis. That’s it. Simples. Both Harry's and Dollar Shave Club adopt a distinct brand voice. Less strong and self-assured as “Turbo” and “Mach” – far more down-to-Earth to suit today’s modern man.

Harry’s and Dollar Shave Club: Shave Money. Shave Time.

Dollar Shave Club (DSC) had a meteoric uptake with their award-winning digital

strategy, brash billboards and viral videos (see right).

Gillette felt the pressure to respond to the changing market with their own subscription service – Gillette Shave Club - starting at £4.95 – you’ll get a Mach 3 Starter Kit with four blades, every 2 months. This looks like a cheaper alternative to their in-store range (June 2019) – suggesting they will compromise on price at the risk of jeopardising their retail partnerships.

In a recent article from Raconteur, P&G’s Gillette has been forced to make what it calls “meaningful price reductions” to cope with these new competitors.

However, David Taylor, Chief Executive of P&G, has warned that consumers are not going to want to buy everything on a direct to consumer basis because it would be impractical. “I get asked a lot ‘Should P&G go direct to consumer?’” he told investors, explaining how it is testing D2C with some of its other brands such as Olay Skin Adviser.

“But certainly our belief so far is that most consumers do not want to have a lot more accounts for narrow parts of their daily or monthly needs.” - Raconteur, Why DTC is Dominating Retail

If you haven’t seen the video that put Dollar Shave Club on the map, click here.

Gillette

https://youtu.be/ZUG9qYTJMsI

LEVERAGE TECHNOLOGY & CONTENT DRIVEN COMMERCE


Emily Weiss, founder of Glossier, started her blog “Into the Gloss” back in 2010 whilst interning at Vogue. Probably without realising it - Weiss was onto a winning strategy that most in the Ecommerce industry would recognise as “content-driven commerce”.

Starting out, her blog was a space where she would talk to celebrities about their beauty regimes and essential makeup rituals. Naturally, her authentic blogging style grew in popularity and eventually hit 1.5M unique views a month.

Weiss seized the opportunity to launch her own product line and Ecommerce platform, Glossier.

There’s no doubt that this seamless “content and commerce” approach was the backbone to her success. By focusing on something other than conversion alone, readers develop a meaningful relationship with the brand. By leading with lifestyle and editorial content first, purchases later, the Glossier blog has been fundamental in helping the brand grow 600% YOY. In fact they claim that people who read Into the Gloss are “about 40% more likely to buy products from Glossier” than other customers.

For more “Principles for standout digital experiences” click here.

Glossier


https://www.maginus.com/imagine/articles/principles-of-standout-digital-experiences/

Everlane are an ethical brand focused on sourcing the finest materials at the best factories (with fair wages and compliant health standards). Not only do they stand for something worthwhile. They believe consumers should be empowered to make the ‘right’ choice by revealing the true costs behind all the clothes they make — from materials to labour, to transportation. They make their products available online, minus the traditional retail mark-up. Now you might be thinking, this isn’t anything new. I’m pretty sure lots of consumer goods manufacturers out there make a point to be ethical and cut out the middle-man to keep costs affordable. MADE.com springs to mind.

Everlane: Modern Basics. Radical Transparency

However, Everlane’s marketing insinuates that you’ll get the same quality as a designer T-shirt, without the inflated price. This retail transparency clearly resonated with their younger audience, so much so that their “cotton to consumer” / “It’s a fact” infographic helped Everlane build a 20,000 strong following and sell-out the company’s first-ever line of products. The said infographic (left) simply outlines the true cost of producing one of their T-Shirts.

The graphic shows the total cost to the consumer: $50 for a shirt that cost only $6.70 to produce. As you’d expect, there was sufficient backlash from other players in the industry, but this only helped to fuel the PR fire. According to Business Insider, the combined social media activity contributed to 200,000 organic users in one year.



Farrow & Ball are one of the leading manufacturers and suppliers of premium paints and wallpapers in the UK. With a thriving B2C and B2B business, more than 60 showrooms and 1,300 stockists worldwide – it’s clear F&B are going from strength to strength. So, what’s the secret to their success?

In a sentence - Farrow & Ball don’t sell paint. They sell a lifestyle.

From their instantly quirky product names such as Hague Blue, Nancy’s Blushes and Elephant’s Breath. To their inspirational blog, The Chromologist, Get the Look features and product guides - all this content helps to build confidence at the checkout. They are experts at weaving information, inspiration and user generated content into the customer journey, rather than focusing solely on conversion alone.

Farrow & Ball

According to the latest report from Episerver, “Eighty-three percent of online shoppers intend to do something other than make a purchase when visiting a brand’s website for the first time.” This trend is unlikely to change anytime soon.

To get ahead, retailers should take a leaf out of F&B’s books and get behind consumers' instinct to browse now and buy later. Developing Ecommerce strategies to understand their consumers' behaviours and preferences, rather than transactional information alone.

Brands no longer need to listen to customer needs through the 'retailer filter'. Where the success of a product was once defined solely by a retailer’s sales figures, now you can interact directly with your customers to find out exactly what drove those sales (or lack thereof).


This combination of Ecommerce driven data, direct social engagement and meaningful consumer conversations is key to developing brand affinity that lasts a lifetime.

It's also worth noting that the best B2C / DTC brands don’t just share on social, as a side-line, but ensure social referrals and user generated content are a core part of their online strategy. Farrow & Ball's customers love the transformation their products bring, they don't need much pursuasion to share their “before and afters”. These ‘micro-influencers’ or brand ambassadors help to spread the word for them. It’s clear that social media marketing engagement and conversion is high, particularly amongst younger audiences.

Industry giants such as Amazon lack a strong social presence. It's clear that brands that invest time and energy into their social media strategies can use the channel to reach a wider audience, before they even consider Amazon. By becoming a regular part of a consumer’s social lifestyle, you can inspire shoppers first and play a valuable role in their research and inspiration needs over time.

The Coronavirus Pandemic

Distribution chains are affected and retailers are struggling for survival. Economists are suggesting that Manufacturers must look at the future through a post Covid-19 lens in which the supply chain ecosystem has been upended.

Should Manufacturers and OEMs mitigate the risk to their business now by insuring themselves against frailties of the retail sector.

Every manufacturer needs to take a look at the financial case for Direct to Consumer Ecommerce. Will an Ecommerce channel create a better buying experience? Is there potential to make Ecommerce a large percentage of your revenue? More importantly what’s the impact of staying still? After lock-down, how many of your retail channels will still be in business?

Almost half (48%) of manufacturers are now considering building direct to consumer channels, while the number of brands selling D2C are expected to grow by 71% this year alone.

Be in control of your own future by having full ownership of at least one sales channel – go online and go Direct to Consumer.

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Final Thoughts


When Ecommerce offers you the best opportunity to grow your enterprise quickly and profitably, then you’ll want the best enterprise Ecommerce expertise at your side.

There’s a single, simple reason that many of the smartest and most respected names in British business, the likes of Farrow & Ball, The Royal Mint, ERA and Joe Browns use us to maximise their online sales. In a word - expertise.

More than 25 years of proven B2C and B2B Ecommerce expertise.

Scalable, flexible, B2C and B2B Ecommerce expertise that empowers your sales teams, inspires your customers and helps you quickly enjoy new sales growth.

How can Maginus help?


About Magento Commerce

Magento Commerce, part of Adobe Experience Cloud, is the leading commerce solution for merchants and brands across B2C and B2B industries and was recently named a leader in the 2019 Gartner Magic Quadrant for Digital Commerce.

Magento Commerce boasts a strong portfolio of cloud-based omnichannel solutions that empower merchants to successfully integrate digital and physical shopping experiences.

Magento is the #1 provider to the Internet Retailer Top 1000, the B2B 300 and the Top 500 Guides for Europe and Latin America. Magento is supported by a vast global network of solution and technology partners, a highly active global developer community and the largest eCommerce marketplace for extensions available for download on the Magento Marketplace. For more information visit www.magento.com

About Maginus

For retailers – big and small – for whom success depends on growing online, we provide what it takes to sell better online. We do this by delivering class-leading Ecommerce websites that drive online growth and sales fulfilment solutions that facilitate next day delivery and customer service excellence.

We are independent and technology-agnostic but with close partnerships to several leading technology companies so we can always recommend the most appropriate platform for our customers' needs.

With a 20-year heritage in technology implementations, we take pride in helping our customers achieve long term benefits from the solutions we provide. We can do this, because we've done it before, for people just like you. For more information visit maginus.com

Get in touch

To start a conversation about a project give us a call on 0161 946 0000

or email [email protected]

direct to consumer ecommerce · 2020. 6. 24. · from a brand manufacturer’s website last year....

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