Companies that had previously been distributing their products via a partner sales network are seeing an increasing need to adapt. Selling directly to consumers, or D2C for short, is a lucrative market. In the following, we shed light on the opportunities and challenges that come with a D2C business model.
What does Direct-to-Customer
The ‘direct-to-customer’ business model, also known as D2C, refers to companies approaching end customers directly. They sell their product directly to consumers, skipping distribution partners and third-party retailers. In general, this market is associated with higher margins, less dependencies and a direct relationship with customers.
Starting up a D2C-based business model comes with plenty of opportunities but is not without its challenges.
D2C – Opportunities and Challenges
Focus on the consumer: The scenario described above requires a deeper understanding of the needs, preferences and behaviour of the respective target groups. Generally speaking, digital expectations are higher in D2C: A seamless and accessible user experience across all touchpoints and on all devices is no longer cutting edge, it is simply what is expected. In addition, you need to build a relationship with a much larger number of customers. Fast, efficient customer service with short response times, for instance through real-time features such as live chat, is also a must-have.
Brand values: Developing a clear brand statement along with marketing strategies tailored to the target groups is essential. Build an emotional connection with your customers and you will be able to set yourself apart from the competition. This connection will also increase customer loyalty and satisfaction.
Customer data/data analysis: Customer data is the gold of the digital age. So why not use this data and information for the company’s success by way of data-driven online marketing? This requires marketing experts, software developers, data analysts, strategists and key account managers. Together, a carefully chosen team not only improves the customer experience; the product portfolio and marketing campaigns will also benefit from optimisation efforts. Don’t forget that when you adopt a D2C model, you need to take certain legal requirements for data and consumer protection into account, especially in online retail.
Product presentation: Sell emotions, not just the product. The implementation is all about identifying positive emotions and experiences associated with a product or service and placing those at the heart of the campaign. High-quality pictures, concise product and service descriptions as well as positive customer reviews complete the product presentation and help sharpen the focus of your product. Why all this effort? Shopping trends as well as e-commerce analyses show that success is no longer just about pricing, quality or convenience. Consumers increasingly focus on the brand, the company values and the story behind them. If your company can meet these individual needs, building long-term relationships with your customers should be a walk in the park.
Supply chain/logistics: Usually, B2B transactions are more predictable with larger volumes, whereas the D2C model requires more flexible and faster logistics, especially for individual orders. This includes easy and quick returns handling.
Pricing: In B2B, prices are often negotiable and customer specific. D2C retailers tend to work with fixed prices. This allows for an easy and transparent pricing model for your customers and opens up opportunities for more flexible and manageable discounts. In general, increased costs for marketing and sales in D2C models should be taken into account in pricing strategies. On the other hand, of course, direct sales come with a chance of higher margins and a better position in the market.
Technology and platforms: It is important to select a platform that scales, comes with all the required features and meets the demands of the D2C business. E-commerce platforms such as Spryker Commerce OS and SAP Commerce Cloud, for instance, include the required features and also support strategic considerations such as omnichannel.
Do you plan on entering the D2C segment in addition to existing B2B business? Maybe you are even considering a complete switchover from B2B to D2C? Then you should at least consider the aspects mentioned above in your planning. It usually also helps to bring in external experts, not least to ensure a seamless and successful transition.
A Successful Start in the World of D2C
To prepare your start in the world of D2C – and for proactive management of expectations – we recommend that you collect the D2C ideas and expectations from all relevant stakeholders and document them in a ‘product vision design’. The resulting ‘product vision’ will then become your guiding light in all your D2C initiatives.
Your Product Vision, Your Advantages in Detail
Product vision as a starting point and guiding light: The resulting product vision enables us to provide you with answers to key questions within and even outside the company – in a way that is clearly phrased, concise and concrete. Fundamental questions include: Who are our customers? What is the added value for our customers? What are the key elements to providing this added value? What do we expect in terms of business development? And what sets us apart from the competition?
Product vision as a strategic communication tool: Setting up and growing a D2C business comes with a host of changes – internally for sponsors, teams in technical departments and IT as well as externally for distributors and the target groups. The drivers of the initiative will have to inform, convince and motivate many people in your company. For that, the product vision is of essential value.
Product vision as a framework for the impact on IT: Entering the D2C segment is a comprehensive endeavour. It is not enough to just set up a web shop. All the necessary initiatives surrounding D2C, such as SEO, SEA, PIM, affiliate, marketing automation, etc. can determine their goals and setup before the start of the initiative. This generates valuable feedback before any digital investments are required. It is this feedback that supports the team in setting the right priorities, taking targeted action and keeping in line with the product vision of your company.
Unic Can Support You in Drafting and Implementing Your D2C Plan
Develop digitalisation strategies based on the need to adapt – from the current to the new business model
Draft and implement digital customer journeys with a focus on digital marketing and digital commerce
Consult on digital brand representation during the shift from B2B to D2C, including related potential for optimisation
Data analysis
Identify and optimise your product information management (PIM – as a management process and as a digital helper in the form of a PIM system)
Complete a fit-gap analysis of the existing IT architecture and future demands on applications, digital services, product information, interfaces, websites and their technical deployment
Contact for your Digital Solution with Unic
Book an appointmentAre you keen too discuss your digital tasks with us? We would be happy to exchange ideas with you: Jörg Nölke and Gerrit Taaks (from left to right).
Contact for your Digital Solution
Book an appointmentAre you keen to talk about your next project? We will be happy exchange ideas with you: Melanie Klühe, Stefanie Berger, Stephan Handschin and Philippe Surber (clockwise).
