DTC successes: forget your product and focus on your operations – magazine articles
The race is on. In an effort to capture increased wallet spending, brands around the world – over 57% of them in fact – are rushing to launch direct-to-consumer (DTC) channels. This explosion marks a shift in the way products are sold, disrupting established industries and causing a fundamental shift in brands’ relationships with consumers.
But perhaps the most important reason behind the growing popularity of the DTC approach is the direct response to recent changes in consumer online shopping behavior, which indicate that shoppers – up to 81% of between them – want to buy brand products directly.
Direct-to-consumer brands have unfiltered insight into customer behavior, direct control over their relationships, and very competitive prices. Many of these brands have built a worldwide cult following in less than ten years. Success stories include companies valued at $ 1 billion such as Dollar Shave Club, Gym Shark, and beauty brand Glossier.
The rise of leading DTC players has made this channel more and more attractive to me too brands who also want their market share. But, as a business model, it is not without its challenges; especially within the supply chain. Some brands have stumbled, some have encountered obstacles in the road, while others have fallen completely while trying to make their DTC model a success.
THE OFTEN IGNORED DTC BACKBONE
While most brands are well aware of what they need to do up front in the race to attract direct sales, few seek to solve the operational complexities that lie beyond the buy button. In fact, many brands moving to a DTC model quickly learn that managing all operations in the supply chain can be extremely difficult to coordinate.
This is because once a DTC brand bypasses a retailer, it becomes directly responsible for every touchpoint in the buying journey, including pre and post-purchase experiences, such as delivery and returns, management. inventory and customer communications.
Once brands have captivated customers enough to capture a sale, this is where the real âworkâ really begins. With brands in charge of every step of a customer’s buying journey, brands need to recognize that at all times they risk making mistakes, which can elicit real reactions from their customers.
Glossier initially had problems keeping its products in stock. Glossier staff always refer to âThe Great Inventory Stock Outâ – when the company has had major problems meeting demand for its products and has run out of stock on several items. As the business grew so quickly, it just didn’t have inventory to track.
It is not an isolated challenge. Some 25% of shoppers have seen items out of stock after their purchase in the past year – a similar number citing it as their biggest point of frustration when shopping online.
To ensure that the issue did not recur, Glossier hired operational experts and made an effort to be more up to date with inventory planning to resolve the issue. âIt was really a hard lesson learned,â said Glossier President and COO Henry Davis.
Inventory challenges aren’t just a problem for emerging DTC brands either. Adidas recently told investors that supply chain shortages will prevent the brand from fulfilling orders for mid-priced clothing in the first half of 2019, slashing growth this year by as much as 2% and leaving the field open to its customers. competitors like Nike, for example. , which reported DTC revenue up 12% to ($ 10.4 billion) in its 2018 fiscal year.
So what does this mean for growing brands and those considering switching to DTC? This means that there is a real risk of not having a solid infrastructure to support demand. 75% of UK brands agree that if you mess up your DTC approach, it does a lot more harm than good.
When Waldo ran out of stock in the UK last December, the contact lens supplier had to be upfront with customers and explain to them that they weren’t expecting demand to grow so quickly.
NAVIGATE THE DTC TENSION ROD
Brands considering the DTC space need to understand that this channel is going to expand beyond what they had before. When you operate in different markets and move quickly, you need to have the right retail operations in place to respond effectively.
Without these mechanisms, for example, to manage inventory management, shipping and logistics across the channel, or for more customer-oriented support, the business will quickly run into problems.
Speaking of how important operations are to successful DTC models, for me, Eve Mattress co-founder Kuba Wieczorek puts it best: âThis whole back-end is so important if you don’t. not correctly, you’re screwed. “
Wieczorek argues that brands need to make sure the supply chain is as good as it can get before stepping into the DTC arena: are guilty of doing â.
Wieczorek’s point is reinforced by the fact that a whopping 61% of consumers told us that they had experienced issues buying from brands online in the past 12 months alone. For a DTC business with new ideas on how to better serve customers, letting them down because you can’t keep up with operations is hugely disappointing. And, even worse, 69% of shoppers say if their experience is bad, they are unlikely to buy from the same brand again; which means that future sales are threatened due to poor supply chain management.
THE SECRET INGREDIENT
The DTC opportunity is ready to be exploited, but it should not come at the expense of a brand’s operations. Post-purchase experiences, from delivery to returns, will influence a customer’s loyalty – and collectively, each of these scenarios should be recognized as just as important as those upstream.
There is now a clear need for DTC business models to be more customer centric. In my opinion, this is the only way to achieve true DTC success. To do this, you need to have a complete picture of your customer, ideally using data-driven insights that only exist in specialist retail operations and CRM software.
Operating âblindâ in the DTC space will only have you eaten for breakfast by more proficient competitors, like the Gymsharks, Dollar Shave Clubs, and Caspers of the world.
The real secret of the DTC model, however, lies in the understanding that ownership of the total customer experience is more important than the product itself. When you’re a DTC brand, shipping, returns, and amazing response times are all part of the proposition.
This means that DTC is more than just a channel – it requires thinking about the feelings you want to create for customers every step of the way and using smart retail technology to remove any potential bottlenecks in the process. your operations.
This will not only allow you to be competitive, differentiate yourself and thrive in this new retail landscape, but will ideally help you avoid the same fate as companies that have tried to build a consumer-centric strategy on unstable bases.