Direct-to-Consumer: If Not Now, When?

Direct-to-Consumer (“D2C”) is the practice of brands selling their products directly to their end customers, without distributors or retailers.

It’s not a particularly new model. 

As a child of the 90’s I remember the ‘Avon Lady’ turning up at our front door every few weeks to consult and sell my mother on all things cosmetics. This, albeit a traditional doorstep service, was by definition direct-to-consumer.

That said, the internet has been the real driving force of modern-day D2C. 

Consumers, across most demographics, have become far more comfortable with shopping and paying online, whilst digital marketing provides a cost-effective way to target particular consumer segments.

Many product categories have been severely disrupted; men’s shaving (“Million Door Club”), jewellery (“MVMT”), home furnishing (“Simba”) and fitness apparel ("GymShark") are just a few examples.

But I’m not here to talk about innate D2C brands. 

‘Traditional’ powerhouse brands, such as Apple and Dyson, have been aggressively shifting away from retail in pursuit of D2C for well over a decade; utilising almost every marketing channel available to drive direct sales. 

However, many brands are yet to commit. Whilst the e-commerce trend is there for all to see, and commercial benefits unquestionable, business risk and lack of expertise have prohibited many from opening up a D2C channel.

I believe now is the time that has to change. 

Recent macro events, namely Brexit and Covid-19, have sent shockwaves through the retail sector, which in turn hurts’ brands ability to reach their ultimate customers. Whilst I do believe there’s a place for retail, brands can no longer rely on it solely to drive the top line.

So, below I will explore 5 fundamental questions with recommendations to help brands prepare for launching D2C:

1. Why are you doing it? 

Benefits: increase gross margin, reduce reliance on retailers, control end-to-end CX, data capture etc.

Challenges: retailer backlash, skills & resource (see Q3), changes to operations (see Q4), internal culture etc.

Your ‘Why’ can be any or a combination of these benefits, but it’s critical you keep it front and centre. The challenges are inevitable, and in the heat of battle, it will be easy to forget your ‘Why', give in to short term pressure and undo any progress made.

Recommendation: decide on your primary ‘Why’ and consistently communicate it across the business.

2. Who will be commercially accountable?

From personal experience its often a sales vs marketing debate. It’s unlikely when you first start out, you’ll be able to invest in a full time ‘Head of D2C’ position (see Q3) but make this the ultimate goal. 

D2C must form part of your broader business strategy. With that said, leadership need to be actively involved and sponsor the initiative.

Recommendation: focus on personnel skills & competencies across your senior Sales & Marketing teams, rather than department headings; leadership of the initiative can come from either.

3. Where will the required expertise and resource come from?

Assuming you’re starting from zero, specialist marketing & e-commerce expertise will be required to maximise success and alleviate challenges. You have 2 primary options:

• Outsourcing: Specialist agency / Consultant
• In-house Upskilling: Recruitment / External training courses / ‘on the job’ training

Recommendation: outsource initially to help build out the plan, processes and lead internal project team, overtime upskilling and resourcing up to manage independently.

4. How will you adapt operations?

You are in essence becoming the Retailer when you open up D2C, so Retail-CX fundamentals must be considered: convenience, speed & quality.

• Web & Ecomm: website should be mobile first and set up to sell. Must accept all major payment methods. 
• Delivery: single pick/pack/ship capabilities. Customers expect delivery within 1-3 days (quicker the better), and good communication throughout. 
• Returns: ‘Consumer Contract Regulations’ apply. Furthermore, customers expect a seamless returns process on warranty repair or guarantee, free of charge.
• Customer Service: web/phone/email. Expect day-to-day post-purchase product & order queries to increase, in line with D2C sales growth. Offering pre-sale support could also serve as a USP (see Q5).

Versus traditional retail models, assume a minimum 200% increase in operational costs.

Recommendation: engage Ops colleagues (& 3PL’s if applicable) and include in project team from day 1.

5. What will your value proposition be?

In other words, why should a customer buy direct from you? (vs Amazon / B&Q / Currys etc.)

You need to be ‘as good as’ in all operational metrics (see Q4), plus offer unique reasons-to-buy across Product & Price (+ Promotion).

Don’t underestimate the attraction for consumers being able to buy direct. There is automatic trust (assuming your brand is robust); this is a USP that no retailer can compete with. 

Recommendation: consider how quickly you want to grow the channel; more aggressive USP’s will deliver faster growth but increase risk, and vice versa.

Whilst the challenges are considerable, and effort required to set up and manage substantial, the long-term benefits cannot be ignored. 

Executed well, D2C will drive your bottom line.

And with the retail sector as it is right now, can you really afford not to?