ERP Software Logo

Microsoft Dynamics vendors provide comparisons and opinions to professionals in the ERP/Accounting software selection process

 
 

Sana Commerce

How Manufacturers and Distributors Can Both Benefit from D2C Sales


Email | Print

It’s been argued that B2B and B2C are dead (or that they should be), and that we should be evolving toward B2B2C and D2C (direct-to-consumer) sales for more customer-centric strategies.

It seems that —especially lately— B2B organizations are taking note.

For quite some time now, the rise of D2C sales has been observed, but it’s primarily been posed as a threat to distributors and a game-changing opportunity for manufacturers.

However, that doesn’t have to be the case.

 

Quick Look: How D2C is Impacting the Supply Chain

 

By now, many manufacturers have already begun to cut the middle man —the distributor or retailer— out of the supply chain and the e-commerce equation. But they’re not doing it entirely for the sake of the customer.

So then, why?

When it comes to value distribution within the supply chain, distributors make a significant cut of profits and third-party retailers often mark up the price of goods by up to 50% or more. By executing D2C sales, manufacturers reap the full profit margin themselves.

 

Let’s visualize this.

 

Here’s what the traditional value chain looks like (distributed relatively evenly across channel partners):

 

And here’s what it looks like in D2C:

 

 

This looks great – at least for manufacturers.

But there’s a fix: a win-win solution in D2C for manufacturers and distributors alike that’s often overlooked.

Here’s a hint: it’s customer-centricity.

 

What’s the State of D2C Sales in 2018?

 

Last year, over a third of B2B consumers bought directly from a brand manufacturer’s web site (citing convenience, product quality and shipping as primary motivators).

As customers’ expectations of e-commerce continue to grow, the rise of D2C sales is expected to follow suit. (And the data in our latest research report supports this claim).

 

 

This year, we found that 61% of B2B businesses have seen evidence that manufacturers, distributors and wholesalers within their supply chain have started selling direct-to-consumers. Of those, 64% expect to see that trend continue.

And they’re not wrong.

  • Forbes predicts that the number of manufacturers selling directly to consumers will grow 71% this year alone.

  • 81% of US e-commerce customers expect that they’ll make at least one purchase from a D2C brand within the next five years (eMarketer).

    • 33% expect that at least 40% of their purchases will be made through D2C companies within that timeframe.

 

The opportunity is certainly ripe, but the conversation around D2C sales remains misinformed.

Here’s a breakdown of how both channel partners — distributors and manufacturers alike— can reap the benefits of D2C sales:

 

The Advantages of D2C Sales for Manufacturers

 

We’ve already covered one of the more obvious benefits for manufacturers going D2C: bigger profit margins.

But beyond revenue share, D2C manufacturers are also being given the opportunity to take ownership of valuable aspects of e-commerce, including customer experience, data, and business-to-consumer relationships.

In fact, thanks to D2C sales, 82% of manufacturers selling directly to consumers improved their customer relationships, and 76% improved customer experience.

And this should be the focus of D2C: your customers.

Keeping this in mind is how distributors can benefit from manufacturers’ shift toward D2C sales as well.

 

How Distributors Win (Too) on the D2C Battlefield

 

In D2C, revenue is typically the major benefit taken into consideration when assessing a successful business model. But there is so much more value to be gathered from D2C sales (especially regarding a better customer experience, and the critical customer data needed to make that a reality).

Distributors continue to be considered the losers in the D2C equation, but there are many ways they can thrive.

 

Here’s how distributors can take advantage of a D2C sales model (Fidelitone):

  • Almost half of manufacturers said direct-to-consumer sales increase brand awareness and have boosted leads for their channel partners, including distributors.
  • 54% of manufacturers said both they and their channel partners saw growth in sales as a result of a D2C model (by funneling order fulfillment for larger orders through to distributors and retailers).
  • 27% of distributors feel that by letting the manufacturer fulfill orders for lower-volume inventory items, they can focus on items that yield the best profitability.
  • 14% of distributors see a benefit in letting the manufacturer test the success of new products before passing them along to retailers.

 

In summary: D2C sales do drive more revenue.

But more importantly, it gives manufacturers and distributors alike access to invaluable customer data. It gives them both the ability to serve customers in the easiest, most convenient way. It allows customer relationships to blossom and boosts brand awareness. It gives channel partners within the supply chain the ability to experiment with what works best for their customers —not just what works best for them.

And with an investment in e-commerce, this can be even easier.

 

Improving D2C Sales with an E-Commerce Investment

 

Though there does seem to be a bit of a tug of war when it comes to winning customers on the manufacturer and distributor side, the key to success is not to consistently be the channel of choice, but to optimize all options for customers, so they are satisfied regardless of where they choose to purchase.

Why?

Before a buyer even contacts a potential supplier, they’ve already completed as much as 70% of the buying process (beginning largely with online research). This means that not only does the e-commerce experience need to be strong, but organizations throughout the supply chain need to maximize that last 30% of the buying process for customers who are already hyper-informed.

Investing in e-commerce has already made D2C sales possible for 49% of businesses. Another 24% plan to be able to in the future. They also have been able to create additional revenue streams and expand their business model as a direct result of investing in an e-commerce platform.

 

Here's How You Can Get Started:

 

If they can get D2C e-commerce right, manufacturers have a huge opportunity to drive up their profit margin, while distributors have a $6.6 trillion opportunity at stake.

If you’re not sure where to start, here’s our advice: prioritize your customers’ experience —across channels and in all phases of the buyer journey— to have the biggest impact on your bottom line without having to fight for your share of the profits.

Invest in e-commerce now, and invest in what you’ll need to succeed long-term; it’ll pay to be prepared when the next disruptor comes along.

For more on how changing business models and competitive threats are impacting the supply chain in 2018, download our research report:

 

Ask This Expert a Question / Leave a Comment