Both in offline channels and eCommerce, the traditional manufacturing supply chain has included several middlemen, such as distributors and retailers, before a manufacturer’s products were available to the end customer.
Until recently, few manufacturers had a direct online sales model. Direct-to-Consumer (D2C) is a business model where a manufacturer sells its products to the end customer without the use of distributors and retailers.
Many businesses across industries, including manufacturing, are waking up to the importance of digital transformation (post-Covid 19). In some cases, manufacturers have started trying out D2C as a possible alternative for the future.
Omnichannel experiences and customer expectations have changed the ways brands, retailers, and manufacturers engage with customers. And unless your manufacturing business plans to open physical retail locations, the D2C model only allows for the advertising and selling of products through digital channels.
This means that manufacturers need to be selling everywhere online. It’s no longer just about advertising to a commercial network, but operating as a classic retailer, seeking out consumers and positioning products to them in all possible channels.
And why is change happening now? Because the manufacturing industry needs to become accustomed to external changes and the mounting expectations of modern consumers.
To better understand how customer expectations are changing, Salesforce Research surveyed +6,700 consumers and business buyers globally. The study found that 76% of consumers expect companies to understand their needs and expectations.
For many companies, being able to exercise full control over their operations seems to have become a priority, and what better way to achieve this than to start selling directly to digital customers, instead of going through retailers? The trend is growing among manufacturers of products that have been in high demand during the last couple of challenging months. Here are a few beneficial reasons, among others, why manufacturers are going with direct sales:
Brand control: Managing your own website and online store gives you full control over your brand image. Manufacturers can create product pages with as much information and details as they want, attractive photos, and quality copy and design that aligns with the impression they would like to give their customers. Being able to manage product information is one of the great advantages of D2C that can help companies to win more customers.
Learning about customers to build strong relationships: Manufacturing companies that take on a D2C approach will grow closer to their customers and be able to get to know them better since it is they now gain direct access to orders, queries, complaints, reviews and more.
Higher profit margins: Directs sales involve bypassing the expenses associated with managing supplier and distributor warehouses, transport and inventory insurance, and contracts and profit-sharing with all involved parties.
Simply put, if the cake is not shared, it means more slices for the manufacturer. However, manufacturers must also take a break to consider how cutting costs from one area could mean spending more money on another.
Why not sell direct to consumers?
D2C is not a bed of roses for all manufacturers. Before implementing this model, it is important to understand its potential costs and risks. On the surface, it may appear that selling direct is just about setting up a webshop and selling to consumers. However, if that were the case, all manufacturers would be selling directly. Here are some factors you'll want to consider:
Fear of channel conflict - Setting up an online shop can be seen as challenging existing channel partners; the manufacturer appears to be competing with their own partners
How to handle retail-related tasks? To be successful in selling directly requires different skills and resources to that of selling to resellers, often in the form of more sales and marketing investment
Technology barrier - Selling to consumers requires adjustments to volumes, pricing, and order processes to reflect the right buyer experience. You'll want a solution that can adapt to both B2B and B2C scenarios in order to sell to both distributors and end-consumers.
As the manufacturer takes on all responsibilities in the supply chain, channel conflict can become more problematic. Additional competencies and technical abilities are also required.
As online sales are constantly increasing and the expectations of customers for eCommerce are rising, many have become convinced of the importance of digital integration for the future.
A D2C model is certainly an option for manufacturing brands to consider - with its advantages and risks. However, what is important to remember is that success will come to those who make the necessary effort to nurture their consumers and offer them quality content and shopping experiences.
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