Your Direct-to-Consumer success is reliant on operations
In a bid to capture increased wallet spend, brands around the globe – over 57% of them in fact- are racing to launch direct-to-consumer (DTC) channels. This explosion is the direct response to recent shifts in consumer online buying behaviour, which indicate that shoppers - as much as 81% of them- want to buy products from brands directly.
DTC brands have unfiltered insight into customer behaviour, direct control over their relationships, and highly competitive price points. Many such brands have built up a global cult following and success stories include Dollar Shave Club, Gym Shark and beauty brand, Glossier.
The rise of prominent these players has made this channel increasingly attractive to me-too brands who also want their share of the market. But, as a business model, it doesn’t come without its challenges.
The retail operation: the oft-ignored DTC backbone
While most brands are aware of everything they need to do on the front-end, in the race to attract direct sales, few seek to address the operational complexities that lie beyond the buy button.
That’s because once a DTC brand bypasses a retailer, they become directly responsible for every single touchpoint in the buying journey, including pre- and post-purchase experiences, such as delivery and returns, inventory management and customer communications. Brands must recognise that at any moment, they risk getting things wrong.
"The real secret of the DTC model relies on understanding that ownership of the total customer experience is more important than the product itself"
Glossier staff still refer to “The Great Inventory Stock Out”- when Glossier had major issues keeping up with demand for its products and ran out of stock on several items. As the company grew so quickly, it simply didn’t have the inventory to keep up. “It was very much a hard lesson learned,” 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 would prevent the brand from fulfilling orders for mid-priced apparel in the first half of 2019, reducing growth this year by up to 2% and leaving the field wide open for its competitors
So what does this mean for growing brands and others considering a shift towards DTC? It means there’s a real risk in not having a solid infrastructure in place to support demand. 75% of UK brands agree that if you get your DTC approach wrong, it does far more harm than good.
Navigating the direct-to-consumer tightrope
Brands that are considering this space have to understand that when you’re operating in different markets and you’re scaling quickly, you have got to have the right retail operations in place to respond effectively. Without those mechanics, for example, to handle inventory management, shipping and logistics or for more customer-facing support, the business is quickly going to run into problems.
This point is reinforced by the fact that a whopping 61% of consumers have told us they’ve experienced issues buying from brands online within the past 12 months alone. And, what’s worse, 69% of shoppers say that if their experience is poor, they’re unlikely to shop with the same brand again; which means future sales are being put at risk because of mismanagement within the retail operation.
The secret ingredient to DTC success
The opportunity is ready to be capitalised on, but this shouldn’t be 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 recognised as equally important as those on the front end.
The real secret of the DTC model relies on understanding that ownership of the total customer experience is more important than the product itself. When you're a DTC brand, shipping, returns and incredible response times all become part and parcel of the proposition. This means DTC requires thinking about the feelings you want to create for customers every step along the way and using intelligent retail technology to remove any potential bottlenecks in your operations.
This will not only enable you to compete and thrive in the DTC landscape, but help you to avoid the same fate as businesses that have tried to build a consumer-focused strategy on top of unstable foundations.