Direct to consumer e-commerce is retail’s rising star

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Global e-commerce platform Kooomo outlines the opportunities in direct to consumer e-commerce and how to prepare for potential challenges

The acceleration of online retail throughout 2020 saw a subsequent increase in brands cutting out the middleman and selling direct-to-consumer (D2C). This is according to global eCommerce platform provider Kooomo which outlines that as more brands look to cash in on the strategy this year, there are some unique challenges that must be considered and planned for.

While 80% of traditional retailers saw sales decline since the pandemic started, 52% of D2C brands have seen surges in demand. Agile D2C and digitally native brands had the upper hand when it came to responding to the pandemic and they had an ability to fast-track customer engagement initiatives that were already underway pre-covid. As a result, D2C brands surveyed by Totem Media reported 58% fewer sales declines than traditional retailers since the onset of the pandemic.

Ciaran Bollard, CEO of Kooomo, says: “While third-party distributors are likely to always play a part in the consumer sales mix, there’s a lot to be said for brands owning everything from logistics to supply chain and everything in between. This ensures an air of certainty – something much sought after following a turbulent 2020 – and allows brands to boost their online sales even more by getting a clear, first-hand look into their customers’ buying behaviour.

“D2C brands are able to place a strong focus on customer support, being responsive, answering questions in a timely fashion and building trust, enabling them to maintain their relationships, leading to brand loyalty. They are able to set up their online store and even set up their own physical outlets for the unification of off and online, creating a truly omni-channel environment. Furthermore, they are able to own the data from all consumer interactions, meaning they can improve the customer experience, delivering the most relevant content to audiences.”

However, D2C commerce does present some challenges and Ciaran outlines the following key areas to consider:

Liability risks

With full control of your product, there will now be new responsibilities and challenges that you will need to consider. A D2C model exposes a business to risks that are previously or normally bore by distributors such as wholesalers and retailers.

Most notably, data management will be crucial for both your brand reputation and legal issues such as GDPR. You will only be able to reap the benefits of data control if you can make sense of it and interpret it at a high level.

Security will also be a new factor to consider and plays a major role when consumers build trust with your brand. You will now need to consider the checkout process, ensure the right payments are offered to the right audiences and that each transaction is processed safely and securely.

Precision analytics

Supply chain processes and systems work a little differently for D2C brands, and companies will need a warehouse network that excels at picking at the sell-unit level, rather than at the case or pallet level. When working with smaller quantities that aren’t shipped to large consolidation points supply chains become piece-specific. Therefore, accuracy is essential.

If companies merely dip their toes in a D2C strategy, it’s not critical to massively redesign the whole supply chain network. However, if the strategy is successful and starts accounting for a significant portion of the business, companies will need to rethink their strategy to accommodate the shift. For example, distribution points, contractual arrangements with 3PLs, warehouse designs or the level of automation.

Organising and optimising product information

Effective product information management (PIM) is one of the biggest challenges D2C brands face when starting out or making the switch from wholesalers. You might have hundreds or thousands of stock-keeping units (SKUs), which is an enormous amount of content to manage.

Content is king when it comes to a successful CX and every product description must be compelling. Every size, colour, and product specification has to be accurate. Not only that, but there is also short-term content and sudden changes to consider such as seasonal promotions, or new items they want to bring to market. If this information is inaccurate or out of date, it could lead to lost time and customers.

PIM is a critical aspect of any commerce and a well-defined catalogue enables omnichannel, improved conversion rates, fewer product returns and more.

Bollard concludes: “While there are some pain points involved with getting up and running, the advantages of going D2C are evident. It may take some organisation, but once put in place, a D2C strategy could play a major role in increasing the longevity of your brand, maintaining a glowing reputation and improving relationships with your current and potential customers. So why not cut out the middleman and take your brand by the horns.”