Six Reasons Why Brands Should Consider Direct-to-Consumer E-Commerce
Once upon a time, the lines between manufacturers and retailers were clear. Manufacturers made widgets, retailers bought large amounts of said widgets, and consumers bought widgets at stores. The advent of online shopping in the 1990s gave rise to a host of new pure-play online retailers, but the fundamentally linear model of the brick-and-mortar world – manufacturer to retailer to consumer – remained largely intact.
This linear model no longer rules. Consumers have access to more information and buying opportunities than ever before. They can compare pricing, read product reviews, complain about poor customer service on social media platforms, order groceries at 3 a.m., and so on. As a result, consumers have higher expectations of both brands and the retailers that sell those brands. Meeting these expectations is forcing brand manufacturers to rethink their relationship with, and dependence on, retail partners for getting their goods and services to consumers, and whether they themselves should begin selling online directly to consumers, otherwise known as D2C e-commerce.
In recent research Digital Clarity Group conducted with executives building D2C solutions, it found that D2C can boost manufacturers in these ways:
- More sales. According to a study by Forrester Research conducted on behalf of Digital River, slightly over half (52%) of consumers are already visiting manufacturers’ websites intending to make a purchase, and a third of those actually would prefer to buy from the manufacturer.
- Better margins. Depending on the product category, net margin dollars per unit doubles with D2C. One vendor interviewed for this report reported seeing increases among customers from 50% to as high as 400%.
- Less dependence on retail partners. In the U.S., Amazon’s dominance of online retail, coupled with Walmart’s and other big box stores’ dominance of physical retail, puts the squeeze on manufacturers’ margins. And as more physical retailers close stores, there is less physical shelf space for brands, and thus shrinking opportunities to reach end customers. D2C is a way to counter this dependence.
- More opportunities to offer broader product assortments. Retailers rarely carry a brand’s complete product catalog, preferring instead to provide shelf space for products most likely to generate regular sales. By opening and managing their own online store, manufacturers can offer as wide a product assortment as they want, further augmented by their own content such as detailed product descriptions, photos, and videos, which retailers may not use.
- Improved customer engagement and loyalty. D2C gives manufacturers an alternative channel to consumers where they can counter the effect of price competition. They gain data on their customers’ purchasing habits and can tailor product assortments and promotions accordingly.
- Access to customers in new geographies. Online marketplaces, website translation and localization software and services, and cross-border software solutions that handle customs, duties and taxes, and payments, are now widely available, and consumers in fast-growing economies are a ready and willing market for foreign brands.
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