Manufacturers Selling Direct-to-Consumers: An Essential Guide

For many manufacturers, shifting to a Direct-to-Consumer (D2C) model is no longer just an option, but a necessity. With the rise of e-commerce and changing consumer preferences, D2C channels have become a critical component of a manufacturer's sales and distribution strategy.

Direct to Consumer channels open manufacturers to more opportunities, especially after accessing high volumes of consumer data and insights. KPMG also reports that bypassing traditional distribution partners enables businesses to save up to 40% in expenses, which can be channeled to other business areas. 

However, transitioning to this model can be a challenging endeavor. Let's go over why D2C matters to manufacturers and the roadblocks encountered.

What is direct-to-consumer (D2C)?

Here's how the conventional retail model works: The manufacturer develops the product, then sells it to wholesalers and retailers. These, in turn, sell the products to the customers, whether it's through physical brick-and-mortar stores or online e-commerce shops.

Direct to Consumer works by removing the middleman. So, the manufacturer skips using the wholesalers, distributors, and retailers and instead sells the product directly to the end customer. D2C channels include setting up an e-commerce store, making sales through your social media pages, getting into the relevant marketplaces, and even through offline avenues like going to trade fairs and using pop-up shops. 

However, you don't have to do away with traditional business agreements with your wholesalers and retailers entirely. You can still set up your own D2C channels to reach your consumers in parallel with them. 

For instance, Danone, which deals with fresh dairy products and plant-based products and beverages, uses commerce tools and Google Cloud to support its B2B eCommerce. However, the Paris-based business responded to the baby formula shortage during the COVID pandemic by implementing D2C solutions on its brand websites. For this, they added cart functions for consumers to purchase the product directly.

How can a D2C strategy benefit your business?

Modern consumers prefer to interact directly with the brands behind their favorite products. 55% buy from the product's manufacturer instead of a third-party retailer. The D2C model gives you more control over your brand, marketing, and sales channel, enabling stronger consumer relationships. You also get more room to innovate. 

Retailers are usually rigid and do not readily accept products that are not guaranteed to sell. At the same time, with D2C, you can roll out new products directly to target demographics and test the market reception. It allows you to grow your product line and improve on existing ones. 

Customer insights from your collected data enable you to set up more tailored solutions to address consumer needs. You can also sell anywhere. Online D2C websites and marketplaces remove geographic restrictions, meaning you can put your brand in front of a global audience and scale faster.

Five benefits of manufacturers going D2C

Pouring your heart and soul into a product and still being at the mercy of retailers to push your product can be frustrating. It's no surprise that manufacturers are transitioning into D2C models. More customers turning to online shopping makes it easier for manufacturers to get to them. And this comes with multiple benefits, including:

1. Connect directly with your customers

Customer experience is the cornerstone of effective marketing. Each brand has its message and appeal. However, when you rely on wholesalers and retailers to push your products to the market, you don't have much control over "how" the product is sold. 

You're relying on intermediaries to convey your brand message or product story to the customer - but their priorities are not always aligned with yours. Their focus is increasing turnover and profits. Unfortunately, this also means stocking up on products from competing brands, which limits your brand's performance.

With D2C, you can convey a consistent message to your customers and customize the experience based on the target audience. You get to decide the packaging used and other marketing activities to follow. 

For instance, Away, a D2C luggage brand, has positioned itself as a travel company. Its branding involves sharing travel media and content and keeping up with social trends to engage with its audience. So while the "suitcase" may be a mundane item, the business brings adventure and a fun culture to the brand. 

Greater autonomy in providing customer service and support – even post-sales, enables you to build brand loyalty. Communicating with your customers at every stage helps you understand them better. Understanding "why" they are making a purchase means you can use this to tap into their emotions and drive more sales. 

In addition, potential customers browsing your D2C site won't get distracted by competing brands and products. With the data you obtain from buyer personas, you can tailor suggestions that align with your target audience. That brings us to the holy grail of e-commerce: customer data.

2. Control over data

D2C gives you an end-to-end view of data throughout the sales process. It includes basic customer information, social media profiles, and interests. You can observe their purchase behavior, preferences, sentiment, and browsing activities. Segment your audience into demographics, income levels, job descriptions, etc. Analyzing this data allows you to tailor your existing products to better meet your customers' needs and create new product lines if needed. You also get to drive more customer retention by creating targeted marketing campaigns.

3. Taking out the intermediaries = Higher margins

Cutting out the wholesalers and retailers from your sales process means your business will absorb the profits that would have been otherwise hived off. Definitely, a chunk of this will go into the resources you use to market and deliver your products to the consumer.

 A proper D2C strategy will leave you enough room to absorb the costs and make high profits. You can sell your products at a price similar to the retailers or even less since you will have more pricing power. You also have more control to provide unique offers and product combos that rake in more revenue and clear inventory faster. That, in turn, draws in more customers to buy directly from you. That is what saw Nike's e-commerce sales increase 82% in Q1 2020, with customers buying right from the brand instead of retailers.

4. No competition for shelf-space

When retailers and wholesalers stock your products, they give you limited shelf space. After all, they have similar partnerships with multiple other manufacturers. That hampers your brand growth. If a customer is leaning towards your competitor's product, the retailer will unlikely sway them back to yours. For them, a sale is a sale. 

There's also the risk of retailers not sticking up sufficient accessories/spare parts that customers may need during the lifetime of the product's usage. Lacking spare parts is one of the reasons customers shy away from products. With D2C, manufacturers can display their entire rage to the customer to help them make the right decision.  

5. Faster time-to-market

You can reach your customers faster, from readily available e-commerce solutions with complete inventory management to social media business pages that enable you to market your products quickly. Whip up a Shopify or WooCommerce store, and launch your Facebook page - all these can be quickly done. 

Custom and more complex stores can take longer, but you won't be relying on the enthusiasm of a third-party retailer to get your products in front of the end consumer. It's also easier to test new products and their reception in the market when promoting them on your platform – instead of taking time and resources to convince a retailer to take on the risk. That way, you can quickly distribute innovative products, promotions, and subscription models.

6. Control over customer experience

A DTC strategy enables companies to provide a seamless and consistent brand experience across all touchpoints, including customer service. With direct customer feedback, companies can easily track and resolve issues in real-time, making customer service more responsive and effective. This, in turn, can help build trust and loyalty with customers, further strengthening the brand's reputation.

Overall, a DTC strategy provides companies with complete control over the customer experience, allowing them to create a stronger, more differentiated brand identity and build deeper relationships with their customers.

Four main challenges of D2C

Despite its promise, making the switch to D2C isn't always easy. Challenges that manufacturers encounter include:

1. You're not the only manufacturer going D2C

Brands are increasing their footprint in the e-commerce space, creating more competition for D2C brands. This results in a crowded marketplace, and the customers have many options. Even your former/current retail partners can now be your competition. When setting up your D2C channels, you must identify potential conflict areas with traditional distribution channels.

How do you differentiate yourself and stand out from the competition? How can you improve your customer experience? Set up customer-centric digital marketing campaigns and automate processes to speed up product deliveries. Respond swiftly to queries. Ensure that the online stores have easy-to-use interfaces and smooth checkouts. 

Make your unique selling point clear to the customer. You can even give your customers the option to customize their products, like the color, style, and sizes of fashion wear. A Deloitte Study showed 36% of consumers being more willing to purchase personalized products, and 48% even willing to wait longer for such products to be prepared and shipped. Winning over new customers and building trust is also a challenge, making strong branding and smooth customer experiences more critical.

2. Changing consumer trends

The average online shopper doesn't just log onto the e-commerce store from their desktop or laptop, credit card in hand, ready to complete any purchase. Omnichannel shopping is here. 

Customers can purchase products from the same firm across multiple devices and channels with the same experience. You can lose up to 30% of sales by failing to meet omnichannel consumer shopping expectations. 

The brand messaging across the different sites and social media platforms needs to be consistent. The entire buyer's journey, from the awareness and onboarding stages to the purchase and post-purchase service, must also be seamless in these channels.

Even when customers check out the products on the shelf at the physical store and then browse through the brand's e-commerce store to scout for discounts or similar products, the branding needs to be consistent. Setting up a consumer-friendly D2C website with a mobile-first interface is crucial for the omnichannel shopping experience. 

However, unlike the traditional approach, where the front-end user interface is tightly coupled with the back-end data, the architecture should be decoupled to enable customers to shop easily on any device. An example of this is headless commerce, where separating the front-end and back-end functionality gives the business more freedom to express its brand and enrich the customer experience. 

You must also ensure you're on the proper channels to reach your audience. Do they use TikTok or Twitter to discover new products? Do they make purchases through Instagram Shoppable Posts or Facebook Shop? While you don't have to spread yourself across all platforms, you'll want to invest in the channels your target audience primarily uses.

3. Order fulfillment

Booting the wholesalers and distributors means you must take on the fulfillment and shipping yourself. Getting the orders to the customers in time requires significant investment. Late or damaged deliveries ruin the customer experience. D2C brands can still partner with a third party to handle the logistics of the order delivery.

4. Technology investments

Transitioning to a D2C model, or incorporating one into your current sales strategy, will require significant infrastructure investments. First is an e-commerce solution that has been designed for the end consumer. That needs to meet the customer's experiences, from the UI and buying process to the after-care support. The eCommerce transaction must also be integrated with the customer data being collected. Some manufacturers will still need to support their B2B partners for wholesale transactions, which adds to the complexity.

A successful strategy for D2C manufacturer

The first step to a successful D2C strategy is understanding your customer better. That is achieved by collecting data, from the information customers give you during the registration process, to data from customer surveys and social platforms. Segmenting this data enables you to target different audiences best suited to the products you manufacture. The next steps include:

Build an e-commerce presence

Develop a user-friendly website that offers seamless navigation, product information, and secure payment processing. Ensure that your website is optimized for mobile devices and has a fast page load time.

Develop a digital marketing strategy

Create a digital marketing strategy that includes search engine optimization, social media marketing, email marketing, and paid advertising. Use data-driven insights to target your audience effectively. Marketing can help you craft your brand message and communicate the value of your products - significantly how they improve the customers' lives or address their pain points. 

Provide exceptional customer experience

Offer excellent support, customer service, including prompt responses to inquiries, easy returns, and refunds. This will help build customer loyalty and positive word-of-mouth.

Monitor and optimize performance

Regularly track and analyze your website and digital marketing performance. Identify areas for improvement and optimize your strategy to increase conversions, improve customer retention, and drive growth.

Manufacturers are already doing this with Layerise, the platform developed to enable consumer brands to collect and manage customer data. You can use it for valuable insights for hyper-targeted marketing and improve your product offering.

Attracting traffic to different D2C endpoints is one thing. Keeping them engaged is another. That is achieved through aspects like smooth site navigation and incentives like loyalty schemes, contests, and product promotions. 

The customer support systems you have in place are an integral part of the process, through which your users can raise any issues they have with your products or delivery processes. For instance, Layerise Chat enables you to give your customers real-time support, complete with voice, video, and image sharing. Meanwhile, the data on the customer and products with issues are automatically collected and presented to you.

Book a demo and discover tools to improve customer experience and drive sales.