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5 mistakes brands make when going Direct to Consumer (DTC)

Growth Secrets|11.10.2017

It's always getting easier to get set up selling online. Over the years the costs have reached

Most brands will focus on product and will outsource the selling of their items. They'll typically share the marketing effort with their stockists, by providing them with assets that they can use in their own campaigns.

The direct-to-consumer model means you cut out stockists and sell direct, typically via a website. 

The benefits of selling direct

In the context of an increasingly competitive market, there are some big benefits of going direct to consumer:

  • Bigger margins by cutting out middle men. Allowing brands to spend more on marketing, product development and future growth.
  • More opportunity to cross-sell and up-sell, versus a brand-agnostic retailer who might not fully understand the offering.
  • Control the brand story more, and directly interact with customers.
  • Build up a direct following of customers/followers/fans, therefore more chance of repeat (direct) revenue.

By adding an online channel, brand manufacturers can uncover added revenue streams, increase margins, and monetize existing brand affection.

Direct-to-consumer brands like Bonobos and Warby Parker set the template for next-generation retail.

Should go Direct to Consumer?

When you are a start-up brand in apparel for example – growing consumer awareness and driving organic growth can be tough on the web. At the same time a deal with a wholesale channel can offer product exposure at a faster pace. As a result, many young businesses may be better served by delaying the direct-to-consumer decision.

1. Not planning

  • Can you touch upon - how does one get started?
  • What kind of orders will customers be making? Will the customer, for example, make a single order or include multiple items in one order?
  • How will the order be packaged and shipped?
  • How important is speed in delivery? How soon will the customer expect to have the order delivered?
  • How will seasonality impact demand and order volume?
  •  How will returns be handled?
  • Will free shipping be offered?

Establishing KPIs is key!

2. Upsetting stockists

Retailers are becoming more hesitant to work with brands that compete with them by selling direct-to-consumer, according to Shopatron in it's 2013 Retailer E-commerce study, which surveyed more than 8,000 retail executives. As many as 71% of retailers plan to stop or reduce spending with these brands, the study reported.

Further, 33% of retailers stated that they would “never” purchase products from brands that sell online directly to consumers; and another 37% said they would consider it a factor.

Your stockists depend on selling something that is scarce, and that happens to be your product. If you then begin to compete with them by offering something more interesting through your own DTC channel, they might be upset.

Here are some potential tactics to avoid 'channel conflict':

  • Communicate objectives and emphasise upside to retailers well in advance so the existing distribution channel is not “blindsided”.
  • Level the playing field by not competing on price and even consider being slightly above market or “street” price.
  • Include website features that will benefit the retailers – store locator, links to retail sites, etc.
  • Enlist retailers to fulfill direct online orders to drive consumers to the existing distribution for add on sales opportunities.
  • Share revenue from online sales with retailers.
  • Include opportunities online to engage with the brand that will strengthen brand awareness and increase sales across all channels.
  • Consider targeting a different demographic market than existing retailers in the distribution network.

3. Compelling USP

At the same time, the brand needs a unique proposition that appeals to customers when competing against other channels.

Remember the other channels may be able to under price you, offer added value services (Amazon Prime), have a better delivery network and capability, have better technology, marketing, reach, social presence, TV presence and all round may just be kicking your arse.

Here are some ways to differentiate:

  • Better content
  • Strong social channels
  • Create a brand statement
  • Tell your story
  • Make your brand cohesive
  • Gather awesome reviews and testimonials
  • Find out what others are doing in your industry and then do it differently

Make sure you don't just create unncessary competition with stockists. 

3. Bad website

Most brands use their website as their DTC channel.

Building a website is an investment and takes time to perfect. 

The most common mistake for brands trying DTC for the first time is simply bolting on a e-commerce store to their current website. 

  • Bolting on a shop that doesn't match, isn't optimised for mobile and creates a broken experience for the visitor

  • Also means you don't get the SEO benefit of running the store on you main domain

  • Results in maintaining two websites

  • Not following best practice

What are the things that make a good DTC e-commerce website:

  • Lots of social proof: customer reviews, press, social 
  • Show the advantages of your products
  • Ensure that the website navigates well
  • Always show the full price
  • Design matters; and good website design signals a solid company
  • Website security, use payment system logos 
  • Allow customers to find what they are looking for, and quickly

We'd of course recommend Shopify, it's a brilliant platform to get a great e-commerce up and running.

4. Fulfillment difficulties

Order fulfilment is a vital part of the supply process. Problems with order fulfilment can have serious impact on your customers’ shopping experience. 

Common problems include:

  • Lack of expertise
  • Practical considerations such as repackaging for single orders, or breaking open palettes and making it possible for the warehouse and courier to handle single items
  • Assmebling orders
  • Overcharging for delivery
  • Making delivery date promises to your customers that you don't have the inventory or delivery services to meet them
  • Failing to keep the customer updated on progress
  • Having an acceptable returns policy

5. Support

Stockists typically deal with the inevitable support that goes with selling something. This might include returns, help or just general information during the customer lifecycle.

Lack of decent customer sevice.

The key theme: expertise

Have at least one member of the team that has worked in an e-commerce operation prebviously will help. Often manufacturers do not know what questions to ask or understand the complexity of the e-commerce channel and there may not be a natural choice for a leader of the strategy, planning and execution of the e-commerce initiative.

Common challenges for brand manufacturers going direct

 

How can we help?

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