D2C E-Commerce: What It Is, Benefits, and Challenges
Developing a solid understanding of D2C e-commerce, and then implementing it in your own business, can help you avoid marketplace intermediaries like wholesalers and retailers. So, instead of establishing and nurturing strong B2B relationships, you can shift your focus entirely over to the end consumer.
Switching over to a D2C e-commerce model can help you optimize your inventory levels, cut costs, and deliver exceptional customer experiences. In this post, we’ll dig deeper into D2C e-commerce and explore the benefits and challenges associated with it.
What Is D2C E-Commerce?
Direct to consumer (D2C) e-commerce involves selling goods directly from the manufacturer to consumers without involving third-party middlemen such as retailers and wholesalers.
This business model is ideal for SMEs that don’t want to involve intermediaries in their supply chain, whether it’s because of budget constraints or a lack of brand awareness. It allows them to interact with their end customers directly and develop a better understanding of the needs and wants of their consumer base.
Several factors determine whether or not you’ll be able to implement D2C e-commerce in your business successfully. Here are a few questions you’ll need to ask yourself:
Will you be able to conduct thorough market research before you start selling products directly to customers?
How will you segment your customer base? Based on demographics, age, or other parameters?
How will you go about targeting each segment?
Over the last few years, e-commerce has changed dramatically, and we’re now witnessing the gradual fall of the multichannel retailer model. Two primary reasons behind this are diminishing margins and a drop in the number of customers willing to walk in physical retail stores to make purchases.
Accessibility to online shops and faster delivery services have made physical retail shops somewhat redundant. Consequently, the margins have drastically decreased for both the retailer and the wholesaler.
Due to this, even well-established brands have seen dips in their sales numbers over the years, including Blue Apron, Casper, Macy’s, and Bloomingdales. These businesses have to compete with some of the leanest and efficiently-run online brands that have adapted well to digital selling. As a result, big-name brands have been closing their stores in many key locations around the world.
Nowadays, customers have started to look more towards buying goods directly from the manufacturer – regardless of the types of products they’re looking to purchase.
As such, this has had a significant impact on how businesses view their supply chains and intermediaries. Companies have realized they can fulfill customer orders themselves which is why they’ve taken full control over their brand messages and customer relationships. This is especially true for businesses that have something unique to offer to their target customers.
In addition to selling their products through physical retail stores, they’ve also started building their online presence and are focusing on taking control of their most valuable asset i.e., their customers.
Now that we have a better understanding of D2C e-commerce, let’s take a closer look at the D2C e-commerce challenges and advantages facing store owners.
Benefits and Challenges of D2C E-Commerce for Store Owners
The e-commerce business model you use affects your sales, costs, operations, income, profits, and customer satisfaction. By properly implementing D2C e-commerce in your business, you’ll be able to get more control over your supply chain as well as your customer relationships.
Below, we discuss common D2C e-commerce challenges store owners face and how to turn them into opportunities.
#1: Choosing Which Products to Sell
Most businesses offer dozens (or even hundreds) of products to their customers, which can quickly become overwhelming – especially for growing businesses. Deciding which products to sell via e-commerce stores and which ones to leave out can be tricky.
Depending on the industry you’re in, you might have to think of which products your competitors are selling and which ones you should sell. Plus, there is no definite way to know which products will have a higher demand.
One way to overcome this challenge is to purchase products wholesale and opt for a private labeling strategy. For this to work, you’ll need to find a D2C e-fulfillment service provider that handles wholesale products and can offer compliant product options. This will enable you to meet customer demand and help ensure that your inventory never runs out.
#2: Storing Products
When you start receiving lots of orders from customers, you’ll have to make sure that you adequately stock your inventory at all times. You’ll need to find a way to capitalize on customer orders and look for multiple options to fulfill them.
If you’ve never experienced an increase in product demand or haven’t focused on scaling your inventory and storage, this can be a serious problem. Consequently, you won’t be able to meet those orders in time and could potentially miss out on valuable revenue.
Fortunately, knowing how to scale your warehousing operations or hiring a fulfillment service that offers scalability can help you meet a sudden rise in customer orders head-on. Most order fulfillment providers have the resources and expertise to adapt to your changing needs. They can offer the necessary warehouse space, staff, and resources you need to complete customer orders promptly.
#3: Handling Returns
Returns happen all the time for online businesses. As such, you need to make sure you have the necessary systems in place to offer customers a quick and simple return and replacement of damaged products. Offering easy returns is an essential part of improving the customer experience your business delivers and allows you to prevent chargebacks and customer complaints.
Processing product returns accurately and as fast as possible helps you retain customers and can even earn you favorable reviews online. Ideally, you should enlist an order fulfillment provider with an FDA-compliant returns process that lets you quickly get products back on your store’s virtual shelves.
Creating an amazing product isn’t enough. You also need to make sure it offers a memorable unboxing experience to your customers – especially if you sell subscription boxes. As a bonus, proper packaging also ensures that products reach customers in excellent condition.
Product packaging has a huge impact on the value customers place on your product. You need to make sure they perceive you as a high-value brand even before they unbox your product. One way to achieve this is by hiring a fulfillment provider that takes care of kitting and assembly for you and helps you deliver the right packages to customers on-time and in great condition. Doing so will also help you reduce your returns and replacements and, ultimately, increase customer satisfaction.
D2C e-commerce is helping businesses take control of their supply chain and better manage customer relationships. Understanding the challenges and benefits associated with D2C e-commerce can enable you to target your customers and increase brand awareness efficiently.
Do you agree that D2C e-commerce gives you better control over your customer relationships? Let us know by commenting below.