What Manufacturers Need To Know About Direct-To-Consumer Sales

DTC channels not only provide incremental revenue, but they're also a great way to expand a brand’s online presence.

(AP Photo)
(AP Photo)

Major brand manufacturers have long been reliant on selling through retail channels and have largely avoided selling directly to consumers. The costs of setting up logistics to support physical stores was the main deterrent for those even with the largest operating budgets; however, now with the growth of digital commerce there are many new ways in which brands can easily sell directly to consumers. Brands need to capitalize on this channel as U.S. e-commerce sales are expected to grow by 53 percent to $523 billion by 2020.

Selling direct-to-consumer (DTC) for a brand manufacturer has many benefits, including incremental sales, new consumer touch points and most importantly, owning the entire consumer journey from awareness to product delivery.

Despite the numerous benefits, companies often worry about the impact that selling DTC will have on sales at retail channels. There are clear distinctions, however, between selling directly and selling through channel partners, and understanding the potential benefits of doing both simultaneously will allow brand manufacturers to make informed decisions regarding a multi-channel retail strategy.

The ultimate goal of selling DTC is to build brand image and loyalty by offering an exceptional and authentic shopping experience at each and every touch point of the customer’s journey.

Here are some of the ways that selling DTC differs from selling through third parties:

1. Supporting Retail Sales

It’s important to understand that retail partners will continue to play a huge role. For brand manufacturers, retailers still drive a majority of the revenue. Additionally, 85 percent of consumers still prefer to shop at physical stores. The goal of DTC is not to steal sales from retail. Rather, DTC will help retail sales, since consumers will often look up product information on the e-commerce site in order to make an informed decision of what to purchase.

2. Deeper Brand Interaction

Retailers have numerous brands to sell within a given industry or market segment. Brands fight tooth and nail to offer promotions that will convince a consumer to purchase one product over another. When a brand manufacturer sets up a DTC e-commerce store, it’s all about that specific brand. No other suggested products or promotional offers from competitors are around to distract and steal consumers. This allows the brand manufacturer to own the entire purchasing experience, creating the perfect opportunity to provide not only basic product information but also suggested uses, how-tos and more in-depth details.

 

3. Abundant Promotions

Retailers have thousands of brands vying for attention yet there are a limited number of opportunities to promote a brand within this channel. With so many brands offering promotions at the same time — even if your company runs one — there is no guarantee that it will lift sales. When selling DTC, your brand has the opportunity to offer as many targeted promotions through coupon codes or on-site promotions whenever desired and without the need to get approval.  

4. Greater Product Assortment

Retailers have limited shelf space and therefore only the best performing products survive line reviews. Even if your brand has a product that generates consistent revenue and is a star within your product portfolio, it might not make the cut by a retailer’s standards. This is where DTC demonstrates its value by providing the ability to sell all your products for as long as you like.

Don’t alienate loyal customers for products that are niche or discontinued but still selling well. Instead, put them up on your DTC e-commerce site and provide an easy way for loyal customers to continue purchasing the products they love.

(AP Photo)(AP Photo)

5. Improved Data And Insight

If you are a small branded manufacturer, it might be cost prohibitive for you to pay for syndicated market data (such as IRI) to better understand how your products are performing at the retail level. While DTC e-commerce sales might make up only a small portion of sales, your brand can gain immediate insight into how products are performing on a granular level. This data will help you make better decisions when optimizing sales, promotions and advertising that you would not otherwise be able to get from a retailer without paying high fees.

With advances in e-commerce, all brand manufacturers should consider selling DTC in addition to retail. It is now simpler than ever to set up an e-commerce store. Not only does this channel provide incremental revenue but it is also a great way to expand a brand’s online presence. Retailers and DTC don’t need to be looked at as competitors but instead as complimentary teammates.

About The Author: Reuben Hendell is co-founder and CEO of BrandShop, a digital commerce solutions provider for Fortune 1000 brands including Coca-Cola, SC Johnson, Hershey’s and Casio.

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