Why read this? : We look at the direct-to-consumer (D2C) channel and the benefits you get from having an online store. Learn how it drives deeper customers connections. How it affect your commercial mix. And how it gives you a very different level of control. Read this for a business view on D2C and online store benefits.
Before we get on to online store benefits, here’s a question for you.
If you asked most CEOs or MDs what the most valuable piece of equipment in the company was, what do you think the answer be?
But they’d be wrong guesses. Because there’s an even more valuable price of equipment.
An even more valuable piece of equipment
The answer’s a mobile phone. But not just any mobile phone. It’s the phone of the sales account manager who manages the relationship with your biggest trade customer.
Because often it’s the relationship with the trade customer which has the most influence on sales.
Spend all the time you want on marketing plans and brand activation. But if your product isn’t available to buy, you get no sales. And until recently, the main availability choice was to sell through retailers.
So a lot of your business’s chances to succeed depend on the relationship with the retail buyer.
How they see you as a supplier. If they see what you sell as an opportunity to grow their business. If they actually like what you do.
How confident they are in your track record of delivering what you say you will.
Whether they really feel that your new product or campaign will help deliver their business objectives.
Like any relationship you have to work at it. There’ll be good times and bad times. They work with you because it helps them get what they want. Most suppliers have an on-going love-hate relationship with the retailers they sell through.
Let’s look at 2 contrasting stories from the world of retailer relationships. We’ll keep the names of all involved anonymous for what will be obvious reasons.
Love you - mistakes happen
First story, starts with a very savvy account manager we use to work with. He was at a company conference a few years ago. A few beers into the evening event, he sent a ‘miss you, love you’ message to his wife.
At least that’s what he meant to do.
In actual fact, it went to the most frequently contacted person on his phone. Which wasn’t his wife.
In fact, he soon found out it was the buyer at his biggest account. Because he got this text back. ‘Appreciate it mate. But not sure you meant this for me ;-)’.
There was some piss-taking afterwards, obviously. But because the relationship was already good, it didn’t do any harm. In fact, it probably helped.
When your retailer relationship is good, it’s easy to get past the inevitable mistakes which happen.
Hate you - prices and margins
But many retailer relationships don’t work so well.
For example, we worked with another business who’d been arguing with a major retailer on prices and margins for over a year.
The relationship wasn’t good. Top to top meetings. Delays in launching new products. Nasty emails.
It got to the point where the retailer would send a list of demands every Friday afternoon. Always a Friday afternoon with a requirement to respond by Monday.
Just so they could screw up the sales manager’s weekend.
We know of another buyer who used to get so angry with suppliers in meetings, she would get right up in the face of the account managers shouting the odds. Those account managers took tissues to the meeting. Because they knew they’d be wiping the buyer’s saliva off their face after the meeting.
Online store benefits?
You might well ask what all this has to do with online store benefits?
Well, when you set up your own online store, you move away from all of that.
There’s no external retailer for those sales, YOU are the retailer. You reduce your dependence on the relationship with the retail buyer. All those nasty conversations and risks to your business? Not as important as they were before.
The ups and downs of your retailer relationship don’t go away. But the risk of the downs is much less. You rely much less on the account manager’s phone.
It’s less important whether the buyer is in a good or bad mood the day you go in.
There’s not many businesses where D2C will completely replace traditional retail channels. But we see many benefits to having a D2C channel as one of your sales routes to market.
The biggest online store benefit is it gives you an alternative to relying on retailers to sell your product.
Beyond that, there are 3 more online store benefits we’ve seen. Consider these when thinking about D2C as a sales channel. Make them part of your e-Commerce planning process.
Online store benefits - Connection
You extend the connection further down the brand choice funnel.
Awareness and consideration from your online activities are great.
When a customer buys direct from you, they show a high level of engagement and trust with your brand.
What could show a customer’s trust in you more than when they hand over their credit card details? When they trust your order to delivery process to deliver the product safely to their doorstep?
For marketers, D2C is the ultimate relationship builder. Where you move from ‘unknown’ user data in your Google Analytics to details of your actual customers. Their names. Where they live. Permission for you to contact them. And details of their purchase history from you.
It amazes us that so many marketers we meet aren’t more excited about this. It’s an amazing marketing opportunity to connect with customers.
See our functions of e-Commerce guide to see more on why D2C is such an opportunity for marketers.
Online store benefits - Commercial
Then there’s the commercial opportunity.
D2C changes the way businesses think about their overall profit and loss. No more trade margin when you are the retailer selling direct.
Except of course, very few businesses could rely on D2C sales alone. So there still will be trade margin discussions (national account managers can breathe a bit easier). But if 5-10% of your sales can come through your own channel, that’s a good thing.
You get a lot of commercial benefits from that.
Less dependency on the retailers. The full retail price coming in to your bank account.
Though as we cover in our article on online store business models, there’s also a lot of additional costs that you need to factor in before jumping into D2C.
Credit card surcharges, warehouse costs, packaging costs, delivery costs, refunds and returns just to pick out a few examples.
Some of these can easily freak out accountants if they don’t know what they are. But overall, the commercials generally look good with D2C business models.
Online store benefits - Control
But ultimately where we see the biggest opportunity with D2C and online stores is the element of control it brings to your business.
For us, it’s the most powerful of the online store benefits. You control the whole D2C experience.
You directly manage all touchpoints. From the first point of contact with the customer to the product landing on their doorstep. It means you can act much more quickly to take advantage of opportunities and fix issues.
You have deeper knowledge of the interactions between the customer and your product. Your e-Commerce dashboard gives you a view of all the key interactions between reaching potential customers, and turning them into long-term loyal customers.
Conclusion - Online store benefits, but not for everyone
This doesn’t mean we’d recommend D2C for everyone. Far from it.
But we wouldn’t be so dismissive of it as some marketing pundits have been.
If you have the business smarts to work it through, it can be an amazing business advantage to have that direct connection with your target audience.
You may be a complete beginner in the D2C journey. Or you’ve started but are struggling with managing an online store. Keep going. Connection, commercialisation and control make all the challenges worthwhile.
Check out our guides on how to set up an online store for more on this. Or contact us if you have a specific need. We’ve got a lot of experience in D2C, and love to help others realise their online store benefits.