What is direct-to-consumer (D2C)?
Direct-to-consumer disrupts the two-step distribution chain, where customers visit a department store to buy from the shelf. Instead, customers buy directly from the manufacturer. This ‘no-middle-man model’ can help brands grow faster than traditional competitors. D2C brands rely on digital platforms like Instagram, TikTok, Facebook, online marketplaces and other digital channels to build an audience and sell online. This strategy isn’t new. The rise of scalable fulfilment options such as Shopify, which specialises in providing storefront and backend operations, has made it possible for smaller challengers to take on dominant players. New challengers have grown quickly by passing on the competitive advantage to their customers, such as lower prices.
The risks for D2C digital natives
For D2C natives, their “brand is the channel, and their channel is the brand”. Casper mattresses break the assumption that consumers want to see, feel and try a mattress before purchasing. It started selling mattresses online with the promise of a 90-day trial to return their purchases if they weren’t happy. Casper mattresses were successful because they tapped into an initial market of people who didn’t care about trying new mattresses in-store. Digital channels initially made it easier to reach a wider audience, resulting in a high number of customers. But over time, it realised there was still a large number of people who preferred trying in-store rather than risking the hassle of potentially returning a large product - so they started opening pop-up shops.
Selling in physical stores can recreate a dilemma for D2C digital natives because it can dilute the brand and weaken its competitive advantage over traditional players. In addition, the demise of third-party cookies and increased consumer privacy and legislation such as GDPR have made digital advertising less targeted and effective, meaning digitally native D2C brands may struggle to maintain momentum.
D2C for wholesalers: A winning strategy?
Established wholesalers don’t have the same challenge as D2C natives. Their business already exists outside of digital channels, so they aren’t dependent on them. Instead, wholesalers are free to explore D2C channels more freely - and the potential is huge. “A global survey found that 56% of in-store shoppers used their smartphones to shop or research items while they were in a store in the past week”, says Think with Google. Wholesale brands can use their in-store presence to their advantage and win customers directly through D2C digital channels. By identifying gaps in the value chain, connecting with customers where they are, and using data to deepen customer relationships, wholesalers can use digital D2C as a strategy for growth.
How wholesalers can use D2C as a strategy for growth
1. Focus on deepening customer relationships through data
Gaining access to customer data is one of the most important advantages of going D2C. Wholesalers get ownership over customer and behavioural data by selling directly to consumers. As a result, they become better connected and can gather feedback to boost customer service and improve products by feeding data into the research and design (R&D) phase. Data access can help wholesalers differentiate themselves and build their brand by understanding what’s important to their customers.
2. Continue the journey beyond the point of purchase
D2C brands benefit from being in direct connection with their customers. Wholesalers can use this relationship to identify gaps in the value chain and consciously design a strategy around it. For example, if you manufacture trampolines, consider offering a post-purchase subscription service that gives consumers access to training plans curated by professional trampolinists. By continuing the journey beyond the point of purchase, wholesale brands can build a loyal D2C customer base and open up new possibilities for generating revenue.
3. Use omnichannel strategies to add value, not to reduce costs
Omnichannel strategies shouldn’t centre around increasing reach cheaply; they should focus on understanding and streamlining the complex ways consumers make purchasing decisions. Wholesalers who want to scale instantly may be tempted by global marketplaces like Amazon but risk losing brand ‘pull’ by reducing product attractiveness and uniqueness. It also forfeits the benefits of going D2C in the first place, such as gaining access to customer data and owning the consumer journey. Wholesalers should carefully select D2C channels that add value, such as social media platforms that build interest through targeted messages, memorable in-store experiences and post-sale initiatives such as care services, community activations and value-adding subscriptions. Meeting consumers where they are in a way that adds value is the best strategy for success.
The D2C roadmap
Going from wholesaler to D2C isn’t simple and requires a few changes to the business mindset and tech setup.
1. Warehousing and logistics
Instead of shipping products in bulk, you’ll need to get more hands-on, which may require a new shipping partner. From thank you cards to soft tissue and branded shipping boxes, wholesalers must also own the unboxing experience and consider how it reflects on the brand.
2. Product management
How will you manage inventory between consumer goods and wholesale goods? Instead of creating two separate systems, consider a tech setup that leverages integrations between the Enterprise Resource Planning software (ERP) and Product Information Management software (PIM). Wholesale brands can better manage stores across different customer segments by managing both from one source. Find out how IONA used Shopify Plus to help Nordic Pet Care Group and Kuoma move from wholesale to D2C with scalable integrations. iona.fi/nordic-pet-care-group iona.fi/kuoma
3. Digital channel strategy
Which channels do you plan to use and why? Consider your target audience and select 1-2 important channels before scaling up. Ensuring consistent messaging across all channels is key - there’s no bigger turn-off to buying than inconsistent pricing or messaging. Find out how IONA helped HMD Global elevate its brand and reach new customers with a new D2C ecommerce channel built using composable (headless) architecture solutions BigCommerce and Contentful. iona.fi/hmd-global
4. Customer data
Individual customer data is a great thing for wholesale brands looking to understand their target market better, but it’s also an extra responsibility. You’ll need to define how you gather, store and utilise that data while ensuring it follows regulations.
5. Customer support
When selling direct to the consumer, customer support plays a crucial role in answering questions about the product, resolving distribution issues, handling returns and winning back unhappy customers. While chatbot integrations are great for repetitive FAQs, a dedicated customer support team is the best way to ensure smooth customer service and build brand loyalty.
6. Payment gateways
If you’re still working with invoices, get ready to change your payment system. Selling D2C requires easy-to-use and secure online payment gateways. You’ll need to choose from gateways that offer options to pay in instalments or pay in full using online banking, credit cards and apps. It’s not unusual for B2C brands to have multiple payment gateways.
Wholesale businesses often opt for products that sell themselves, but if you have the resources to invest in owning the end-to-end experience, it can be a winning strategy for established wholesalers looking to grow. Businesses selling directly to the consumer benefit from stronger customer relationships and behavioural data access, which builds brand loyalty over time. By prioritising tools and strategies that tell the brand story cohesively across platforms, wholesalers can unlock more opportunities to sell online. We’re not saying you should cut out the middleman, it’s about tapping into the retail experience in an omnichannel way - and winning in-store shoppers through digital channels as a strategy for growth.
Starting a D2C sales channel requires a sound strategy and careful planning. New tech may be needed to support new capabilities. Composable architecture makes opening up new sales channels easier thanks to its modular, API-driven approach. It also ensures consistent messaging by making it possible to publish content in multiple places from one backend. The result? A stronger brand presence and a bigger B2C customer base over time.
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