Brands Adopting an OmniChannel Approach Part 2: DTC Challenges
In Part 1 – DTC Opportunities, we looked at the options that brands have to adapt to the evolving retail environment by leveraging Cloud-based technologies to enhance their product visibility and develop deeper relationships with their core customer base, directly and online. With less reliance on third parties and fewer limitations on branding and fulfillment, the Direct To Consumer (eCommerce) model provides advantages for both up-and-coming brands as well as established brands, who are compelled to grow their online presence to supplement a reduction in brick and mortar revenue streams.
Distribution Channel Evolution
However, traditional distribution channels are evolving, not disappearing. Brands will continue to place a high degree of emphasis on their retail relationships. This dynamic puts the brands at crosscurrents with their retail partners which, together with some operational complexities, adds a set of challenges to consider:
- Retail is art and science. Retailers understand shoppers, and they have existing infrastructure to acquire, distribute, and sell a wide range of products and services. Brands may not have this same level of experience, focus, nor have the requisite skills over content development, marketing, customer service, and social media.
- A common challenge for brands migrating to DTC is in the area of warehouse management and fulfillment. Evaluating and adapting processes for eCommerce warehousing, managing each vs. pallets, reverse logistics, and pick/pack plus shipping in a next day delivery world will need to be thought out.
- Brands would also be assuming control over customer service operations at scale based on transactions, which can be a significant cultural change and investment.
- Another key factor is pricing. A brand must fairly balance its prices across its DTC channel and its wholesale channel, so one doesn’t undercut the other. Also, price is a crucial consideration for shoppers, and they’ll frequently shop around for the best price. A DTC brand’s pricing and discounts must be competitive and conform to MAP pricing guidelines where they’ve been established.
Sales generated by retailers will continue to be critical to many brands who still believe it’s in their strategic interest to migrate towards DTC. To maintain and build on these relationships, brands should look for mutually beneficial ways to have DTC selling be seen as adding value to their retail partners. One opportunity to do this is by sharing data on consumer behavior beyond just sales statistics. Retailers will appreciate learning more about customer preferences and opportunities to add to personalization metrics. Not every customer will prefer DTC over an in-store experience or shopping at the brand site versus the retailers, so it’s beneficial to determine what is driving these decisions, share data, and create strategies around these opportunities. Brands can also use their DTC channel to test new products, trial innovations, and workshop ideas with consumers adding to the viability of products before distributing to the retail channel.
The balance is finding out the best way to have a successful DTC channel and retail partnership strategy as part of your overall Omnichannel strategy.
Implementing These Ideas
While the solutions and some of the questions will be different by brand, we wanted to flag awareness of the issues, start a conversation, and offer help in whatever way makes sense for your situation. If you are going through similar thought processes and would like to discuss planning and resource strategies, adding skills capacity, or would just like a sounding board, please connect with us.
Written by Bill Melvin, VP of Retail
Bill Melvin is a Retail specialist and a seasoned CIO with extensive executive and hands-on experience. As VP of Retail for Cyber Group, Bill focuses on the transformational trends impacting our client’s operations, including the design and development of technical strategies, OmniChannel implementations, as well as strategic roadmap planning and execution.
Give him a call to explore these ideas further!