In the direct to consumer channel, we continue to look at the entire world as an extension opportunity for all of our brands. (Richard Hayne CEO/Urban Outfitters)
Discussions about Direct to Consumer are usually framed in terms of the benefits gained by the supplier, and the threat to traditional middlemen.
Manufacturers can win with better margins, the capture of invaluable customer data, and stronger customer relationships. However, in traditional channels suppliers selling DTC can be perceived as competitors that undermine the revenue and profits of distributors and retailers.
But is it possible that Direct to Consumer can actually provide benefits to your traditional channel partners? Here are 3 ways that it does:1. Increased Brand Awareness
According to a study conducted by Forrester Research Inc
49% of manufacturers that sell DTC via ecommerce said direct-to-consumer sales have increased brand awareness and created incremental leads and visitors for merchants that sell their products.
Retailers offer limited opportunities to build your brand and they control the channels of communication and the distribution of content. They’re concerned with building their brand and making a sale, whether it’s your product or a competitor’s.
With the emergence of ecommerce and social media, manufacturers now have much greater opportunities to communicate directly with the consumer and enhance brand awareness. They have total control over the content and messaging. Data and analytics enable personalization and better targeted marketing.
This is great news for manufacturers, but how does it translate into benefits for the retailer?
Many Shoppers Still Prefer Buying in Stores
According to a Pew Survey, 64% of Americans indicated that they prefer buying in stores to buying online. In addition, more than seven-in-ten think it is important to be able to try the product out in person (78%). At the same time, 74% think it’s important to read reviews online, and 45% have used smart phones to research products while inside a physical store.
The Omnichannel Experience
This is part of the omnichannel experience that consumers now expect – the convergence of the online and offline channels in making a purchasing decision. A consumer may use the internet for product information and reviews but make the purchase at a store. Or might see a product at a store and wind up buying online.
Through a branded ecommerce site and social media you can provide the robust product content, reviews, and personalization that enhance brand awareness. By doing this you’ll support the buying behavior of the large number of Americans that still prefer the in-store shopping experience. Retailers benefit because these shoppers are effectively fully qualified referrals – they’ve done their research, have made a buying decision, and will make their purchase in a physical store. And the retailer will benefit from increased traffic and have the opportunity for incremental sales of other products once the shopper is in the store.2. Increased Pull Through
A report by Forbes provides further evidence that consumers do product research online but still prefer to make purchases in a physical store. According to this study, 82% of retail customers do research online.
At the same time, only 38% of retailers said that they are past the beginning phase of providing the omnichannel experience that consumers expect.
This is an opportunity for manufacturers that use their eCommerce site to provide an omnichannel experience and facilitate sales with channel partners. Fortunately, many manufacturers have already tested models for adopting eCommerce while still maintaining channel relationships.
- Where to Buy – we know that most consumers research products online but prefer to buy in a store, even if your site has a Cart. Provide comprehensive product information on your site and point shoppers to local stores with a Where to Buy tab. This creates a win-win for consumers, retailers, and your brand.
- Sell on your site, with option for in-store pickup. In the Forrester study that we cited earlier, half of retailers said they would increase purchases from brands that send purchases to stores for in-store pickup; and an additional 9% stated they would “significantly increase” purchases from these brands.
- Sell on your site, fulfill through a retailer via dropship
- Share data and insights with partners. You’ll gain invaluable data via the sales and customer interaction on your ecommerce site and social media. This data can be used to collaborate with retailers to create more effective marketing campaigns, promotions, and help guide product assortments.
A failed brand or product launch to traditional channels is expensive. The supplier makes investments in programs such as co-op advertising, in-store merchandising such as endcaps, and slotting allowances, but doesn’t realize ROI. For the retailer, they invest time in developing and monitoring promotional programs, training associates, and managing inventory and returns.
A DTC launch via the manufacturer’s eCommerce site can minimize the risk for both parties and provide benefits for the retailer.
According to Forbes, the translation of demand from a customer’s purchase in-store to a manufacturer receiving an order will average two weeks. With an eCommerce launch you’ll get immediate feedback in matching product attributes to customer buying behavior.
The product can be tested for variables such as packaging, color, and styling. Targeting, segmentation, and demographics can be narrowed. Messaging and pricing strategies can be fine-tuned.
How will this benefit retailers?
- The data can be used to help channel partners develop more effective marketing programs
- The retailer can have a high level of confidence that the manufacturer is delivering a product that is a good match for the retailer’s customers
- It gives retailers a better chance at focusing on products that will sell and deliver profits for them
- It mitigates the risk of time and opportunity loss that retailers face with failed products
The data and research supports these 3 key points:
- While eCommerce sales are growing, most consumers still prefer to buy at stores
- Many consumers do research online, but buy at stores
- Consumers expect an omnichannel experience – and most retailers are falling short in providing this
The engagement created as consumers use eCommerce sites to research products and search for promotions not only drives online sales but also augments offline sales. The insight gained from eCommerce interaction also enables manufacturers to increase engagement across all channels, including traditional retail and distribution.
By creating a Direct to Consumer strategy that helps facilitate an omnichannel experience, a manufacturer can help drive traffic and sales to the retailer while also staying competitive with eCommerce and DTC trends.