“People who don't take risks generally make about two big mistakes a year. People who do take risks generally make about two big mistakes a year.” —Peter Drucker
You’ve been reading about the growing trends in Direct to Consumer (DTC) and Omnichannel. No doubt you’re aware of evolving consumer behavior and the forecasts for eCommerce growth. And you might be seeing competitors selling their products online and are concerned about falling behind.
Despite signs that it’s the right time to launch an eCommerce strategy, some businesses have hesitated. There are many reasons for this, but in most situations they can be distilled into one word: risk. Risk to your business and risk to your career.
A better way to look at it is that risk can run in both directions. There’s the risk of acting—and the risk of NOT acting.
Without an eCommerce strategy, you are likely to fall behind the competition. In the unlikely event that your competition is not selling DTC, you’re still throwing away the chance to gain the upper hand by entering the space first. That’s a missed opportunity to grow market share and build new revenue streams. You’ll also deny yourself the chance to cultivate closer relationships with your customers and website visitors—and the data and insight that comes with it.
So think about it again—which risk will you take?
Orderhouse CEO Mike D'Errico discusses options for DTC eCommerce & how to mitigate the risk of an eCommerce launch.
Navigating Financial Risk
Let’s start by looking at the possible risks for your business, which vary but can be mitigated with the right planning and strategy.
An eCommerce business requires investments in technology, customer service, marketing, and warehousing and fulfillment. For example, your warehouse that is currently configured for B2B shipping of pallets and containers is probably inadequate for the high volume pick and pack of individual orders that DTC demands. Will you need to lease more space and add head count?
Are there ways to gain access to the services, technology, and infrastructure that you need without breaking the bank?
- Outsourcing – Fulfillment, digital marketing, and customer service can all be outsourced. This is one way of reducing infrastructure and manpower burdens during start up and early growth stages. It can also be scaled to meet your demands as your business grows or during seasonal fluctuations.
- Turnkey Solution – Perhaps a better way to minimize financial exposure is to work with a turnkey solution provider. They provide complete end to end solutions and managed services with a financial model based on a small startup fee and ongoing revenue share.
- What About Amazon? – At first glance Amazon looks like the ideal solution for eCommerce without financial risks. You can be set up quickly and have visibility with Amazon’s huge customer base. And they can handle fulfillment and first level customer support.
But proceed with caution. When you sell through Amazon, they own the customer relationship and invaluable data. You’ll be making sales, but not building your brand. It’s eCommerce without the benefits of DTC. Don’t develop an “Amazon Addiction.” Make Amazon one part of an eCommerce strategy that also includes a branded eCommerce website. (Read more about Amazon Addiction)
Managing Channel Conflict
You may have grown your business through traditional channels and invested in a sales team and marketing strategy to optimize these channels. Can you launch a DTC strategy without threatening your existing channel relationships and revenue streams? If your DTC strategy includes ways to add value for the channel, the answer is yes.
- Omnichannel – Studies show that consumers research products online but often make purchases in physical retail locations (Forbes). Point your website visitors to retail locations with a Where to Buy tab to facilitate the Omnichannel experience – and help your channel partners in the process.
- Leverage Data – In DTC you’ll gain valuable insights about buyer behavior and interaction with your brand. Use this data to develop targeted marketing programs with your channel partners.
- Sell Online, Pick Up In-Store – Give consumers the option for pick up at a retail location. A win-win for consumers, retailers and your brand.
Channel conflict issues are often raised by internal sales teams rather than by channel partners. Is your sales team advancing this narrative to protect their turf at the cost of innovation? DTC eCommerce has existed alongside channel partnerships for years in industries such as consumer electronics and apparel, and many other industries have followed.
Optimizing Business Processes
You’ll be faced with a key decision as you begin to plan your eCommerce initiative – your solutions roadmap. You can select best-of-breed solution components or outsource to an end to end turnkey eCommerce company. This decision will have an impact on whether operational pitfalls will be minimized or amplified.
- Can you juggle? Do you have the bandwidth, management skills and appetite for coordinating multiple vendors, solution points and processes? If so, then you might be able to successfully launch and manage the day-to-day requirements of an eCommerce business using a best-of-breed model.
- A turnkey provider—If you don’t have the time, resources or desire to integrate multiples, a turnkey provider already has the required infrastructure, technology and expertise in place. They have systems and processes that are tested, proven and well-integrated.
Operational risks can be managed effectively, but only if you make an honest assessment of the best roadmap to fit your organization’s bandwidth and skill set.
Double the Risk?
"Take calculated risks. That is quite different from being rash." – General George S. Patton
The title of this post got your attention, but is it really necessary to double the risk in order to realize the many benefits of DTC and eCommerce? We don’t think so.Fortunately, many other businesses have successfully mitigated the risk factors and launched profitable eCommerce operations. Their strategies can be modeled and modified. And you can be a DTC hero.