Should Brands Adopt a Direct to Consumer Model in 2020?
Scaling manufacturers like the guys at “Nurme Cosmetics” have been adopting the direct to consumer business model in their masses. By skipping the middleman they are able to increase profit margins, as well as connecting with their customer in a much more direct and organic way.
It’s no secret that manufacturers and brands have been edging closer to consumers in recent times.
There is plenty to be gained for both sides of the coin.
Manufacturers get to skip the middleman and boost profits, while consumers get to enjoy a much more personal connection with their favorite brands.
This overall approach has become so popular now and it is more commonly known as the direct to consumer business model.
And the benefits stretch much further than just profits and connections.
We’re talking greater control of brand perception, data analytics and faster growth for businesses. Consumers can now build on their closer relations with manufacturers to push for the features they desire, built on the principles they believe in most.
It seems to answer fairly clearly the question as to why many brands have decided to take this direct to consumer approach.
But to really understand why manufacturers are moving in this direction we first need to understand how the model works.
There’s a lot to be learnt, whether you are planning to go down this route or not.
So, let’s take a deep dive in to the direct to consumer model and find out if it’s the right way to go for your manufacturing business.
What is the Direct to Consumer Model?
Alright, so back in the day brands had little choice when they wanted to get products out to consumers.
It was always going through the hands of either retailers, outlets, resellers or wholesalers. The main reason being that it would simply be unfeasible for most manufacturers to maintain their own physical stores from which to sell their products.
But, thanks to the dawn of online shopping and cloud manufacturing software, manufacturers can now easily sell direct to consumers. A customer can view all your products online and get them delivered quickly without the need for a physical store.
The way it generally works is that you set up an online store on a platform like Shopify or Woocommerce from which to sell your products. And then you make use of the right software to support the running of your product-making business.
Game-changer, we know.
This paradigm shift has caused an influx of brand new direct to consumer brands coming to the market and disrupting the old guard. Even the smallest of makers can get on this train and sell the products they make at home online.
But that doesn’t mean that this model only applies to new brands and disruptors. Even long-established manufacturers and giants of the trade have realized that this is the way to go.
Companies like Nike have been amassing 27% of their sales thanks to D2C sales alone. And if they’re doing it on that scale then there must be good reason why.
Manufacturers that don’t adopt at least some of the practices of the direct to consumer business model are likely to fall behind fast.
Why is the Direct to Consumer Model So Attractive to Businesses?
Despite the extra responsibilities manufacturers have to take on when adopting the direct to consumer business model, it’s clear that many still decide to do so. And that’s because there’s a lot more to gain in the long term than simply a slightly larger profit margin.
If the direct to consumer model is so good that big players like Nike are on board then the advantages must be vast. People and businesses don’t change their ways for nothing.
So, here are some of the benefits you can expect to exploit going down this road:
1. Boost your profits
Let’s start with the obvious.
Cold hard cash.
Because the first thing you will notice when going to direct to consumer is that there is no one else between you and your clients. No one else taking a slice of the pie when they don’t need to be.
Retailers often take 60% of your revenue, which can be a tough hole to fill elsewhere.
And that ultimately means that your profit margins are going to grow considerably.
But remember that you will be taking on a greater share of marketing and sales efforts now, so don’t get too carried away with your initial calculations.
2. Keep control of your brand
With a direct to consumer business model, your manufacturing branding stays in your control.
You get to push your vision, message, designs and principles directly to consumers so that there is little chance for miscommunication.
It’s in direct contrast to giving your products to others to distribute, where they get to choose on which shelf your product lands on and how it gets described.
Plus, if you rely on retailers and resellers to do your selling for you, then it’s quite possible that your brand will automatically become tainted as a mass consumer item.
And that’s not great in an age where trends and predictions for manufacturers suggest consumers are craving that personal touch.
3. Build brand relationship with customers
Going direct to consumers means that you get to tell your story how you want it told. But even more importantly is that you can get customers involved in this story.
This can be through shared experience, personalized messaging or simple feedback.
You have the opportunity to communicate to customers, find out what they care about and get them involved in making it happen. This gives you the ability to form long-lasting bonds with customers that keeps them coming back.
For example, you could ask questions on your social media profiles on what kind of products your customers would like to see next.
Or offer valuable content in the form of guides and eBooks on your web store, to give customers information that will stay for the long term.
There are infinite ways to take advantage of these direct forms of communication with your consumers. You’re only limited by your imagination.
4. Use data to predict the future
When you give up your sales efforts to others, you also give up the data for those sales.
And that means that you have to work a lot harder to figure out what customers are craving for, and why they are even buying your products in the first place.
This puts you at a massive disadvantage when it comes to developing your product-making business.
On the other hand, if you start to collect customer data you can much easier paint a picture of what your customers desire from your business. For example, if you see that more and more customers are clicking on products which are using a particular design sticker, then you know already where to focus your product design efforts.
Plus, with customer data you will be able to offer personalized experiences to customers when they come to your store. This could come in the form of offering recommended products based on previous purchases or could be as simple as addressing customers by first name.
And considering 59% of customers say that personalization influences their shopping decision, that’s not an approach you should take lightly.
5. Grow at a faster rate
If you work with retailers and resellers then you already know how arduous the process of getting a new product in the market can be.
You have to make sure your product is in line with the market your middleman is selling in and wait for them to give the green light.
Well, to state the obvious, there won’t be any of that going on when adopting the direct to consumer business model.
And to go even further, you will find it much easier to sell internationally and to new markets. The physical constraints of distribution will be drastically reduced and allow your product-making business to expand as you want it to.
PRO TIP: If you’re looking to expand into the direct to consumer business model then make sure to check out the competition and see what they’re doing first.
Looking at other direct to consumer brands can provide you with inspiration to give your customers exactly what they’re missing.
Why is Direct to Consumer Model Attractive to Customers?
Growing manufacturers like “Framed” know that going with the direct to consumer business model means they can offer a more tailored approach to customers. By speaking directly with their customers they can more easily analyze which aspects of their product designs to highlight, and which they can taper off.
Alright, so it’s clear why you might consider going down the direct to consumer business route. But what’s in it for customers?
Well, unsurprisingly there’s quite a lot they have to gain too.
1. Greater connection with brand and products
The great thing about a manufacturer selling direct to consumer is that they can offer their entire product line in one place.
Customers don’t have to go searching around to understand where products fit in their respective collections and product lines.
All the information is going to be up to date, and brands can offer customers valuable information concerning products. We’re talking guides and FAQs which go beyond just simple manuals, and concern the lifestyles associated with their products.
Customers very much appreciate brands going this extra mile for them.
2. Improved shopping experience
Thanks to the advent of mobile technology, easy-to-use online shopping platforms and smart manufacturing software manufacturers can make the shopping experience incredibly seamless now.
Once on your direct to consumer ecommerce store, customers simply make their order and provided you are using the right tools your system will put the order in production.
This means customers can get their products much faster than they would otherwise, with more direct channels of communication if problems arise.
3. Promoting shared social and ethical values
Although not strictly necessary to the direct to consumer business model, there’s no doubt that many brands have decided to promote social and environmental awareness in their branding.
This means that customers can gain the satisfaction of knowing that their product purchase is going some way to promoting their own values. And considering that 75% of consumers have adopted more ethical shopping habits of late, this shows just how important direct to consumer brands can be in the zeitgeist.
That could be as simple as recycling in the production process, adopting green manufacturing or sourcing materials from ethical providers.
How Direct to Consumer Companies Can Find Success
Katana Smart Manufacturing Software allows brands that are adopting the direct to consumer business model to manage their inventory, production and sales from one place. Each order is displayed on the screen where you can see how progress is, and whether you need to be ordering more materials to move production along.
Now don’t get us wrong here.
Just because direct retail looks like the way to go does not mean it’s easy.
There are plenty of pitfalls to consider when you skip the middleman and take on all those extra responsibilities.
You would have to spend a lot more time on marketing and selling your product, which can be very time-consuming in itself.
That’s why you need to make sure you have the right tools to support your product-making business and give you the time to focus on connecting with customers.
Katana Smart Manufacturing Software is an all-in-one solution for product-making businesses looking to adopt the direct to consumer business model.
It combines inventory, manufacturing and sales onto a single, visual dashboard where you can control the entirety of your operations.
Plus, the software integrates with platforms such as Shopify and Woocommerce so you can sell direct to consumers without having to constantly move between applications.
This is a software which is designed for brands looking to adopt the direct to consumer business model without losing track of their product-making business. You always know if you have enough materials for orders and when those orders will be completed by.
But that’s just the tip of the iceberg.
Here are just some of the key features on offer:
On-demand access to your manufacturing costs;
Sync accounting with your QuickBooks;
Production scheduling software functionality;
Floor-level control for manufacturing;
Efficient material purchasing plans; and
A way to keep your entire business workflow on a single dashboard.
By using Katana you can adopt the direct to consumer business model without having to worry about maintaining control of your everyday operations. Which is one of the key issues growing manufacturers face when they move to take full control of their brand.
Instead, the software helps you keep track of and easily make changes to all aspects of your business without having to constantly trawl through spreadsheets.
Point being that you can spend time on the things that actually matter, like developing your product and growing your product-making business.